833 Findings of Fact taxes, report any part of the plaintiff's contributions to the trusts in the taxable periods during which the contributions were made. The beneficiaries did, however, report the amounts distributed to them from the trusts on their individual returns for the taxable periods in which the distributions by the trustee occurred. 21. On its income and declared value excess profits tax return for the fiscal year that ended on November 30, 1945, the plaintiff deducted from gross income the amount of $47,200 as additional compensation paid to the beneficiaries of Trusts F and G out of the plaintiff's profits for such fiscal year. (See finding 11(a).) 22. After an examination of the plaintiff's income and declared value excess profits tax return for the fiscal year that ended on November 30, 1945, the Commissioner of Internal Revenue disallowed the amount of $47,200 (see finding 21) as a deduction in the fiscal year 1945 or any other year, and allowed no deduction to the plaintiff for the fiscal year 1945 or any other year on account of contributions by the plaintiff to, or distributions by the trustee from, any of the trust funds mentioned in these findings. 23. The plaintiff did not at any time make application to the Commissioner of Internal Revenue for a ruling that any of the trusts referred to in these findings qualified as a taxexempt employees' trust under the provisions of Section 165 of the Internal Revenue Code of 1939, or for a ruling as to the applicability of Section 23 (p) of the Internal Revenue Code of 1939 to funds paid into such trusts. Facts relating to the amount of plaintiff's excess profits credit for fiscal 1945 24. (a) For the fiscal year 1945, the plaintiff computed its excess profits credit, for the purpose of determining the excess profits tax imposed by Chapter 2, Subchapter E, of the Internal Revenue Code of 1939, under the invested capital method. (b) In its tax returns for the fiscal years 1942, 1943, and 1944, the plaintiff had claimed as deductions the following amounts which were due and owing under the agreements creating Trusts A, B, C, D, and E: None of the aforesaid amounts-all of which were paid by plaintiff to the trustee named in the respective trust agreements-was included by the plaintiff in its annual earnings or capital account. (c) In its excess profits tax return for the fiscal year 1944, the plaintiff also claimed as a deduction the amount of $58,864.87 as abnormal net income under section 721 of the Internal Revenue Code of 1939. 25. (a) On December 9, 1948 and April 4, 1951, revenue agents issued their reports of examination of the plaintiff's Federal tax returns for certain years, including fiscal 1942, 1943, and 1944. In such reports, the agents proposed to disallow the deduction of the plaintiff's contributions to the trusts from the profits of such years, in the total amount of $130,400; and also proposed to disallow the deduction of $58,864.87 as abnormal income in the fiscal year 1944. There resulted the following adjustments in the plaintiff's tax liability for the years 1942–1944: (b) Under the dates of December 29, 1950 and January 4, 1952, the plaintiff protested the adjustments and tax deficiencies proposed by the revenue agents. On September 7, 1951 and July 22, 1954, the Appellate Division of the Internal Revenue Service held conferences to hear the plaintiff's protest. 26. On March 30, 1955, by registered notice, the Commissioner of Internal Revenue disallowed the deductions claimed by the plaintiff on its returns for 1942, 1943, and 1944 as 833 Findings of Fact contributions to the trusts and as abnormal income received in 1944, and determined the following deficiencies (or overassessments): Such deficiencies were duly assessed and paid. In so far as such deficiencies resulted from the disallowance of the plaintiff's contributions to the trusts, it filed claims for refund on August 23, 1956, asserting substantially the same grounds as those relied upon in the present litigation. 27. In computing the plaintiff's invested capital credit for its fiscal year 1945, the Commissioner of Internal Revenue reduced its accumulated earnings and profits at the beginning of such year by the amount of the total net tax deficiency of $164,844.25 determined by him for the years 1942-1944, which thereby reduced the plaintiff's excess profits credit for such year. Also, in computing such credit, the Commissioner did not increase the plaintiff's earnings and profits at the beginning of the fiscal year 1945 by the amount of the deductions ($130,400) which the plaintiff had claimed as contributions to the trusts and which the Commissioner had disallowed; nor did he otherwise include in the plaintiff's invested capital at the beginning of fiscal 1945 such amount of $130,400 or any part thereof. 28. During the fiscal year that ended on November 30, 1941, the plaintiff sustained a bad-debt loss on the basis of which it filed a claim for a refund of 1941 income and excess profits taxes. On March 12, 1957, the Commissioner of Internal Revenue allowed such claim to the extent that the plaintiff's previously determined tax liability for 1941 was reduced in the amount of $47,161.69. The Commissioner of Internal Revenue, however, has made no adjustment of the plaintiff's invested capital for any of the fiscal years 1941-1945 on account of such tax reduction. Order 146 C. Cls. 29. (a) The examination of the plaintiff's tax returns for its fiscal year that ended on November 30, 1945 resulted in a determination by the Commissioner of Internal Revenue of an excess profits tax deficiency in the amount of $79,999.25. The plaintiff duly paid such deficiency on or about September 1, 1955. (b) On or about February 21, 1956, the plaintiff filed with the Commissioner of Internal Revenue a claim for refund of excess profits tax for the fiscal year 1945 in the amount of $64,245.98, or such greater amount as might be legally refundable. The grounds asserted for the allowance of such claim were substantially identical with those asserted in the petition filed with this court on October 15, 1956. The plaintiff's claim was rejected by the Commissioner of Internal Revenue on July 19, 1956. CONCLUSION OF LAW Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover together with interest thereon as provided by law, with the amount of recovery to be determined pursuant to Rule 38 (c). In accordance with the opinion of the court and on a memorandum report of the commissioner as to the amounts due thereunder, it was ordered on June 24, 1960, (1) that, for its fiscal year ended November 30, 1945, the plaintiff is entitled to judgment for overpayment of excess profits taxes in the amount of $7,817.39, together with the overpayment of deficiency interest thereon in the amount of $4,448.95 or an aggregate overpayment of $12,266.34 with interest on the aggregate sum as provided by law; and (2) that for plaintiff's fiscal year ended November 30, 1945, there is a deficiency in plaintiff's income taxes in the amount of $2,377.18, which, together with appropriate interest thereon, may be offset against the aforesaid aggregate amount of overpayment of excess profits taxes. ORDERS JUNE 1, 1959, TO JULY 15, 1959 No. 50027. JUNE 5, 1959 Pennsylvania Railroad Company. Carriage of goods; applicable tariff; Interstate Commerce Commission determination of reasonableness.-Plaintiff sued to recover additional transportation charges computed at the tariffs in effect for domestic shipments on the ground that defendant was not entitled to the tariffs applicable to export shipments since the goods shipped were not exported as planned. Proceedings in the case were suspended on April 3, 1957, to enable the parties to have the Interstate Commerce Commission pass on the reasonableness of the domestic rates. On November 12, 1958, the Interstate Commerce Commission determined that as to certain shipments in issue the rates urged by plaintiff were unjust and unreasonable, while as to others they were just and reasonable. On March 23, 1959, defendant moved to vacate the suspension of proceedings and for judgment in accordance with the determination of the Interstate Commerce Commission. Plaintiff opposed the motion urging that the suspension of proceedings continue until the United States District Court in Pennsylvania rendered a decision on plaintiff's petition to enjoin and set aside the order of the Interstate Commerce Commission. On June 5, 1959, the Court of Claims issued an order in which it found the procedure requested by plaintiff inapplicable, and it was ordered that the defendant's motion to vacate the suspension of proceedings be granted and judgment be entered for plaintiff in the amount found reasonable by the Interstate Commerce Commission. On June 13, 1960, the Supreme Court rendered a decision holding that plaintiff was entitled to have the order of the Interstate Commerce Commission judicially reviewed by the District Court and that the Court of Claims should have stayed its proceedings pending such review. The judgment of June 5, 1959, was accordingly reversed. 363 U.S. 202. 588587-62- -56 |