OPINION OF THE COURT
Memorandum.
The order of the Appellate Division should be reversed, with costs, the determination of respondent annulled and the matter remitted to Supreme Court with directions to remand to respondent State Tax Commission for a grant of petitioner’s application for a refund in accordance with this memorandum.
Petitioner instituted this article 78 proceeding to obtain annulment of a special franchise tax assessment imposed on it by respondent pursuant to Tax Law § 208. The issue is whether income derived during the years 1973 and 1974 from a variety of short-term corporate obligations was “business income” or “investment income” for allocation purposes. Special Term and the majority at the Appellate Division concluded that the income was business income under the statute (Tax Law § 208 [5]-[9]; see also, former 20 NYCRR 3.31 [c]). It therefore sustained the respondent’s determination and dismissed the petition. The two dissenters interpreted the patently ambiguous statutory sections otherwise and would have granted the petition.
We find it unnecessary to analyze the statute and former regulations in specific detail as the courts below have done. The record makes it abundantly clear the Commissioner has consistently for more than 20 years, interpreted the statute to mean that short-term notes of the kind in issue here are investment capital and the income earned from them investment income (see, letter of Commissioner Joseph Murphy, dated June 6,1962, Appellant’s Brief, at A-5-6; Matter of Diamond Intl. Corp., 5 CCH New York State Tax Rptr [Transfer Binder 1966-1968], 1198-933 [State Tax Commn Dec. 1, 1967]). Petitioner was entitled to rely on the Commissioner’s interpretation, therefore, and respondent’s contrary interpretation of the statute in this case was arbitrary and capricious.
Chief Judge Wachtler and Judges Jasen, Meyer, Simons, Kaye and Alexander concur; Judge Titone taking no part.
Order reversed, with costs, determination of the respondent annulled and matter remitted to Supreme Court, Albany County, with directions to remand to respondent State Tax *728Commission for further proceedings in accordance with the memorandum herein.