On Petition to Rehear.
Petition is filed and rehearing urged on three grounds, namely:
(1) That the Court erroneously said in its opinion that the Commissioner was undertaking to levy the tax herein under the authority of Michie’s Code, section 1123 (28), and not under section 1123(1).
This, we think, is immaterial, as both these sections are a part of the codification of the so-called “Hall Income Tax Law” passed as Chapter. 86, Public Acts of 1929, as amended by Chapter 20, Public Acts, 2nd Ex. Sess., 1931. Both the foregoing sections of the Code are identical with the corresponding sections of the Act as amended.
The parts of the two sections pertinent to the case before us, are as follows:
Section 1123(1),: . . an income tax . . . shall be levied and collected on income derived by way of dividends from stocks, or by way of interest on bonds of each person . . . . in the state of Tennessee who received, or to whom accrued, or to whom was credited *157during any year income from the sources above enumerated . . .”
Section 1123(28): “Residents of Tennessee who receive income from trust estates located without the State of Tennessee, any portion of which is invested in securities, the income from ivhich is taxable under this law whether said trust estate be revocable or irrevocable, shall file with the commissioner of finance and taxation‘ as part of his income tax return a sivorn statement of the trustee, executor or other administrator of said trust estate showing what portion of the total income received by such Tennessee resident from such estate was derived from securities, the income from which is taxable under this law. And if such resident of Tennessee fails to file such sworn statement from the trustee, executor or other administrator, then he shall report for income taxation in the manner otherwise provided in the law the entire amount of income received by him from such trust estate.” (Emphasis ours.)
It is insisted for petitioner that nn account of the language used in the former opinion, that the Court gave no effect to the levy of the tax on income that was “credited” and “accrued,” as well as to that which was “received” by the taxpayer.
A .careful reconsideration of our former opinion discloses no merit in this proposition. We were following, and had cited the language of the opinion of Ross v. McCabe, 166 Tenn., 314, 317, 61 S. W. (2d), 479, 480. “The .person who enjoys the benefits of the income is the party against whom the statute is directed.” This language includes not only one who receives, but also one to whom is credited or to whom accrues income by way of dividends on stocks or interest on bonds. And whether or not the *158tax is levied on authority of section 1123(1) or 1123(28),. or both sections together, our decision is the same as regards an attempted levy on the authority of either.
Petitioner, in his second proposition on petition to rehear, insists that the following statement from our former opinion is erroneous:
“The opinion of this honorable Court says: 'And we think that when this annuity comes into the jurisdiction of the taxing authorities of Tennessee, it is an entity and has lost the characteristics of the property from which it is derived.’ ”
Petitioner insists that Mrs. Sanborn, “since she was the beneficiary of an express trust which in plain terms required that she be paid, not only from the principal, but from the income thereof, that she became the owner of' the equitable title to the taxable dividends and interest as the same accrued.”
This statement overlooks entirely, the language of Mrs. Sanborn’s father’s will and the intermediate discretion of the trustees there granted. The incidence of the Tennessee tax is upon Mrs. Sanborn’s interest when and not until the trustees have set that interest apart. It is then, and not before, that such interest is credited, or has accrued and comes into the jurisdiction of the taxing authorities of Tennessee. The trustees have a number of legacies to provide and may pay Mrs. Sanborn out of the corpus entirely if they see fit and their obligation as trustees will be met so long as they pay her the fixed sum of $2400 per year. We cited the Whitehouse Case merely as illustrative of the legal character of annuities, not as determinative of their taxability or non-taxability under-Tennessee Law. The Federal Income Tax Law may reach (under the XVI Amendment) income from tohatever *159source derived. It is significant, therefore, that despite this very broad authority, in the Whitehouse Case it was held that annuities were not taxable as income.
If they are not taxable as income under the Federal Law a fortiori they are not taxable under the very limited and restricted scope of the Hall Income Tax Law, which can be no broader than the Constitutional grant that the Legislature shall have power to tax income from stocks and bonds not taxed ad valorem.
Distinguishing the facts of the Whitehouse Case from the authority of Irwin v. Gavit, 268 U. S., 161, 45 S. Ct., 475, 69 L. Ed., 897, which was pressed to support the tax as income in the Whitehouse Case, Justice McReyNOlds delivering the Court’s opinion said:
“Irwin v. Davit is not applicable. The bequest to G-avit was to be paid out of income from a definite fund. If that yielded nothing, he got nothing. This court concluded (in the case of Irwin v. Gavit) that the gift was of money to be derived from income and'to be paid and received as income by the donee. Here (in the case of Burnet v. Whitehouse) the gift did not depend upon income, but was a charge upon the.' whole estate during the life of the legatee to be satisfied like any ordinary bequest. ’ ’ Burnet v. Whitehouse, 283 U. S., 148, 151, 51 S. Ct., 374, 376, 75 L. Ed., 916, 918, 919, 73 A. L. R., 1534.
Only two new authorities in support of the petition to rehear are presented for our consideration. They are Heiner v. Beatty (3 Cir.), 17 F. (2d), 743, and Warner v. Walsh (2 Cir.), 15 F. (2d), 367.
The case of Heinerv. Beatty, cited and relied on most strongly by petitioner, is so clearly distinguishable on the facts from the case before us, that a careful analysis makes it authority for the opinion rendered, rather than *160for a modification or rehearing. In onr opinion we cited the case of Burnet v. Whitehouse, supra. It is expressly said in the course of that opinion that 11 Irwin v. Gavit is not applicable.” 283 U. S., 148, 51 S. Ct., at page 376, 75 L. Ed. at page 918, 73 A. L. R., 1534. The case of Heiner v. Beatty (3 Cir.), 17 F. (2d), 743, 744, cites as its sole and exclusive authority, Irwin v. Gavit:
“Moreover, the Supreme Court in construing a will, not unlike the one here in issue, in respect to liability for taxes, found its members not all of one mind; yet, we are constrained by the reasoning, illustrations and inevitable inferences found in the opinion of that court, as well as by its judgment, in Irwin v. Govit, 268 U. S., 161, 165-169, 45 S. Ct., 475, 60 L. Ed., 897, to hold that the moneys which came in to John W. Beatty, being income produced from a capital sum created specifically to produce it, was income within the meaning of the Revenue Act of 1918 and that his payment of the tax thereon assessed, being proper, cannot be recovered in this suit.”
It follows, therefore, that the case of Eeiner v. Beatty, supra, furnishes no authority for the case before us here, since we held that in the case of Burnet v. Whitehouse, supra, was the authority upon which we based the distinction to be drawn between “an annuity and an income from a trust fund. ’ ’
The will under which the tax was levied in the Eeiner Case created a trust entirely different from that created in the Sanborn Case. There, an annuity in language similar to that in the Sanborn Case was first created, but of this defining or creating clause, the Federal Court said in its opinion, “If the will had stopped there ... all payments made to him year by year ivould have been exempt from taxation.” The testator^had added (17 P. *161(2d), at page 743) a direction to the trustee to set apart a sufficient corpus-to each annuitant “to produce by the clear net interest and income,” etc. Thereby there was created a gift of income, not an annuity. The Court correctly, therefore, applied the rule of Irwin v. Gavit, supra, and not that laid down in Burnet v. Whitehouse, supra.
The case of Warner v. Walsh, incorrectly cited by petitioner as being reported in 15 F. (2d), 267,, and which appears at page 367 of that volume, is not in point because it was an annuity created in lieu of dower, and which therefore being created in consideration of the forbearance to assert a váluable property right, is governed by different rules than those laid down for annuities which are mere bequests or gifts without consideration other than love and affection. It was there held merely that the case of Irwin v. Gavit, supra, did not apply, and in effect, the widow was in the same situation — so far as taxation was concerned — as if she had purchased an annuity from an insurance company. It is distinguishable from our present ease because it involved an uncertain amount of annual dividend's from stocks in a commercial corporation, and not the fixed sum of an annuity. In Bettendorf v. Commissioner of Internal Revenue (8 Cir.), 49 F. (2d), 173, 175, because the sum involved was held to be interest from stocks and bonds, and not an annuity, the amount was subject to income taxation. The court said in part in this regard:
“In pointing out the distinction between income and an annuity, in Peck v. Kinney, supra [2 Cir., 143 F., 76]:, the court said: ‘There is this distinction between income and an annuity. The former embraces only the net profits after deducting all necessary expenses and charges; the *162latter is a fixed amount directed to be paid absolutely and without contingency. Ex parte McComb, 4 Bradf. Sur., N. Y., 151, 152. ‘‘An annuity is defined as ‘a stated sum, payable .annually’ (Pearson v. Chace, 10 R. I., 455), or as ‘a yearly payment of a certain sum, of money granted to another in fee, for life, or for years.’ ” ’ ”
Finally petitioner says:
• “We are wholly unable to find any authority supporting the- notion that annuities ■ are so impervious* to investigation by the taxing authorities as that otherwise taxable income when incorporated therein ceases to be taxable.” '•
\ It-is, of course, admitted that never since the adoption of the Constitution'of 1870 and the passage-of the various taxing statutes' under its' authority thereafter, has there been such an attempt to tax as is made in the present case.- If there has béen,-petitioner has not called it to our attention. - We'are not at all surprised that petitioner finds no authority for or-against this unusual procedure, any more than he would find authority to forbid the taxation-of--a “house” or- a “horse” as income-because dividends and interest from stocks and bonds had gone into thé purchasé money.for those articles, which then become taxable as separate • entities ad valorem. Mrs. Sanborn should- not escape taxation on the' annuity, but under our law- it would be assessable to her ad valorem on January tenth next after its receipt.
In the case of Home Insurance Co. v. New York, 134 U. S., 594, 10 S. Ct., 593, 33 L. Ed., 1025, 1030, a tax was assessed ón'"the franchise or business of the Company, which- resisted- payment of the tax -on the ground that such- tax was in effect on bonds- of the United States, in which securities, much of the capital of the company- was *163invested. Mr. Justice Field, who delivered the opinion of the Supreme Court of the United States, upheld the .tax on the ground that the bonds, though a part of the capital assets, were integrated in the business and that the business was an entity separate and distinct from the parts, and that it was therefore within the power of the State of New York to lay a tax upon it. This, it seems to us, is the same principle which we have applied in the case before us, the sole difference being that in the one case the taxpayer has sought an exemption, which was disallowed, and in the present case a collector has sought to levy a tax which has been disallowed on exactly the same ground.
Finally, since petitioner here seeks to impose a tax, it is his duty and certainly not ours, to produce authority for his action. "We have carefully read and re-read the petition to rehear, but fail to find any such authority, and have discussed those cited in the petition to show that they are not in point. It remains only to hold that this case seems to us clearly an attempt to extend by implication the taxing power conferred by the Constitution and the Hall Income Tax Law. There is very definitely a doubt of the authority, and that doubt, under all our authorities, is to be resolved in favor of the taxpayer and against the State.
“Revenue acts are not to be interpreted so as to extend their provisions by implication beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out, but are to be construed most strictly against the State and in favor of the citizen. United States v. Merriam, 263 U. S., 179, 44 S. Ct., 69, 68 L. Ed., 240, 29 A. L. R., 1547; Smietanka v. First Trust & Sav. Bank, 257 U. S., 602, 42 *164S. Ct., 223, 66 L. Ed., 391; Gould v. Gould, 245 U. S., 151, 38 S. Ct., 53, 62 L. Ed., 211; State ex rel. v. Louisville & N. R. Co., 139 Tenn. [406], 412, 201 S. W., 738.” Bank of Commerce & Trust Co. v. McCabe, 164 Tenn., 591, 593, 51 S. W. (2d), 850.
Petition to rehear is denied.