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April 23, 1964

UNITED STATES of America, Defendant (two cases)

The opinion of the court was delivered by: LEVET

The plaintiff-taxpayer, Universal Film Exchanges, Inc., seeks by these actions to recover the identical sum, $ 7,357.06, as interest allegedly due it on a payment of $ 16,230 made by the Commissioner on June 25, 1957, pursuant to Sections 780 and 781, Int.Rev.Code of 1939. *fn1"

The actions represent but separate theories to recover the identical sum. The first, 62 Civ. 3059, is based on the contention that on June 28, 1957 Universal paid a deficiency in excess profits tax and interest for its fiscal year ended October 31, 1944, *fn2" which was excessive to the extent of $ 7,357.06, for failing to take into account that sum as interest on a credit to it of $ 16,230. The second action, 63 Civ. 1814, seeks the identical sum but is premised on the theory that Universal's payment of its taxes for 1950 was an overpayment because of the Commissioner's erroneous application of an overassessment on Universal's tax for that year. In its brief the taxpayer concedes that the second action was simply a precautionary measure, and, after a subsequent clarification of the government's accounting, concedes that the first action is the appropriate one. The remainder of the opinion will proceed on the basis of that concession.

Both the taxpayer and the government have moved for summary judgment. The facts are not disputed and the case is in all respects ripe for summary judgment.


 On December 8, 1949, Universal filed an amended excess profits tax return for 1944 disclosing an additional deficiency in excess profits tax of $ 162,300 *fn3" and claimed an additional 'net post-ear refund credit' of $ 16,230. The additional deficiency had been assessed the previous day and was considered paid by Universal's aggregate payment of $ 632,663 on December 7, 1949. At the time of the assessment, the Commissioner did not allow as an offset against the additional deficiency the $ 16,230 claimed increase in the net post-war refund credit. Taxpayer's application for relief under Section 722 for 1944 was determined on January 25, 1950.

 On May 15, 1957, the exact additional excess profits tax deficiency was determined to be $ 167,008. A credit of $ 162,300 was allowed against this deficiency. On June 25, 1957, a post-war refund credit of $ 16,230, attributable to the additional deficiency of $ 162,300 assessed and paid on December 7, 1949, was allowed and paid to Universal, without interest.

 The taxpayer contends that the Contends that the Commissioner should have allowed interest in the sum of $ 7,357.06 on the post-war refund credit from December 7, 1949, the date the additional deficiency of $ 162,300 was assessed and paid, to June 28, 1957, the date when Universal was finally credited with the amount.


 There is little doubt that under Sections 780 and 781 the taxpayer is not entitled to interest on the overpayment attributable to the ten per cent 'post war refund credit.' As originally enacted, Section 780(a) provided a post-war refund credit of 10% Of the excess profits tax imposed for each taxable year ending after December 31, 1941. Subsections (b) and (c) required taxpayers to pay their excess profits taxes in full without regard to the post-war refund credit and provided that taxpayers were to receive United States bonds in amount equal to the credit and went on to provide:

 'Such bonds shall bear no interest, shall be nonnegotiable, and shall not be transferable by sale, exchange, assignment, pledge, hypothecation, or otherwise, on or before the date of cessation of hostilities in the present war * * *.'

 In the case of a deficiency in excess profits tax for any taxable year for which a credit was provided by Section 780(a), a post-war refund credit of 10% Of the deficiency was available to the taxpayer for the purpose of acquiring non-interest bearing United States bonds.

 These sections were made inapplicable to taxable years commencing after December 31, 1943 by Section 3 of the Tax Adjustment Act of 1945, 59 Stat. 519. That section substituted a new section, Section 784, which provided a 10% Credit as a direct offset against the excess profits tax imposed. Although interest was payable under Section 784, Universal's fiscal year 1944 commenced on November 1, 1943, thus making Sections 780 and 781 applicable.

 As far as pertinent to this case, Section 3 of the 1945 Act also amended Section 781(a) to provide that where a deficiency in excess profits tax is paid on or after July 1, 1945, bonds are not required to be issued with respect to the post-war refund credit. Section 781(c) was amended to provide that the amount was to be paid in cash.

 The Report of the House Ways and Means Committee (H.R.Rep.No.849, 79th Cong.1st Sess.), commenting on the amendment to ...

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