The opinion of the court was delivered by: LEVET
The plaintiff-taxpayer, Universal Pictures Company, Inc., seeks by this tax refund action to recover what it alleges to be overpayments of interest on income and excess profits tax payments made by it for its fiscal years ended October 31, 1944 and 1945.
For the year 1944, the Commissioner assessed interest in taxpayer's favor pursuant to Section 3771(g)
from January 31, 1951 on a component excess profits tax overassessment resulting in part from the carryback to 1944 from 1946 of an unused excess profits credit due to the granting of taxpayer's prior application under Section 722. The taxpayer contends that interest should have been allowed from April 28, 1948, one year after it filed its Section 722 application or, in the alternative, from January 13, 1950, the date of filing its carryback claim. Under its first theory, the taxpayer seeks to recover an overpayment of $ 148,801.35 together with interest thereon from May 15, 1957, the date the component excess profits tax overassessment was credited against the excess profits tax liability for 1944 and the resultant deficiency paid. Under its alternative theory, the taxpayer seeks a refund of $ 54,717.57 with interest thereon from May 15, 1957. Should the court find that interest was properly assessed from January 13, 1951, the taxpayer claims, in the alternative, that it was entitled to recover interest on the portion of a payment made by it on December 7, 1949, which was applied by the Commissioner in satisfaction of the component income tax deficiency resulting from the carryback of the unused excess profits credit. Simply stated, the taxpayer claims under this theory that, having paid before the date from which interest could have been assessed against it, the government should respond in interest for the period it held the money before it was due.
For 1945, the taxpayer claims interest with respect to an income tax payment for 1945 under a theory identical to its 'use of money' theory advanced for the year 1944. Originally, in filing its refund claim for 1945, the taxpayer also contended that the Commissioner failed to credit it with an interest payment of $ 20,745.42 made with respect to its excess profits tax liability for that year. The taxpayer, in its brief, now expressly concedes that it did in fact receive credit for the payment and this issue is no longer in controversy.
Both the taxpayer and the government have now moved for summary judgment. The facts are not disputed and the case is in all respects ripe for summary judgment.
Simultaneous with the filing of its 1944 excess profits tax return, Universal filed an application for relief under Section 722 seeking to establish a constructive average base period net income (CABPNI) for use in calculating its excess profits tax liability for that year.
On its return, it elected pursuant to Section 710(a)(5) to defer payment of a portion of its excess profits tax liability pending the outcome of its Section 722 application.
On April 24, 1947, Universal filed its excess profits tax return for 1946, utilizing in its computations an excess profits credit of $ 1,977,837.
Again, it chose to defer the payment of a portion of its excess profits tax liability for that year and simultaneous with its return, filed a Section 722 application for 1946.
On April 13, 1949, Universal filed a claim for refund of the excess profits taxes it paid for 1946 based on the carryback from 1948 to 1946 of a net operating loss which had the effect of eliminating all of its income subject to the excess profits tax for the year 1946. At the same time it filed a claim for refund of the excess profits tax it paid for 1944 in the amount of $ 893,272 based on a claimed carryback of an unused excess profits tax credit for 1946 arising from the carryback of the net operating loss from 1948 to 1946.
On December 7, 1949, Universal made an aggregate payment of $ 3,669,536 to the Collector of Internal Revenue which, at Universal's request, was applied against deficiencies in income and excess profits taxes for various years including 1944 and 1945. The following day Universal filed amended income tax returns for both 1944 and 1945, reporting additional deficiencies.
In January 1950, the Excess Profits Tax Council approved Universal's Section 722 applications for 1943 through 1946 and determined that for 1944 and 1946 Universal was entitled to a CABPNI of $ 2,685,000.
On January 13, 1950, Universal filed a further claim for refund of the excess profits taxes it paid for 1944 based on the carryback from 1946 to 1944 of an unused excess profits credit resulting from the granting of its Section 722 application. This carryback resulted for 1944 in a component excess profits tax overassessment of $ 911,959 and in a con-commitant component income tax deficiency of $ 387,381. On the same date, Universal filed a claim for refund of the excess profits tax it paid for 1945 based on the carryback from 1947 to 1945 of an unused excess profits credit resulting from the operation of Section 722.
The Commissioner, at Universal's direction, applied $ 774,762 of Universal's December 7, 1949 payment in equal parts to eliminate the income tax deficiency resulting from Universal's successful Section 722 application for the year 1944 and the income tax deficiency occasioned by the granting of Universal's January 13, 1950 carryback application. On the December 7, 1949 payment, the sum of $ 452,121 was credited against the component income tax deficiency of $ 387,381 arising from the grant, in part, of Universal's Section 722 application for 1945 and to the extent of $ 64,740 against the net additional income tax deficiency for fiscal year 1945 as shown on the amended return. The component income tax deficiency which resulted from the grant, in part of Universal's carryback of an unused Section 722 excess profits credit from 1947 to 1945, amounted to $ 86,962.
When all was said and done, there remained an excess profits tax deficiency for 1944 and both an excess profits tax and income tax deficiency for 1945. These amounts together with interest were paid by Universal on May 15, 1957. Universal preserved its right to recover the amounts here challenged ...