DAVIS, District Judge.
Before the Court are Rule 56 cross-motions for summary judgment. The plaintiff essentially asserts that it is entitled to recover interest paid on a portion of an income tax deficiency which was purportedly extinguished in a later year.
Briefly, the facts are as follows. The plaintiff is a corporation which operates on a fiscal year basis, terminating September 30th. In the years ending September 30, 1953 and 1954, the plaintiff duly filed tax returns and satisfied its income and excess profits taxes, by the December 15 due date. The FY 1953 return was prepared in accordance with the Internal Revenue Code of 1939, and the FY 1954 return in accordance with the then-recently effective 1954 Code. After some modifications and adjustments,
the plaintiff paid taxes aggregating $253,934.26, for the fiscal year 1954.
The complaint alleges that on August 19, 1955, as a result of flooding, the plaintiff experienced a casualty loss. This created a net operating loss for the fiscal year ending September 30, 1955. Under authority of Section 172 of the 1954 Code, the plaintiff applied for a net operating loss carryback, which was tentatively granted. Accordingly, refund checks were received from the Treasury Department on December 15, 1955, for the fiscal years 1953 and 1954, in accordance with Section 172(b)(1)(A).
Then on April 27, 1962, the plaintiff filed a claim for a refund for the fiscal year ending September 30, 1954. This claim was favorably considered, and the plaintiff was authorized to apply $125,368.03 against a then-existing deficiency for the year 1953 (not at issue), of $218,923.10. In so doing, the Government considered that $125,368.03 of the 1953 deficiency had been extinguished as of April 27, 1962, the date that the plaintiff filed the claim. Consequently, it had assessed interest from September 30, 1953, the date that the deficiency arose, until April 27, 1962, the date the deficiency was deemed satisfied by the set-off.
The plaintiff is asserting that the deficiency should have been deemed extinguished, not on the application date (4/27/62), but on the due date of the return for the loss year (12/15/56). This is the precise issue presently before the Court.
Preliminarily, we hold that the 1939 Code applies in determining the effective date of a refund for fiscal years ending on September 30 of 1953 and 1954. This is based on Section 7851(a)(6)(B) of the 1954 Code, which provides that the provision of the 1939 "Code" . . . "shall remain in effect until January 1, 1955, and shall also be applicable to the taxes imposed by this title." This provision includes Section 3771(e) regarding claims on carryback of losses or credits.
This statute has been further implemented by Treasury Regulation 1.395-1(a) which states that "all years beginning before January 1, 1954, and ending either before, on or after August 16, 1954 are subject to the Internal Revenue Code of 1939."
We also note that the plaintiff does not strenuously contest this conclusion, since it is "willing for the purposes of this motion to concede that the 1939 Code applies" (p. 4 plaintiff's brief in support of its motion).
A technical defense has been interposed by the Government. It is contended that the plaintiff is barred from recovery for asserting a theory of recovery in its complaint which differs from the grounds set forth in its original claim for a refund.
While this requirement is indeed the law (see Treasury Regulation 301.6402-2(b), implementing Section 7422 of the 1954 Code) it has not been construed as strictly as the Government herein asserts. The purpose of this requirement is quite properly to "apprise the Commissioner of the exact basis thereof ". Nemours Corp. v. United States, 188 F.2d 745, 750 (3rd Cir., 1951). The fact that the plaintiff originally based its application for refund
on the analogous provision of the 1954 Code, rather than the 1939 Code, did not deprive the Commissioner of a clear understanding of the plaintiff's contention and theory of recovery. Indeed, even if the plaintiff's case were prosecuted under the 1954 Code, only a nominal variance would result. There was sufficient information supplied by the plaintiff pursuant to its various refund claims to adequately apprise the government of the pendency of a claim under the 1939 Code.
Turning to the merits, we hold that Section 3771(e) of the 1939 Code is applicable. This statute provides, in relevant part:
Claims based on carry-back of loss or credit.