The opinion of the court was delivered by: LEVET
The United States of America, plaintiff in the above-entitled action, moves under Rule 12, Fed. R. Civ. P., to dismiss the respective counterclaims of defendants Championship Sports, Inc., a New York corporation ("CSI NY"), Championship Sports, Inc., an Illinois corporation ("CSI Ill") and Championship Sports, Inc., a Massachusetts corporation ("CSI Mass") upon the ground of lack of jurisdiction. The United States also moves under Rule 56, Fed. R. Civ. P., for summary judgment dismissing the counterclaims of defendants Charles Liston and Floyd Patterson. Patterson, in turn, moves for summary judgment in his favor on his counterclaim against the United States. Finally, the CSI defendants move to dismiss the cross-claim of Patterson for lack of jurisdiction and to sever the cross-claim of Liston.
The complaint of plaintiff, United States of America, filed November 30, 1962, grows out of the promotion by defendants CSI NY of the championship boxing match on September 25, 1962 between Floyd Patterson and Charles Liston pursuant to certain contracts between Patterson, Liston and the CSI defendants. The complaint alleges in substance:
(1) Termination of CSI NY's taxable year on September 25, 1962 under IRC § 6851; determination of its tax liability; demand for payment; and non-payment;
(2) Levy under IRC § 6331 on the ancillary receipts from the fight to satisfy an assessment, now abated, against Graff, Reiner & Smith Enterprises, Inc.;
(3) A demand that this court declare the seized funds to be the property of CSI NY and foreclose on those funds the lien of the United States which encumbers the property of CSI NY.
On December 31, 1962, all parties, except Liston, entered into a stipulation, the pertinent parts of which appear later in this opinion. By stipulation of January 30, 1963, Liston agreed to be bound by the stipulation of December 31, 1962.
On June 20, 1963, the Internal Revenue Service received income tax returns from CSI NY and CSI Mass for the fiscal year ending May 31, 1963. According to the affidavit of counsel for the United States, the Internal Revenue Service received no income tax return for fiscal year 1963 from CSI Ill and counsel for CSI Ill is unable to state that any return was filed.
On or about August 12, 1966, the District Director of Internal Revenue issued notices of deficiency to CSI NY and CSI Mass. Thereafter, on or about November 7, 1966, CSI NY and CSI Mass filed petitions in the Tax Court of the United States asking for redetermination of the deficiencies asserted in the notices of deficiency.
By notice of motion filed October 3, 1967, the three CSI defendants moved to dismiss (on consent) Graff, Reiner & Smith Enterprises, Inc. as a defendant, to dismiss the cross-claim of Patterson, to sever the cross-claim of Liston, and for leave to file an amended answer. By order filed October 27, 1967, this court dismissed Graff, Reiner & Smith Enterprises, Inc. as a defendant and granted leave to file an amended answer. The amended answer, containing the counterclaims which are the object of plaintiff's motion to dismiss, was filed on November 9, 1967.
Counterclaims of CSI NY and CSI Ill.
It is well-settled law that a suit for refund of taxes must be based on a claim previously filed with the Commissioner. Rogan v. Ferry, 154 F.2d 974 (9th Cir. 1946); Zeeman v. United States, 275 F. Supp. 235 (S.D.N.Y. 1967).
Section 7422(a) of the Internal Revenue Code of 1954 states in its pertinent part as follows:
"No suit or proceeding shall be maintained in any court for the recovery of any * * * tax alleged to have been erroneously * * * collected, * * * until a claim for refund or credit has been duly filed with the Secretary or his delegate * * *."
Failure to file a claim is, therefore, a fundamental defect in jurisdiction of the district court and it may not proceed to hear such suit.
Apparently, CSI NY contends that its return for the fiscal year ending May 31, 1963 constituted such a claim. Actually, the return in question contained nothing but the word "inactive" spread vertically along the columns set aside for the recording of gross income and deductions and a " 0" in item 32 entitled "Credits." Moreover, Treas. Reg. § 301.6402-3 states, in pertinent part, as follows:
"(a) In the case of income tax, claims for refund may not only be made on Form 843 but may also be made on any individual, fiduciary, or corporation income tax return * * * or on any amended income tax return.
"(b) A properly executed individual * * * income tax return shall, at the election of the taxpayer, constitute a claim for refund or credit within the meaning of section 6402 and section 6511 for the amount of the payment disclosed by such return. * * * An election to treat the return as a claim for refund or credit shall be evidenced by a statement on the return setting forth the amount determined as an overpayment and advising whether such amount shall be refunded to the taxpayer or shall be applied as a credit against ...