*814 Petitioner was liquidated and dissolved June 29, 1936. On July 21, 1936, it filed a capital stock tax return for the capital stock tax fiscal year ended June 30, 1936. It declared the value of its capital stock as "None" as of June 30, 1936, instead of valuing its capital stock as of April 30, 1936, its last prior income tax year, as required by the statute. Later, it discovered its mistake and subsequent to the time for filing capital stock tax returns for year ended June 30, 1936, it tendered to the Commissioner a return fixing a valuation of its capital stock as of April 30, 1936. This the Commissioner refused to accept and determined petitioner's excess profits tax on the basis of no value for its capital stock. Held, the return filed July 21, 1936, should not be considered a proper return under the applicable statute and petitioner's return tendered to the Commissioner April 30, 1937, should be considered its first return of capital stock tax for the year ended June 30, 1936, subject to penalties for delinquent filing.
*689 This proceeding*815 was brought to contest the respondent's determination that for the fiscal year ended April 30, 1937, there was a deficiency of $1,035.57 in excess profits tax and an overassessment of $355.92 in income tax. Petitioner does not contest the overassessment but contends that instead of a deficiency in excess profits tax there was an overpayment of that tax in the amount of $365.14. The errors assigned are as follows:
(a) In determining petitioner's excess-profits tax liability for the fiscal year ended April 30, 1937, the respondent erred in not applying the percentage credits based upon a declared capital stock value of $120,000.00.
(b) Refusal of the respondent to recognize the validity of a delinquent or amended 1936 Return of Capital Stock Tax for the year ending June 30, 1936, showing a declared value of entire capital stock of $120,000.00.
(c) If the respondent should be sustained, then it is submitted that Sections 105 and 106 of the Revenue Act of 1935, as amended, are unconstitutional and void, and result in deprivation and confiscation contrary to the Fifth Amendment to the Constitution of the United States.
FINDINGS OF FACT.
The facts have all been stipulated*816 and we adopt the stipulation as our findings of fact. We state herein such of the facts as seem necessary to an understanding of the issues to be decided.
The petitioner was a corporation, incorporated under the laws of the State of Texas, with its principal office and place of business in the *690 city of Quannah, Texas. The return for the period involved was filed with the collector for the second district of Texas.
The taxes in controversy are excess profits taxes for the fiscal year ended April 30, 1937.
The petitioner kept its books and filed its income and excess profits tax return for the period in question on the cash receipts and disbursements basis. On June 3, 1936, petitioner sold all of its capital assets and distributed the proceeds. On June 29, 1936, an agreement and consent in writing, executed by all of petitioner's stockholders, was filed with the Secretary of State of Texas, consenting and agreeing that petitioner corporation be dissolved.
The last full accounting period of the petitioner falling within the period January 1 to June 30, 1936, was the fiscal year ended April 30, 1936. Petitioner filed an income and excess profits tax return tor*817 that period on June 30, 1936, with the collector of internal revenue for the second district of Texas. The income tax liability disclosed by that return was $657.66 and the excess profits tax liability disclosed was $20.66. These tax liabilities were paid on or about July 10, 1936, and are not in controversy in this proceeding.
On the aforementioned return, the petitioner reported the "adjusted declared value" of capital stock for capital stock tax purposes as $34,957.36.
On August 21, 1936, the petitioner filed a corporation income and excess profits tax return for the period May 1, 1936, the beginning of its last fiscal year in business, to , june 29, 1936, the date of its dissolution and cessation from business, on which it reported an income tax liability of $1,579.90 and an excess profits tax liability of $365.14. These tax liabilities were paid on or about August 21, 1936.
The petitioner declared the sum of $34,957.36 as the adjusted declared value of its capital stock, which was that shown in its capital stock tax return for the capital stock year ended June 30, 1935.
The aforesaid income and excess profits tax return filed for the period May 1 to June 29, 1936, discloses*818 that the petitioner corporation was dissolved on June 29, 1936.
The petitioner filed a capital stock tax return for the fiscal year ended June 30, 1936, on July 21, 1936, on which it reported as the "declared value of entire capital stock" under item 8 of the return, "Dissolved June 29, 1936, $ None."
On the capital stock tax return above referred to was printed question 15, which reads as follows: "State amounts of outstanding capital stock and surplus as of date of the close of income tax taxable year used in declaring value for capital stock." Petitioner's answer to this request for information was, "None."
*691 On April 30, 1937, petitioner addressed a letter to the Commissioner of Internal Revenue, accompanied by a delinquent capital stock tax return for the year ended June 30, 1936, showing a declared value of $120,000, together with a check for $156.75 covering tax liability, penalty, and interest in the respective amounts of $120, $30, and $6.75. The material paragraphs of the letter above referred to are as follows:
We enclose herewith Capital Stock Tax Return for the year ending June 30, 1936, together with check for tax, penalties and interest in the amount*819 of $156.75, which we respectfully ask be accepted in lieu of erroneous return originally filed as though no return had been filed.
We ask for the substitution of the enclosed return for the following reason:
(1) Our fiscal year ends on April 30th, and the Income Tax return for F/Y beginning May 1, 1935, and ended April 30, 1936, was filed june 10, 1936, and the taxes paid.
(2) On June 3, 1936, all of the capital assets of our Company were sold at a profit of $13,689.91 and on June 29, 1936, our charter was surrendered to the State of Texas through filing of Dissolution Certificate and the corporation was completely liquidated.
(3) In July 17, 1936, we filed a Capital Stock Tax return for 1936 and showed no value for the Capital Stock, no Capital outstanding and that the Corporation was dissolved. This return was obviously in error as and constituted in fact no return and no declaration of value, and copy thereof is enclosed.
The Commissioner of Internal Revenue returned petitioner's check for $156.75, but stated in a letter to the petitioner dated May 11, 1937, that "the second return filed with this office on May 4, 1937, is being retained in the files, not as an amended*820 return, but as a part of the record in the case." To this letter of the Commissioner, the petitioner replied by letter dated May 21, 1937, the material paragraphs of which are as follows:
We are in receipt of your letter, reference above, with enclosure of our check for $156.75.
After a careful reading of your letter we wish to submit the following.
The Capital Stock Tax Return for 1936, filed on July 17, 1936, showed (1) no value for the capital stock; (2) no capital stock outstanding and (3) that the corporation was dissolved - all as at April 30, 1936. The facts at April 30, 1936, (the close of our income tax year ended subsequent to June 30, 1935, and prior to June 30, 1936) were:
| Capital Stock - Par Value | $20,000.00 |
| Surplus (Deficit) | 692.09 |
The corporation was in good standing and if we had understood the law, we would have declared a value of $120,000.00.
The original return was so clearly erroneous in every particular that we ask that it be disregarded as though we had filed no return, and that we now file a delinquent return and pay the penalties and interest.
* * *
All of the facts (which happened before the original erroneous return was*821 filed) bear out our statement that the return filed was so erroneous as to constitute no return.
*692 We are returning our check for $156.75, which we respectfully ask be accepted, and that we be billed for any additional interest which we will pay on demand.
The Commissioner again refused to accept the tendered capital stock tax return and returned petitioner's check for $156.75 for the second time by letter dated June 2, 1937. In his deficiency notice the Commissioner, among other things, stated:
Your contention relative to filing an amended capital stock tax return is denied for the reason that you declared no value of capital stock in your original return and as section 105(f) of the Revenue Act of 1935 provides that the value declared on the first return cannot be amended, therefore no credit can be allowed in computing excess-profits tax.
OPINION.
BLACK: If the capital stock tax return filed by petitioner on July 21, 1936, for the capital stock tax fiscal year ended June 30, 1936, was a proper return under the provisions of section 105(a), (d), and (f) of the Revenue Act of 1935 as amended by section 401 of the 1936 Act, then any amendment of such return*822 is not permissible even though a substantial mistake was made in the original declaration of the value of the capital stock. See Scaife & Sons Co. v. Driscoll,18 Fed.Supp. 748; affd., 94 Fed.(2d) 664; certiorari denied, 305 U.S. 603">305 U.S. 603; William A. Webster Co.,37 B.T.A. 800">37 B.T.A. 800; Chicago Telephone Supply Co. v. United States,23 Fed.Supp. 471; certiorari denied, 305 U.S. 628">305 U.S. 628; Rosoff Tunnel Corporation v. Higgins,28 Fed.Supp. 880; Haggar Co.,38 B.T.A. 141">38 B.T.A. 141; affd., 104 Fed.(2d) 24; A. J. Crowhurst & Sons, Inc.,38 B.T.A. 1072">38 B.T.A. 1072; and Blake & Kendall Co. v. Commissioner, 104 Fed.(2d) 679. In two cases where the second return was tendered within the time allowed for filing a first return, the second return was accepted as if it were the first return. Oertel Co. v. Glenn,13 Fed.Supp. 651; affirmed by the Sixth Circuit, 97 Fed.(2d) 495; *823 Philadelphia Brewing Co. v. United States (Ct. Cls.), 27 Fed.Supp. 583. In the instant proceeding the second return was not tendered within the time allowed for filing a first return. For this reason, the two last named cases would not be applicable.
Therefore, it seems clear that if the capital stock tax return filed by petitioner July 21, 1936, was a proper return, then the second or delinquent return which petitioner sent to the Commissioner April 30, 1937, accompanied by a check of $156.75, covering tax liability and interest and penalty could not be legally filed and the Commissioner was correct in refusing it and should be sustained in his determination of petitioner's excess profits tax on the basis of the valuation fixed in the first return. Whether the first return filed by petitioner was a proper return depends upon the applicable law and *693 regulations promulgated thereunder. Section 105(a), (d), and(f) of the Revenue Act of 1935, as amended by section 401 of the 1936 Act, is the applicable law and is printed in the margin. 1
*824 Articles 31 and 44 of Regulations 64 (1936 ed.), which are deemed pertinent to the issue here involved, are printed in the margin. 2
*825 It will be noted that section 105(f) of the Revenue Act of 1935 as amended requires that "the adjusted declared value shall be the value, as declared by the corporation in its first return under this section (which declaration of value cannot be amended), as of the close of its last income tax taxable year ending at or prior to the close of the year for which the tax is imposed by this section."
Petitioner was on a fiscal year basis which began May 1 of a given year and ended April 30 in the following year. Therefore, its last income tax taxable year ending prior to the close of the capital stock year ended June 30, 1936, was the fiscal year ended April 30, 1936. *694 Petitioner, therefore, under the mandatory requirement of section 105(f) above cited, should have declared the value of its capital stock as of April 30, 1936. If it had done this, the return would have been a proper first return under the applicable act and regulations and, even though a mistake had been made in the declared value, it could not have been corrected by a subsequent amended return. See cases above cited.
But petitioner did not value its capital stock as of April 30, 1936. That fact seems*826 perfectly clear when one examines the first capital stock tax return, which was filed July 21, 1936. It shows on its face that the valuation which was intended must have been as of June 30, 1936, which was one day after petitioner had been dissolved and its assets liquidated. The capital stock was reported as having no value, evidently on the basis that there was no capital stock in existence after the liquidation and dissolution of the corporation. This interpretation is borne out by the fact that the return gave the date of the dissolution of the corporation and made the statement that there was no outstanding capital stock, conditions which did not exist on April 30, 1936.
Article 31 of Treasury Regulations 64 (printed in the margin, supra ) provides among other things, that, "if a return form is incomplete to the extent that it is not in substantial compliance with the Act, the form will not be regarded as a proper return and therefore its filing will not preclude the application of penalties for a delinquent return."
It seems clear to us that a return which undertakes to value the capital stock of a corporation at the end of the capital stock year at a time when the*827 corporation has been dissolved and its assets entirely liquidated and which, therefore, reports the value of capital stock as "None," is not in "substantial compliance" with an act which requires the valuation to be made "as of the close of its last income taxable year ending at or prior to the close of the year for which the tax is imposed by this section." See section 105(f) printed in the margin, supra.
As we have already pointed out, petitioner's last income taxable year, within the meaning of the above quoted statute, was the fiscal year which ended April 30, 1936, at which time petitioner was actively engaged in business and had capital stock outstanding of $20,000 par value (200 shared common stock at $100 par value per share). This capital stock had been valued for the capital stock year ended June 30, 1935, at $34,957.36. Therefore, for reasons already stated, we think the return filed by petitioner July 21, 1936, was clearly not in substantial compliance with the statute and we so hold. The Commissioner should have disregarded it, as provided by article 31 of Regulations 64, and petitioner's capital stock tax return filed April 30, 1937, should be accepted as petitioner's*828 delinquent capital stock tax return for the capital stock tax year ended June 30, 1936.
*695 Suppose, instead of having been dissolved on June 27, 1936, petitioner had increased its capital stock on that date from $20,000 to $100,000 and had filed its capital stock tax return for the capital stock year ended June 30, 1936, on July 21, 1936, as it did do and had declared the value of its capital stock to be $100,000 and had shown in that return that it was declaring the value of its capital stock not as of April 30, 1936, its last income tax year, but as of June 30, 1936, the close of its capital stock tax year. Would not the Commissioner have been justified in rejecting the return as no return at all under the law and the applicable regulations and in requiring petitioner to file a delinquent capital stock tax return? We think he would have been so justified and, if we are correct in that assumption, then we think that by the same reasoning the return which petitioner filed on an erroneous basis on July 17, 1936, must be rejected.
The capital stock tax return filed by petitioner April 30, 1937, being petitioner's first return under the provisions of said act, it had*829 the right to declare any value that it saw fit. See section 105(f) printed in the margin. Petitioner declared $120,000 as the value of its capital stock as of April 30, 1936, and tendered the Commissioner a check in payment of its capital stock tax for the year ended June 30, 1936, plus interest and delinquent penalty. Petitioner's excess profits tax, if any, should be computed upon a basis of $120,000 as the value of its capital stock on the basic date.
Respondent's counsel points out in his brief that there were printed instructions from the Commissioner's office which accompanied form 707, "1936 Return of Capital Stock Tax", and if petitioner had carefully read and heeded them it would not have made the error which is now in question. Counsel for respondent is doubtless correct in this statement. Nevertheless, the error clearly was made and it appears to have been innocently made, and we think under section 105(f) and article 31 of the regulations cited above the return filed July 21, 1936, must be disregarded as a "first return."
The Commissioner does not contend that there is any element of estoppel present in the facts of the instant case. He simply relies upon that*830 provision in section 105(f) of the statute which says that a first return, once filed by a taxpayer corporation, can not thereafter be amended. For reasons we have already stated, we do not think this provision of the statute is applicable to the facts of the instant case.
Reviewed by the Board.
Decision will be entered under Rule 50.
ARNOLD dissents.
*696 TURNER, dissenting: I am unable to conclude, as the majority opinion apparently does, that the petitioner did not file a capital stock tax return until April 30, 1937, for its capital stock tax year ended June 30, 1936. Prior to that date and within the period prescribed by statute, it had filed a capital stock tax return for that capital stock tax year, and the fact that the first return filed was "erroneous" does not permit the construction that it was "incomplete" as that latter term is used in the regulations. Scaife & Sons Co. v. Driscoll, 94 Fed.(2d) 664. Compare William A. Webster Co.,37 B.T.A. 800">37 B.T.A. 800, and Glenn v. Oertel, 97 Fed.(2d) 495, for contrary views where the second return was filed within the period prescribed by the statute. *831 For the reasons stated, I accordingly note my dissent.
DISNEY and OPPER agree with this dissent.
Footnotes
1. (a) For each year ending June 30, beginning with the year ending June 30, 1936, there is hereby imposed upon every domestic corporation with respect to carrying on or doing business for any part of such year an excise tax of $1 for each $1,000 of the adjusted declared value of its capital stock. [As amended by Sec. 401, 1936 Act.]
* * *
(d) Every corporation liable for tax under this section shall make a return under oath within one month after the close of the year with respect to which such tax is imposed to the Collector for the District in which is located its principal place of business * * *. Such return shall contain such information and be made in such manner as the Commissioner with the approval of the Secretary may by regulations prescribe.
* * *
(f) For the first year ending June 30 in respect of which a tax is imposed by this section upon any corporation, the adjusted declared value shall be the value, as declared by the corporation in its first return under this section (which declaration of value cannot be amended), as of the close of its last income-tax taxable year ending at or prior to the close of the year for which the tax is imposed by this section.↩ * * * [Italics ours.]
2. ART. 31. Incomplete return. - In view of the finality of the value declared in the "first return under this section" as provided by section 105(f), the filing of a tentative return of this tax by a corporation for the first year in which it is taxable under this Act is not permissible for any purpose. In the event a definite and unqualified value is not declared, or if a return form is incomplete to the extent that it is not in substantial compliance with the Act, the form will not be regarded as a proper return and therefore its filing will not preclude the application of penalties for a delinquent filing. [Italics ours.]
ART. 44. Original declared value.↩ - (a) In its first return a corporation must declare a definite and unqualified value for its capital stock. "First return" means the first capital stock tax return filed by a corporation for its first taxable year under section 105. Extreme care should be exercised in making this original declared value, for the reason that if a return has been filed disclosing a declared value, such value cannot be changed, amended, or corrected, either by the corporation or by the Commissioner. A subsequent return declaring a different value, even though filed before the expiration of the prescribed period, is therefore not acceptable under the statute. The importance of the original declared value may be seen from the fact that such original declared value forms the basis for the computation of the tax on capital stock in years subsequent to the first taxable year, and constitutes a prime factor in determining the amount of tax imposed on excess profits under section 106 of the Revenue Act of 1935, as amended by section 402 of the Revenue Act of 1936. * * *