The relator makes no question as to the valuation placed upon the capital stock. Its sole contention is that the $200,000 returned to the stockholders were not “ dividends ” within the meaning of that word as used in section 182 of the Tax Law (Laws of 1896, chap. 908), under which the tax was imposed; that consequently the divi-' dends for the year in question were only five per cent on the capital stock instead of fifteen per cent, and, therefore, that the rate of taxation should be reduced from three and three-fourths mills for each fifteen per centum to one and one-half mills upon the capital stock subject to taxation under said section.
While there was proof before the Comptroller that before the merger the surplus of the relator was $1,200,000, made up of $500,000 cash contributed by its stockholders and $700,000 earnings of the relator, yet the proof is also entirely clear and undisputed that such $200,000 returned to the stockholders during the year in question was not from any such earnings, but was a return to them of a part of their cash contribution to such surplus, made prior to the merger. When such contribution was made no additional stock was issued for it and it simply went to add to the value of the stock already held by those so contributing.
Section 23 of the Stock Corporation Law (Laws of 1890, chap. 564, as amd. by Laws of 1892, chap. 688) provides that “ the directors of a stock corporation shall not make dividends, except from *122the surplus profits arising from the business of such corporation.” It seems clear that the. $200,000 so returned cannot fairly be regarded as from the “ surplus profits” of the company, for it did not in any sense arise from its profits or earnings in the course of its business, but was contributed solely for the purpose of strengthening the company and adding to its working capital. That being so it was not a dividend within the meaning of the law.
We think for these reasons that the Comptroller should have revised the account for taxes in accordance with the contention of the relator, and should have modified the tax by imposing it at the rate of one and one-half mills instead of three and three-fourths mills.
The determination of the Comptroller should be modified by reducing the tax to $2,262.66, and as so modified affirmed, with fifty dollars costs and disbursements to the relator.
All concurred.
Determination of the Comptroller modified by reducing the tax to $2,262.66, and as so modified confirmed, with fifty dollars costs and disbursements to the relator."