Appeal from the Order of the Board of Finance and Revenue in case of Petition of Chrysel Corporation. Appeal transferred from the Court of Common Pleas of Dauphin County to the Commonwealth Court of Pennsylvania, September 1, 1970.
Lewis H. Markowitz, with him Markowitz, Kagen & Griffith, for appellant.
Eugene J. Anastasio, Deputy Attorney General, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer and Rogers. Judge Blatt did not participate. Opinion by Judge Mencer.
Chrysel Corporation (Chrysel) is a Pennsylvania corporation, a wholly owned subsidiary of Triumph Hosiery Mills, Inc. (Triumph), also a Pennsylvania corporation, which was organized for and engaged in the manufacture of ladies' hosiery and knitwear apparel. Prior to 1966, Chrysel manufactured ladies' hosiery and knitwear apparel in Pennsylvania and sold the manufactured products to Triumph, its parent corporation. By 1967, Chrysel had ceased all manufacturing
operations and had leased to Triumph its building in York, Pennsylvania, where it had formerly engaged in manufacturing. Triumph, during the year 1967, continued manufacturing activities that were formerly carried on by Chrysel in the building which it had leased from Chrysel.
Prior to the year 1967, Triumph owed Chrysel money, and this was shown on Chrysel's books for 1967 as an asset and labeled "advance." The monies owed to Chrysel by Triumph were for goods sold by Chrysel to Triumph in previous years. Instead of paying the monies owed to Chrysel, the parent corporation purchased equipment with available funds and used this equipment to manufacture ladies' hosiery and knitwear apparel.
Chrysel timely filed its capital stock tax return for the year ending December 31, 1967. Chrysel computed its tax on the basis of a sworn valuation of its capital stock of $35,000 and a taxable apportion fraction of 10,573/103,631. The Commonwealth settled Chrysel's tax by increasing the valuation of the capital stock to $45,000 and increasing the numerator of the taxable apportion fraction by 48,431, which made the fraction 59,004/103,631.
The increase of 48,431 in the numerator was due to the disallowance by the Commonwealth of (1) the amount owed by Triumph to Chrysel and (2) the average amount of accrued interest receivable on the "advance." The Commonwealth allowed Chrysel the manufacturing exemption for the value of the building and land owned by Chrysel and leased to Triumph. This allowance was in accord with the holding of Commonwealth v. Jeca Corp., 81 Dauphin 36 (1963).
Chrysel timely filed a petition for resettlement and the petition was refused on February 10, 1969. A petition for review was filed by Chrysel with the Board
of Finance and Revenue and this petition was refused on September 25, 1969. Chrysel timely took an appeal to the Court of Common Pleas of Dauphin County, and subsequently this appeal was transferred to the Commonwealth Court, pursuant to the provisions of Section 13(a) of the Act of January 6, 1970, P.L. (1969) 434, 17 P.S. § 211.13(a).
A jury trial has been waived in accordance with the provisions of Section 1 of the Act of April 22, 1874, P.L. 109, 12 P.S. § 688. The parties have entered into a stipulation of facts. We adopt the stipulation as our findings of fact and incorporate the same herein by reference. In the course of this opinion we will discuss ...