Appeals from judgments of Court of Common Pleas of Dauphin County, Nos. 367 and 368 Commonwealth Docket, 1962, in case of Commonwealth of Pennsylvania, Board of Finance and Revenue, v. Northern Metal Company.
Morris Wolf, with him Steven A. Arbittier, Raymond J. Bradley, and Wolf, Block, Schorr & Solis-Cohen, for appellant.
Vincent X. Yakowicz, Deputy Attorney General, with him Walter E. Alessandroni, Attorney General, for Commonwealth of Pennsylvania, Department of Finance and Revenue, appellee.
Bell, C. J., Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Cohen. Mr. Chief Justice Bell dissents.
Northern Metal Company (appellant) is a Pennsylvania corporation with its sole place of business in Philadelphia. Originally incorporated in 1932 as a dealer in metals, it amended its charter in 1954 to permit it to engage in the business of stevedoring. All of its real and personal property is located in Pennsylvania. All of its employees are located and work in Pennsylvania. It is not registered to do business in any other jurisdiction, nor does it pay any tax to any other state or country.*fn1
During the year 1957*fn2 appellant filed its Pennsylvania corporate net income tax report showing net income in the amount of $52,901.02. From this it subtracted interest on United States securities of $2,094.91 and paid tax (at 6%) on the remainder. The tax, thus computed, was $3,048.37. The State settled the tax by determining net income to be $676,140.18 (the amount of taxable income reported to the Federal Government) which, after substracting the interest on United States securities, left an income of $674,045.27 subject to tax. Tax was then computed at $40,442.72. The State's computation was made without resort to the allocation fractions set forth in the Corporate Net Income Tax Act, Act of May 16, 1935, P. L. 208, as amended, 72 P.S. §§ 3420a-3420n. It simply applied the six percent tax rate to 100% of appellant's net income as determined by the State.
Appellant then filed a petition for resettlement in accordance with § 1102 of The Fiscal Code, Act of April 9, 1929, P. L. 343, as amended, 72 P.S. § 1102; and the State resettled appellant's tax at $31,982.18. This amount was computed by allowing appellant to use the allocation fractions and determining that a partial allocation of gross receipts could be made outside of Pennsylvania.*fn3
Subsequently, the Commonwealth, in accordance with the authority granted it under § 1105 of The Fiscal Code, supra, 72 P.S. § 1105, resettled appellant's 1957 corporate net income tax by disallowing the use of any allocation fractions and imposing tax at the rate of six percent on appellant's total net income. The total income was the $676,140.18 previously determined by the State plus $15,665.17 added to federal taxable income by the Federal Government or $691,805.35. From this total was substracted the interest from United States securities,*fn4 leaving a taxable net income of $689,711.34 and a tax of $41,382.68.
Appellant filed a petition for review with the Board of Finance and Revenue which upheld the final resettlement. On appeal to the court below from the board's refusal, appellant was again denied relief. This appeal followed.
In preparing its corporate net income tax report for 1957, appellant resorted to a procedure it had previously followed in earlier years.*fn5 It determined the amount of its ...