The opinion of the court was delivered by: LEVET
The United States of America, the above-entitled defendant, has moved under Rule 56 of the Federal Rules of Civil Procedure for summary judgment with respect to the claim of the plaintiff for refund of 1950 excess profits tax payments set forth in paragraphs 9, 10, 11 and 12 of the complaint, dealing with the low quality of coking coal and iron ore.
The relevant claims alleged in the complaint are as follows:
" Denial of Application of § 442
"9. Plaintiff duly filed with its consolidated Federal income and excess profits tax return for 1950 a claim that, in determining its excess profits credit, its consolidated 'average base period net income' should be determined in accordance with § 442 of the Internal Revenue Code of 1939.
"10. In determining the Federal income tax for 1950 which Plaintiff has paid, Plaintiff's aforesaid claim for the application of § 442 has been denied.
"11. For 1950, Plaintiff's consolidated 'average base period net income' should have been calculated by reference to § 442 because, within the meaning of § 442(a), during the base period years 1947 and 1948, Plaintiff's normal production was diminished by reason of the occurrence during that period of events unusual and peculiar in the experience of the Plaintiff, and Plaintiff's business was depressed because of temporary economic circumstances unusual in the case of the Plaintiff. Such temporary abnormality was low quality of coking coal and iron ore, resulting in loss of production.
"12. Plaintiff's consolidated 'average base period net income' for 1950 should be computed in accordance with § 442."
The complaint is an action under Section 1346(a)(1) of Title 28 United States Code to recover federal income tax for the year 1950 and assessed interest on additional payments of such tax, which plaintiff claims were erroneously and illegally assessed and collected.
The relevant statute from the Internal Revenue Code of 1939 is as follows:
"§ 442. Average base period net income - abnormalities during base period.
"(a) In general. If a taxpayer which commenced business on or before the first day of its base period establishes that, for any taxable year within, or beginning or ending within, its base period:
"(1) normal production, output, or operation was interrupted or diminished because of the occurrence, either immediately prior to, or during such taxable year, of events unusual and peculiar in the experience of such taxpayer, or [emphasis added]
"(2) the business of the taxpayer was depressed because of temporary economic circumstances unusual in the case of such taxpayer, [emphasis added]
the taxpayer's average base period net income [shall be] * * * determined under this section * * *."
Claim of the United States
The United States contends that the occurrences put forth by the United States Steel Corporation as abnormalities during the base period years of 1947 and 1948 do not qualify as "events unusual and peculiar" or as "temporary economic circumstances unusual" in the case of such taxpayer within the meaning of 26 U.S.C. Excess Profits Taxes, § 442(a)(1) or (a)(2). More specifically, the defendant's contention is as follows: Plaintiff has failed to establish that the shortages of men and materials which delayed development of beneficiating facilities for coking coal and iron ore during 1947 and 1948, and the shortages of steel scrap and coal available for purchase by plaintiff during said years, consisted of more than (1) occurrences affecting business in general; and (2) reasonably-expected competitive pressures.
The Contention of the Plaintiff
The plaintiff, on the other hand, contends that the occurrences cited qualify as abnormalities justifying general relief within the meaning of the statute.
The issue before the court on this motion for summary judgment involves the excess profits tax provided for by the Internal Revenue Code of 1939 and may be stated as follows:
"Do the war-induced shortages of men and materials which delayed plaintiff's development of beneficiating facilities for coking coal and iron ore during 1947 and 1948, and the shortages of steel scrap and coal available for purchase during said years, constitute 'events unusual and peculiar' or 'temporary economic circumstances unusual' in the case of such taxpayer within the meaning of 26 U.S.C. Excess Profits Taxes, § 442(a)(1) or (a)(2)?"
The following facts are derived from the Joint Rule 9(g) Statement submitted by the parties May 1, 1969:
1. In general, plaintiff has continually developed facilities for removing impurities from iron ore and coking coal as mined. Such beneficiating facilities are employed to the extent necessary to render these two important materials suitable for charging into blast furnaces as part of the overall steel-making process. (§§ 28, 29, Joint Rule 9(g) Statement)
2. During the period 1941 to 1948, plaintiff was unable to maintain normal development and expansion of said facilities because of war-induced shortages of men and materials, particularly engineers and draftsmen, steel, steel fabricated products, electrical equipment and delays by suppliers and subcontractors. (§ 16)
3. During 1947 and 1948, the iron ore and coking coal charged to plaintiff's blast furnaces contained more impurities than in any other relevant year.
(§§ 14, 15)
4. During 1947 and 1948, plaintiff's normal production was diminished and its business was depressed due to the high degree of impurities, as mentioned above. The presence of so great a quantity of impurities was the result of the delay in development of beneficiating facilities during 1947 and 1948 because of war-induced shortages of men and materials. (§ 62)
5. The coal available for purchase by plaintiff from independent producers during 1947 and 1948 was less suitable for use in iron and steel production than the coal obtainable in prior or subsequent years. The shortage of acceptable quality coal obtainable by plaintiff during said years was caused by an abnormally high demand coupled with a relatively short supply. The low quality of the coal purchased by plaintiff from independent producers during 1947 and 1948 contributed in part to the low quality of the totality of coal charged to plaintiff's coking ovens and blast furnaces during said years, although ...