of just compensation which lawfully may be paid when the title to a vessel has been requisitioned under said act. In this connection, it was held (quoting from the syllabus):

Section 902 (a) of the Merchant Marine Act of 1936, as amended, relating to the compensation to be paid owners of private vessels requisitioned by the United States during the existence of a national emergency, and providing that "in no case shall the value of the property taken or used be deemed enhanced by the causes necessitating the taking or use," operates to prohibit the payment of compensation for such vessels based on values in excess of those existing on September 8, 1939-the date of the President's proclamation of a "limited national emergency" provided the excess be determined as due to economic conditions directly caused by the national emergency.

However, with respect to the effect of said enhancement clause upon the amount payable as charter hire for the use of a vessel requisitioned on a time charter basis, it was held (quoting from the syllabus):

The limitation in section 902 (a) of the Merchant Marine Act of 1936, as amended, upon the compensation that may be paid by the United States for vessels requisitioned for title or use during any national emergency, prohibits any increase in compenhsation by reason of an "enhancement" in value of the vessel from causes necessitating the taking or use, and has no application to increased costs of operation, etc., in cases where the use of a vessel is requisitioned.

Subsection (b) of said section 902 limits the values which may be placed upon vessels taken or used under said section if it appears either that a construction-differential subsidy has been paid on the vessel under the provisions of Title V of said act or that the vessel contains national defense features previously paid for by the United States. It may not be determined from the facts stated in your letter whether the provisions of this subsection have application to the involved vessels. However, it will be assumed for the purposes of this decision that all five vessels here involved were constructed wholly with private funds.

The statistics and computations appended to your letter are designed to effect certain adjustments in the actual earnings for the three vessels in operation during the year 1939, together with adjustments in the 1941 earnings for the two vessels completed and placed in operation subsequent to 1939, in accordance with section 722 of the Internal Revenue Code, as amended by section 222 of the Revenue Act of 1942, Public Law 753, approved October 21, 1942, 56 Stat. 914. There is no indication either in your letter or in the attachments thereto as to the market value of the first group of vessels on September 8, 1939. Such omission probably is due to your determination that "The Seatrain vessels are unique with respect to method of operation, and their construction and use involve patented and other special features" or to your opinion that "The proper rate of hire is most readily determinable through the use of actual earning power of the vessels while they were in the hands of the owner." It is recognized that other than the usual tests may have to be resorted to in fixing the charter

**

*

hire for the use of particular types of vessel. See The I. C. White, 295 F. 593, 595.

The nature of the objection hereinafter discussed probably will be more readily understandable if it be assumed that the problem concerns only those vessels actually in operation during the year 1939. The absence of evidence of the fair market value of such vessels on September 8, 1939, would seem to have the effect of making the principles laid down by said decision of November 28, only indirectly applicable in the present problem. Perhaps, it would be advisable specifically to state the standard to which the proposed charter hire must conform in order to comply with the enhancement clause of said section 902. Said clause would appear to prohibit the payment of charter hire for vessels in existence on September 8, 1939, and requisitioned for use by the Government thereafter, to the extent that it exceeds the fair market value of the use of such vessels on September 8, 1939, provided such excess be determined as due to the economic conditions directly caused by the national emergency.

While it would appear unnecessary for present purposes to discuss in any detail the effects of the excess-profits tax provisions of Title II of the Revenue Act of 1942-a matter primarily for the consideration of the Bureau of Internal Revenue-it may be helpful to consider briefly the purpose of section 722 of the Internal Revenue Code, as amended thereby. The Committee on Ways and Means, House of Representatives, in its report (No. 2333, page 142) on H. R. 7378, which subsequently became the Revenue Act of 1942, explains such purpose as follows:

In the light of the greatly increased excess-profits tax rate, it is believed desirable to afford relief in meritorious cases to corporations which bear an excessive tax burden because of an abnormally low excess profits credit. Therefore section 722 which currently extends relief only in a limited class of cases is revised and broadened so as to remove existing inequities and to alleviate hardship in cases where relief cannot now be obtained. Under this revision, corporations satisfactorily establishing eligibility for relief will have their excess profits tax recomputed on the basis of the excess profits credit based on income. This credit will be predicated upon an amount which is a fair and just reflection of the normal earning capacity of the business and which it is entitled to retain before the imposition of an excess profits tax. Such amount will be used as a constructive average base period net income, replacing the actual average base period net income in the recomputation of the tax under this section. In the case of eligible taxpayers not now entitled to use the excess profits credit based on income, provision is made for the use of such credit computed upon the constructive average base period net income. In order to eliminate consideration of the effects of the war, it is provided that, in determining the constructive average base period net income, no regard shall be had to events or conditions affecting the taxpayer, an industry of which it is a member, or taxpayers generally, occurring or existing after December 31, 1939. Thus high war prices, swollen demand, and other factors which would not be normal prior to the imposition of the excess profits tax shall be eliminated in the computation of the normal or average earning capacity of the taxpayer.

In other words, where the use of the actual net income for the base period results in an unjust excess-profits tax due to the influence of unusual and extraordinary factors on the business of the tax

540712m-43-58

ing such period, the law permits certain adjustments in such net income resulting in what is termed "constructive average base period net income." And, it is this amount, computed as provided by the terms of said section—subsequently to be adjusted in accordance with any changes actually effected therein by the Bureau of Internal Revenuewhich it is here proposed to use as a base for determining the charter hire for these Seatrain vessels. The last sentence of the above-quoted portion of the Committee report to the effect that high war prices, swollen demand, and other abnormal factors are not reflected in the amount computed in accordance with the formula contained therein, would appear to support the use of such amount as indicative of the fair market value of the use of the vessels during the year 1939.

However, notwithstanding such fact, there is considerable doubt whether the rate thus determined is not subject to the following fundamental objection. The purpose of the formula prescribed by section 722 is as above stated-to provide a fair basis upon which to compute the "greatly increased excess-profits tax" imposed by said Revenue Act of 1942. Nevertheless, the amount of net income so calculated apparently includes some profit-however normal-which the act exempts from the operation of the excess-profits tax. In fact, the very term "excess-profits tax" seems to leave that conclusion inescapable. Both textbook writers and the courts agree that since the element of profit depends so much upon the fortune, skill, and good management with which a business is conducted it, alone, furnishes no test of the value of the property and may not be accepted in condemnation proceedings as proof of market value. Orgel, "Valuation under Eminent Domain," section 177; 2 Lewis, Eminent Domain, 3d Edition, section 670; 2 Nichols, Eminent Domain, section 1172; City of Los Angeles v. Deacon, 7 Pac. 2d 378, 379; Gauley and E. Ry. Co. v. Conley, 100 S. E. 290, 291; West Chicago Park Com'rs v. Boal, 83 N. E. 824, 828. This principle would appear equally for application where the determination involves the fair market value of the use of the property. See, in this connection, Hudson Navigation Co. v. United States, 57 C. Cls. 411; Gulf Refining Co. v. United States, 57 C. Cls. 559.

The soundness of the rule is apparent when considered in the light of the usually employed standard of market value, that is, the amount a willing buyer would pay a willing seller for the property or for its use. See 29 C. J. S. 137, page 974, and cases cited. A prospective charterer of a vessel might be interested in the earnings of the vessel in the hands of its owner as some indication of what he himself might expect to earn from the vessel, but he certainly would not be willing to pay the sum total of such earnings to the owner as charter hire. In other words, he would be willing to pay only its fair rental value.

On the other hand, the same authorities state that where the Government takes not only the property but also the business conducted thereon, evidence of profits is allowable. It might be argued, upon a showing that it is not now possible to replace these Seatrain vessels with others suitable for the purpose of carrying on the business of the owner, that the action of the Government is tantamount to a taking of the business. However, in this connection, attention is invited to that portion of section 902 above quoted which states "The owner shall not be paid for any consequential damages arising from a taking or use of property under authority of this section." Thus, a clear distinction is apparent between a case such as this-where all five vessels have been taken off their usual routes and four of them turned over to military and naval uses-and a case such as the appropriation by the Government of the use of a railroad where the business of the road continues as usual after it has passed into Government hands. Compare, Railway Steel Spring Co. v. Chicago and E. I. R. Co., 261 F. 690; Commissioner of Internal Revenue v. Middland Val. R. Co., 57 F. (2d) 1042.

Accordingly, if, as would appear from the present record, the proposed charter hire for these Seatrain vessels as computed in accordance with the formula prescribed by section 722 of the Internal Revenue Code, as amended, includes an element of profit earned by the owners of the vessels, through their operation during the year 1939, such amount would appear to be in excess of the fair market value of the use of such vessels as limited by the enhancement clause of said section 902 of the Merchant Marine Act of 1936, and to such extent unauthorized. See, particularly, Gulf Refining Co. v. United States, supra. However, if such profit as may be contained in such amount be eliminated-with a fair degree of accuracy-this office would not be required to object to otherwise proper payments for the use of such vessels upon the basis set forth.

(B-32721)

REGULAR ARMY OFFICERS APPOINTED FROM CIVIL LIFE-PERSONAL TRANSPORTATION AND TRANSPORTATION FOR DEPENDENTS FROM HOME TO FIRST DUTY STATION

Warrant officers appointed in the Regular Army from civil life are not entitled, under section 12 of the Pay Readjustment Act of 1942, to reimbursement on a mileage or other basis for expenses of travel from home to first duty station. Transportation, at Government expense, from home to first duty station for dependents of officers of the Regular Army appointed from civil life is not authorized by section 12 of the Pay Readjustment Act of 1942

Assistant Comptroller General Elliott to the Secretary of War, March 12, 1943: There has been received your letter of February 23, 1943, as follows:

The War Department has before it for consideration the question whether it may properly issue travel orders under which payment of mileage or other form of travel reimbursement may be legally made to warrant officers appointed in the Regular Army from civilian life covering travel from their homes to their first duty stations.

In this connection, attention is invited to the fact that such warrant officers are now being reimbursed under proper orders for the expenses of travel performed by their dependents from the homes of such personnel to their first duty stations under the authority of that part of Section 12 of the Pay Readjustment Act of 1942 approved June 16, 1942 (Public Law 607-77th Congress), reading as follows:

"The words 'permanent change of station' as used in this section shall include the change from home to first station and from last station to home when ordered to active duty other than training duty, of any officer, warrant officer, nurse, or enlisted man of any of the services mentioned in the title of this Act, including retired personnel and members of the Reserve components thereof, in a grade for which the transportation of dependents is authorized at Government expense, and the change from last station to home in connection with retirement, relief from active duty, or transfer to a Reserve component". [Italics supplied.] While the inconsistency is apparent of reimbursing such personnel for expenses of travel for their dependents from their homes to their first duty stations, and denying reimbursement to such personnel for similar travel performed by themselves pursuant to orders, the War Department has refrained from including authority for reimbursement of such travel in orders covering this class of military personnel and no payment for such travel has been made, because it was felt that legislative authority for the reimbursement for such travel was doubtful.

In an attempt to eliminate the obvious discrimination against such personnel in the matter of reimbursement for the travel herein discussed, your decision is desired as to whether such travel costs may legally be reimbursed under the authority of the general language of Section 12 of the Pay Readjustment Act cited above reading as follows:

"Officers of any of the services mentioned in the title of this Act, including Reserve components thereof and the National Guard, while on active duty in the Federal service, when traveling under competent orders without troops shall receive a mileage allowance at the rate of 8 cents per mile, distance to be computed by the shortest usually traveled route and existing laws providing for the issue of transportation requests to officers of the Army traveling under competent orders, and for deduction to be made from mileage accounts when transportation is furnished by the United States, are hereby made applicable to all the services. mentioned in the title of this Act,

With a view therefore to the issuance of proper orders to such personnel in the future, your decision is requested as to whether under the authority of the law cited herein, or other laws applicable thereto, warrant officers appointed in the Regular Army from civil life may be reimbursed on a mileage or other basis for expenses of travel from their homes to their first duty station, provided the orders directing such travel so state.

The general rule applicable to all public officers, civilian as well as military, is that unless otherwise provided by statute, or regulations having the force of statutes, such officers must place themselves at the place where they are first to perform duty, without expense to the Government. This rule has been recognized and followed, since at least 1857, and probably prior thereto, with respect to officers of the Regular Army who were appointed from civil life, such officers having been denied transportation to their first duty station at Govern