H suant to § 310, orders specified rates thereafter to be charged these become the only lawful rates and so remain until the further order of the Secretary." The bill shows that the Secretary, after inquiry and full hearing, fixed rates thereafter to be charged by the appellees, and these had not been set aside or enjoined in any appropriate judicial proceeding or been altered by subsequent order of the Secretary. The court was, therefore, without power to enjoin the prosecution of the appellees for charging rates other than those established by the Secretary. The appellants did not raise the question of jurisdiction at the hearing below. But the lack of jurisdiction of a federal court touching the subject matter of the litigation cannot be waived by the parties, and the district court should, therefore, have declined sua sponte, to proceed in the cause.10 And if the record discloses that the lower court was without jurisdiction this court will notice the defect, although the parties make no contention concerning it. While the District Court lacked jurisdiction, we have jurisdiction on appeal, not of the merits but merely for the purpose of correcting the error of the lower court in entertaining the suit.12 The decree must, therefore, be reversed and the cause remanded with directions to dismiss the bill. 12 Reversed. 'Compare Arizona Grocery Co. v. Atchison, T. & S. F. Ry. Co., 284 U. S. 370, 386, 387. 10 See Cutler v. Rae, 7 How. 729, 731; Morris v. Gilmer, 129 U. S. 315, 325; Minnesota v. Northern Securities Co., 194 U. S. 48, 62; Mattingly v. Northwestern V. R. Co., 158 U. S. 53; 443 Cans v. United States, 226 U. S. 172; Mitchell v. Maurer, 293 U. S. 237, 244. "Perez v. Fernandez, 202 U. S. 80, 100; Stratton v. St. Louis S. W. Ry., 282 U. S. 10, 13. "United States v. Huckabee, 16 Wall. 414, 435; Stickney v. Wilt, 23 Wall. 150, 163; Gully v. Interstate Natural Gas Co., 292 U. S. 16, 19. Counsel for Parties. KOSHLAND v. HELVERING, COMMISSIONER OF INTERNAL REVENUE. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT. No. 774. Argued May 1, 1936. Decided May 18, 1936. 1. Common voting shares of a corporation received by the holder of cumulative preferred shares as a dividend-held income and not to be treated as returns of capital. P. 443. Therefore, upon a subsequent sale or other disposition of the preferred shares no part of their original cost is to be apportioned to such common shares for the purpose of determining the gain or loss from such disposition. 2. An administrative construction, the effect of which is to convert an income tax imposed by a statute into a capital levy, cannot be adopted. P. 445. 3. Where the provisions of an Act are unambiguous and its directions specific, there is no power to amend it by regulations. P. 446. 81 F. (2d) 641, reversed. REVIEW by certiorari, 297 U. S. 702, of a judgment reversing a decision of the Board of Tax Appeals, 33 B. T. A. 634, and approving the action of the Commissioner of Internal Revenue in increasing an income tax assessment. Mr. John C. Altman for petitioner. Assistant Attorney General Jackson, with whom Solicitor General Reed and Messrs. David E. Hudson, Sewall Key, and Berryman Green were on the brief, for respondent. By leave of Court, Mr. Roger S. Baldwin filed a brief as amicus curiae, urging affirmance of the decision of the Circuit Court of Appeals. The Appelos do 15 ruse the question of jurisdie- Today the subvert mamer of the HOU DE VITE of the pares and the disTHAT NOT SOA la tecla hare betined sva sponte, Leord discloses that the love IS Tbsbruin this court To be the defer. £tbrush the panes make no MOTODIO MIO The the District Court Lacked pnstruo we bare brice in sppeal, not of the mente but merely for the purpose of correcting the error of the lower count entertaining the suit." The decree coust. therefore, be reversed and the cause remanded with directions to dismiss the bill Reversed. *Compare Arizona Grocery Co. v. Auch son, T. & S. F. Ry Co., 24 U. 8 370, 386, 387. "see Cutler v. Rae, 7 How. 729, 751: Moms v. Gilmer, 129 U. S. 315, 325; Minnesota v. Northern Securities Co.. 14 U. S. 48, 62; Mattingly v. Northwestern V. R. Co., 158 U. S. 53; 443 Cans v. United States, 226 U. S. 172; Mitchell v. Maurer, 293 U. S. 237, 244. "Perez v. Fernandez, 202 C. S. 80, 100; Stratton v. St. Louis S. W. Ry, 282 U. 8. 10, 13. "United States v. Huckabee, 16 Wall. 414, 435; Stickney v. Wilt, 23 Wall, 150, 163; Gully v. Interstate Natural Gas Co., 292 U. S. 16, 19. Counsel for Parties. KOSHLAND v. HELVERING, COMMISSIONER OF INTERNAL REVENUE. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT. No. 774. Argued May 1, 1936.-Decided May 18, 1936. 1. Common voting shares of a corporation received by the holder of cumulative preferred shares as a dividend-held income and not to be treated as returns of capital. P. 443. Therefore, upon a subsequent sale or other disposition of the preferred shares no part of their original cost is to be apportioned to such common shares for the purpose of determining the gain or loss from such disposition. 2. An administrative construction, the effect of which is to convert an income tax imposed by a statute into a capital levy, cannot be adopted. P. 445. 3. Where the provisions of an Act are unambiguous and its directions specific, there is no power to amend it by regulations. P. 446. 81 F. (2d) 641, reversed. REVIEW by certiorari, 297 U. S. 702, of a judgment reversing a decision of the Board of Tax Appeals, 33 B. T. A. 634, and approving the action of the Commissioner of Internal Revenue in increasing an income tax assessment. Mr. John C. Altman for petitioner. Assistant Attorney General Jackson, with whom Solicitor General Reed and Messrs. David E. Hudson, Sewall Key, and Berryman Green were on the brief, for respondent. By leave of Court, Mr. Roger S. Baldwin filed a brief as amicus curiae, urging affirmance of the decision of the Circuit Court of Appeals. MR. JUSTICE ROBERTS delivered the opinion of the Court. 1 The writ of certiorari was granted in this case to resolve a conflict between the decision below and one by the Circuit Court of Appeals for the Sixth Circuit.2 The question is whether, under the Revenue Acts of 1926 and 1928, a taxpayer who purchases cumulative non-voting preferred shares of a corporation upon which a dividend is subsequently paid in common voting shares, must, upon a sale or other disposition of the preferred shares, apportion their cost between preferred and common for the purpose of determining gain or loss. The petitioner, in 1924 and 1926, purchased preferred stock of Columbia Steel Corporation. The company's articles of incorporation provided that holders of preferred stock should receive annual dividends of seven dollars a share in cash or, at the company's option, one share of common stock for each share of preferred. Dividends on the preferred were to be paid in full before any could be paid on the common; the common had voting rights, the preferred none. The preferred was redeemable at $105 per share, plus accrued dividends; and upon dissolution or liquidation was entitled to preferential payment of $100 per share, plus accrued dividends, and no more. The common alone was entitled in such event to the assets of the corporation remaining after payment of the preferred. In each of the years 1925 to 1928, inclusive, the company had a surplus sufficient to pay the preferred dividends in cash, but elected to pay them in common stock. The petitioner received, in each of those years, shares of common stock as dividends on her preferred. In 1930 the corporation redeemed its preferred stock at $105 per 2 Commissioner v. Koshland, 81 F. (2d) 641. * Commissioner v. Tillotson Mfg. Co., 76 F. (2d) 189. |