The opinion of the court was delivered by: KIRKPATRICK
This case is before the Court upon a statutory demurrer, filed in accordance with the Pennsylvania procedure. However, the New Rules of Civil Procedure, 28 U.S.C.A. following section 723c, will be applied to the proceeding, and the demurrer will be treated as a motion for judgment on the pleadings.
The suit is to recover an alleged overpayment of excess profits taxes in the amount of $32,014.05 with interest. The essential facts pleaded, and admitted by the defendant, are as follows:
The plaintiffs are the executors of two deceased partners. The taxes in issue are for the taxable fiscal period beginning March 16, 1917, and ending February 28, 1918.
The partners filed their return for the taxable fiscal period on April 30, 1918, and the tax liability shown thereon was assessed and paid during that year.
On February 26, 1926, the Revenue Act of 1926 became law, 26 U.S.C.A. Int.Rev.Acts, p. 145 et seq.
The partnership, within 60 days after the enactment of the law, appealed from the Commissioner's determination of deficiency to the Board of Tax Appeals, and thus brought itself within the provision of that Act, making all of its terms applicable to the proceedings.
The next step is stated as follows in the plaintiff's statement of claim: "* * * thereafter and on, to wit, November 9, 1929, based upon a stipulation of the parties to said appeal as to the partnership's correct tax liability, the said Board entered its decision and a final order finding a deficiency for the period March 16, 1917, to February 28, 1918, of to wit, $26,046.54."
This amount, together with interest of $5,967.51, was assessed against the partnership by the Commissioner on December 21, 1929, and was paid January 31, 1930, to the Collector.
This suit is brought to recover the amounts so paid. Several grounds for recovery are asserted, the most important of which is that the additional tax and interest were assessed and collected after the expiration of the period of the statute of limitations.
The Revenue Act of 1926, which expanded the jurisdiction and powers of the Board of Tax Appeals, provided, Sec. 284(d), 26 U.S.C.A. Int.Rev.Acts, page 220, that if a taxpayer elected to file a petition with the Board of Tax Appeals for the redetermination of the Commissioner's finding of a deficiency, "* * * no suit by the taxpayer for the recovery of any part of such tax shall be instituted in any court * * *." both sides agree that this provision is fully applicable to the present suit, and that it denies jurisdition to this Court unless the case comes within the exceptions of Sec. 284(d) (3), which allows suits "As to any amount collected after the statutory period of limitations upon the beginning of distraint or a proceeding in court for collection has expired; but in any such claim for credit or refund or in any such for refund the decision of the Board which has become final, as to whether such period has expired before the notice of deficiency was mailed, shall be conclusive."
The statement of claim shows that this suit is "As to [an] amount collected after the statutory period of limitations * * * for collection has expired;" and hence, I think, the Court is bound to entertain it. But, as has been noted, the exception of Sec. 284 (d) (3) further provides that in any such suit the decision of the Board as to whether the period for collection has expired before the notice of deficiency was mailed is conclusive, and this brings us to the ultimate question in the case, which is: Did the decision of the Board of November 9, 1929 (which, of course, has become final), finding a deficiency of $26,046.54, include the decision that the period of limitations had not run before the notice of the deficiency was mailed? In my opinion, it did.
The statement of claim says plainly enough that the parties stipulated that the plaintiff's "correct tax liability" was $26,046.54, and that upon this stipulation the Board entered its order. The Government does not contend that this procedure was effective compromise under Sec. 3229 of the Revised Statutes, 26 U.S.C.A. Int.Rev.Code, § 3761, and I fully agree. It is also true that the decision of the Board of Tax Appeals did not expressly adjudicate the question of the expiration of the period of limitations. It does not appear here that the question was raised before the Board. It undoubtedly could have been, and, of course, there may have been matters of waiver or extensions suspending the running of the period. All this, of course, is speculation, and, for ...