decided: October 16, 1974.
Appeal from judgment of Commonwealth Court, No. 410 T.D. 1970, in case of Commonwealth of Pennsylvania v. Albacore Corporation.
Eugene J. Anastasio, Deputy Attorney General, for Commonwealth, appellant.
William P. Thorn, with him Samuel H. Levy, and Wolf, Block, Schorr & Solis-Cohen, for appellee.
Jones, C. J., Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Opinion by Mr. Justice Eagen. Mr. Justice Roberts took no part in the consideration or decision of this case.
[ 457 Pa. Page 540]
The appellee, Albacore Corporation, is a California corporation, which was duly licensed to carry on business in this Commonwealth on August 26, 1959.*fn1 Dolphin Corporation (an affiliate of Albacore) by deed dated August 3, 1959, acquired an office building in Philadelphia, Pennsylvania, commonly known as the Packard Building, located at 15th and Chestnut Streets, from The Fifteenth and Chestnut Realty Company for a consideration of $2,204,184.*fn2 Said deed provided that the property "was subject to the lien of a certain mortgage [in favor of The Equitable Life Assurance Society of the United States] securing the principal sum of $5,350,000. . . ." However, the deed also recited that: "[I]t is expressly understood that Grantee does not assume, and is hereby expressly relieved from, any personal liability either as Indemnitor or otherwise, to
[ 457 Pa. Page 541]
the Grantor or to any other corporation or person, for or by reason of the above mentioned, or any other mortgage debts or interest thereon or other sums secured upon or payable out of the above described property or any part thereof."
Albacore, under a separate and contemporaneous agreement, purchased a one-third interest in the Packard Building from Dolphin for a consideration of $734,728.
The Pennsylvania Foreign Excise Tax Act*fn3 imposed a non-recurring one-third of one percent tax "upon the
[ 457 Pa. Page 542]
amount of any increase of capital actually employed wholly within this Commonwealth."*fn4 [Emphasis supplied.] Therefore, in compliance with this act, the appellee filed on August 24, 1959, its initial Foreign Excise Tax Report. In this return, Albacore reported that its investment in the Packard Building was $734,728, its sole capital employed in Pennsylvania.*fn5
Subsequently, Albacore filed its Pennsylvania Franchise Tax and Corporate Net Income Tax Report, and its Foreign Excise Tax Report for the short period ending September 30, 1959, and duly reported an increase in capital employed in this Commonwealth of $125,886.57.
The initial Foreign Excise Tax Report and the report for the short period ending on September 30, 1959, were both settled by the Department of Revenue on June 23, 1960, and by the Auditor General on July 7, 1960. Thereafter, the appellee filed the necessary yearly tax forms for the fiscal years 1960 through
[ 457 Pa. Page 5431964]
. However, these forms reported no new tax liability*fn6 for the appellee because Albacore asserts it did not increase, in any of these years, the capital it employed in this Commonwealth beyond the $860,614.57 figure it reported in 1959. None of these returns considered the existing unassumed mortgage on the Packard Building to be part of the appellee's capital employed wholly within this Commonwealth.
On June 18, 1965, Albacore disposed of all of its assets in Pennsylvania and duly filed its final Pennsylvania Foreign Excise Tax Report. Once again, this report stated: that the appellee did not increase the capital it utilized in the Commonwealth during the taxing years; and, that it did not consider the unassumed mortgage to be part of its employed capital. However, the Commonwealth, in its settlement, found that the appellee did increase its capital by the amount of $1,226,603 during this final taxing period.*fn7
[ 457 Pa. Page 544]
The appellee filed a petition for resettlement arguing: (a) that the mortgage should not be included as part of its capital employed wholly within this Commonwealth; and, (b) that, even if the mortgage should properly be included as part of its capital, the Commonwealth is barred by the Statute of Limitations from now so asserting. However, this petition for resettlement was rejected. Albacore filed a timely Petition for Review with the Pennsylvania Board of Finance & Revenue, which was denied after a hearing on the matter.
Albacore filed an appeal in the Commonwealth Court, which an order reversing the Board of Finance and Revenue and granting judgment in favor of the appellee. The Commonwealth then filed a direct appeal with this Court.*fn8
The Commonwealth Court reasoned that since the Foreign Excise Tax only subjects foreign corporations to a tax on any increase in their capital employed in this Commonwealth during the taxing year, and that since the appellee did not first employ the unassumed mortgage as capital in Pennsylvania in 1965, the Fiscal Code's*fn9 two-year Statute of Limitations*fn10 barred the Commonwealth from pursuing this matter. Therefore, it was unnecessary to resolve the question of whether or not the unassumed mortgage should have properly been considered as part of Albacore's capital employed wholly within Pennsylvania. We agree.
The appellant contends that the Commonwealth is never estopped by a mistake of one of its agents from imposing an otherwise proper tax.*fn11 We do not disagree with this statement; however, the Commonwealth completely misses the point. We are not here dealing with a case of estoppel; we are dealing with a Statute of Limitations which can and does bar the Commonwealth from pursuing prior tax obligations.
The Commonwealth is merely attempting to accomplish a result indirectly that it cannot properly achieve directly. It is trying to resettle the appellee's 1959 tax return six years after the return had been filed and five years after it had been settled, which action is clearly prevented by Section 1105 of the Fiscal Code, supra. The mortgage to Equitable, if indeed it constituted "capital actually employed wholly within this Commonwealth," is not something which was first employed in 1965, but was utilized in the initial 1959 purchase.
Mr. Justice Roberts took no part in the consideration or decision of this case.