dissenting.
- I respectfully dissent from the decision of the court. I think our decision in the Henry River Mills case, in which I joined, was wrong.
I see no escape from the mandate of Section 722 (d) of the Internal Kevenue Code. It says, of the very situation here under consideration:
(d) Application for Relief Under This Section. — The taxpayer shall compute its tax, file its return, and pay the tax shown on its return under this subchapter without the application of this section, except as provided in section 710. (a) (5). The benefits of this section.shafi not be allowed unless-.the taxpayer within the period of time prescribed by section 322 and subject to the limitar tion as to amount of credit or refund prescribed in such section makes application therefor in accordance with regulations prescribed by the Commissioner with the approval of the Secretary. If a constructive ayerage base period net income has been determined under the provisions of this section for any taxable year, the Commissioner may, by regulations approved by the Secretary, prescribe the extent to which the limitations prescribed by this subsection may be waived for the purpose of determining the.tax under this subchapter for a subsequent taxable year.'
*860. If . the plaintiff had done what the statute expressly requires, the Government would have had the money,, the interest on which is here in question, until the amount of relief to-whieh the plaintiff was entitled under the. provisions of Section.722 (a), (b), and (c), was worked out between the taxpayer and the Government. The simple fact is that the plaintiff failed to pay the tax which the statute imposed and required, and that there was, in fact, a deficiency, which persisted until it was finally learned what relief the plaintiff was entitled to.
.. The difference between the instant case and cases like Manning v. Seeley Tube and Box Co., 338 U. S. 561, and Rodgers v. United States, 123 C. Cls. 779, in which it was held that interest was payable on deficiencies later wiped out by the carryback of losses from later years, is, as a practical matter, more apparent than real. To be sure, in the carryback cases the data on which the ultimate determination of the tax must be made are not in existence when the taxpayer files his return. But in the Section 722 cases, while in a sense the facts are in existence, they might as well, in a complicated case, not be in existence, for it is plain that it will take much study and analysis and the exercise of much judgment to make the final determination as to the amount, of relief to be granted the taxpayer. And, in the meantime, the statute says, he must pay his tax as if Section 722 were not in existence. Section 3771 (g) of the Internal Revenue Code prohibits the Government from paying interest on overpay-ments resulting from allowance of Section 722, relief for taxable years prior to January 1,1942, and for later years prohibits interest for any period prior to one year after the filing; of an application for relief, or September 16, 1945, whichever.is the later. These provisions show the intention of Congress that the money is intended to be collected and held by the Government, as of right, until the question of Section 722 relief is settled.
FINDINGS OF.FACT
The court having considered the evidence, the report of Commissioner Richard H. Akérs, and the briefs and arguments of counsel, makes findings of fact as follows:
*8611. (a) Koppers United Company was the parent company of a group of corporations which filed consolidated excess profits tax returns for the calendar years 1940 and 194!. The return on Form 1121 for 1940 was filed September 15; 1941; and an amended return on Form 1121 was filed Jtily 21, 1944,- with the Collector of Internal Revenue, Pittsburgh; Pennsylvania. The return for 1940 disclosed thereon excess profits net income of $3,656,110.35, ah excess profits credit of $3,864,935.25, and showed no tax due. The amended return for 1940 disclosed thereon excess profits net income of $3,653,890.77, an excess profits credit of $3,623,876.29, an adjusted excess profits net income of $25,014.48, and'an excess profits tax liability of '$6,512.76. The tax for 1940 was- paid to the Collector at Pittsburgh, $3,000 on March 15, 1941, $3,000 on June 13, 1941, and $512.76 on July 21, 1944, by Koppers United Company.
(b) The return on Form 1121 for 1941 was filed Juñe 15, 1942, and an amended return on Form 1121 was filed June’ 20,1942, with the Collector of Internal Revenue, Pittsburgh, Pennsylvania. The return for 1941 disclosed thereon excess profits net' income - of $6,613,646.26, an excess profits credit of $3,494,726.10, an adjusted excess profits net income of $3,113,920.16, and an excess profits tax liability of $1,822,-352.10. The amended return for 1941 disclosed thereon excess profits net income of $6,545,206.33, an excess profits credit- of $3,494,726.10, an adjusted excess profits net income of $3,045,480.23, and an excess profits tax liability of $1,781,288.14. The tax for 1941 was paid to the Collector at Pittsburgh quarterly during 1942 by Koppers United Company.
(c) The returns mentioned in the two paragraphs next above were made and the tax reported thereon was computed without the application of Section 722 of the Internal Revenue Code.
2. Koppers United Company, together with Koppers Company, The Koppers Erecting Corporation and Fuel Investment’ Associates, each of which companies was included in the consolidated excess profits tax returns of Koppers United Company and Subsidiaries for 1940 and 1941, were merged *862into Koppers Company, Inc.,, the plaintiff, herein, by virtue of a Certificate of Agreement of Merger filed with the Recorder of Deeds for New Castle County, Delaware, on November 10, 1944.
3. By timely filed consents, the plaintiff, as successor on merger to Koppers United Company, and the Commissioner of Internal Revenue mutually agreed that the amount of any income, excess profits, or war profits tax due by Koppers United Company as parent of the consolidated group for 1940 and 1941 could be assessed at any time on or before June 30,1951,
4. On September 15, 1943, Koppers United Company, as parent of the consolidated group, filed on Form 991 an application for relief under Section 722 of the Internal Revenue Code, claiming thereon a refund of $6*000 of the excess profits tax paid for 1940. On September 10, 1945, an amended application was filed, reducing, the amount claimed as a refund for 1940 from $6,000 to $22.56. On September 15, 1943, Koppers United Company, as parent of the consolidated group, filed on Form 991 an application for relief under Section 722 of the Internal Revenue Code, claiming thereon a refund of $1,781,288.14 of the excess profits tax paid for 1941. On November 20,1945, an amended application was filed reducing the amount claimed as a refund for 1941 from $1,781,288.14 to $541,103.86.
5. On December 16, 1950, the plaintiff, as successor on merger to Koppers United Company, executed an “Agreement to Amount of Constructive Average Base Period Net Income Determined Under Section 722, Internal Revenue Code” (Form EPC-1) for the taxable years 1940 and 1941. The amount of constructive average base period net income agreed to for the year 1940 was $2,801,598.22, and for the year 1941 was $3,394,944.93. These amounts were approved on January 10, 1951, by the Excess Profits Tax Council of the Bureau of Internal Revenue.
. 6. At various times, the Internal Revenue Agent in Charge at Pittsburgh forwarded to the plaintiff copies of revenue agents’ reports covering examination of the amended consolidated excess, profits tax return of Koppers United .Com-: pany and Subsidiaries for 1940 in which he proposed excess *863profits net income, excess profits credits and deficiencies in excess profits tax as follows:
. The letter dated February 9,1951, reflected the agreement reached with respect to the amount of taxable net income for the year 1940 and the amount of relief allowable under Section 722, Internal Revenue Codé, as determined by the Excess Profits Tax Council. The relief thus allowed increased the excess profits credit for 1940 to $2,661,518.31, resulting iñ a decrease in the proposed deficiency in excess profits tax to $260,554.39.
7. At various times, the Internal Revenue Agent in Charge at Pittsburgh forwarded to the plaintiff copies of revenue agents’ reports covering examination of . the amended consolidated excess profits tax return of Koppers United Company and Subsidiaries for 1941 in which he proposed excess profits net incomes, excess profits credits and deficiencies in excess profits tax as follows:
The letter dated February 9,1951, reflected the agreement reached with respect to the amount of taxable net income for the year 1941 and the amount of relief allowable under Section 722, Internal Revenue Code, as determined by the Excess Profits Tax Council. The relief thus allowed increased the excess profits credit for 1941 to $3,143,429.68, resulting in a. decrease in the proposed deficiency in excess profits, tax. to $95,749.33. ... .
, 8. Thereafter and ón February 14,1951, the-plaintiff executed and filed with ithe Internal Revenue Agent in Charge *864at Pittsburgh, Pennsylvania, a. waiver on Treasury. Form 874 consenting to the assessment and collection of . deficiencies in tax on returns filed for several taxable periods including the calendar years 1940 and 19.41 in the respective amounts of $260,554.39 and $95,749.33. .
9. In computing the proposed deficiencies set out in the preceding findings, the Commissioner, in accordance with the administrative practice of the Internal Revenue Bureau, first computed the excess profits tax liability for each of the years 1940 and 1941 without the allowance of any relief provided by Section' 722. At that time, February "26 and February 27, 1951, an agreement had been reached between the parties, as shown in findings 6 and'7, both as to the amount of taxable net income and the amount of relief allowable under Section 722. Those computations showed the foliowihg results:
10. After the computations referred to in the preceding findings had been made, the Commissioner gave effect to the relief allowable under Section 722 which reduced the excess profits tax liability for 1940 from $466,921.67 to $267,067.15, that is, in the amount of $199,854.52, and for 1941 from $2,208,019.09 to $1,877,037.47, that is, in the amount of $330,981.62. Against the amounts so- reduced he gáve credit for the excess profits tax reported and paid in the same manner as in the previous computations, that is, $6,512.76 for 1940 and $1*781,288.14 for 1941. After the allowance of these credits there was shown a balance of excess profits tax due for 1940 of $260,554.39 and for 1941 of $95,749.33. On March 8,1951, the Commissioner issued his statutory notice of a determination of deficiencies in the amounts just stated, such notice -reading in part as follows:
*865You are advised that the determination of your excess profits tax liability for. the years ended December 31, 1940, 1941, * * . * discloses deficiencies of '$260,554.39, $95,749.33, * * * respectively.
No similar notice was given by the Commissioner with respect to the results of his computation of the excess profits tax liability before the application of Section 722...-
11.. The Bureau of Internal Revenue computed interest for the years 1940 and 1941 as follows: For the year 1940, interest in the . sum of. $217,376.07 was; computed- upon $460,408.91 for the period beginning March 15,194Í (which w.as the due date of the 1940 return), to January 28, 1949 (which was treated as the. date of payment of the deficiency of $260,554.39); and for the year 1941, interest in the sum of $230,504.86 was computed .upon $426,730.95 for the period beginning March 15, 1942 (which was the due date of the 1941 return), to March 16, .1951. (which was thirty days after the waiver referred to in finding 8 was filed).
12. On April 17, 1951, pursuant to the waiver filed February 14,1951, the Commissioner assessed deficiencies in excess profits tax of $260,554.39 for 1940 ¿nd $95,749.33 for 1941 and at the same time assessed interest of $217,376.07 for 1940 and $230,504.86 for 1941. These amounts of tax' and interest were paid in full by the plaintiff to the Collector at Pittsburgh. The payments of interest were made on April 24, 1951, upon notice and demand.
13. On June 29, 1951, the plaintiff timely filed a formal claim for refund of part of the interest which had -been assessed and paid for the years 1940 and 1941, as stated above. It claimed refunds of $94,358.71 for 1940 and $178,784.48 for 1941, or such greater amounts as legally might be due. Each claim for refund set forth as a ground that the claimed interest was erroneously and illegally collected upon an amount not determined as a deficiency in accordance with Section 292 (a) of the Internal Revenue Code. Each claim said in part:
The interest was computed on the basis of the excess profits tax which would have been due if the relief provided by Section 722 in computing the excess, profits credit had not been allowed.
*866Tbe plaintiff concedes that the remaining interest to the extent of $123,017.36 was properly assessed on the deficiency for 1940 (six percent on $260,554.39 from 3/15/41 to. 1/28/49) and that the remaining interest to the extent of $51,720.38 was properly assessed on the deficiency for 1941 (six percent on $95,749.33 from 3/15/42 to 3/16/51).
14. On December 13, 1951, the Commissioner sent to the plaintiff by registered mail a statutory notice of disallowance of each of its claims for refund.
15. The plaintiff concedes that the set-off in the amount of $2,926.85, alleged by the defendant in paragraph IY of its Answer, is a proper set-off, and that if it is entitled to recover the amount of $273,143.19 claimed in its petition, then that amount should be reduced by the sum of $2,926.85 and judgment entered for the difference.
CONCLUSION OF LAW
Upon the foregoing findings of fact which are made a part of the judgment herein, the court concludes that, as a matter of law, the plaintiff is entitled to recover.
It is therefore adjudged and ordered that plaintiff recover of and from the United States the sum of two hundred seventy thousand, two himdred sixteen dollars and thirty-four cents ($270,216.34), together with interest thereon as provided by law.