Appeals from the Orders of the Board of Finance and Revenue in cases of In Re: Rohm and Haas Company, No. C-282; and In Re: Westinghouse Electric Corporation, No. C-38344.
Philip C. Herr, with him John H. Potts, Philip C. Herr, II, and Herr, Potts & Herr, for appellant, Rohm and Haas Company.
Howell C. Mette, with him Shearer, Mette & Woodside, for appellant, Westinghouse Electric Corporation.
Vincent J. Dopko, Deputy Attorney General, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by President Judge Bowman.
[ 28 Pa. Commw. Page 432]
These consolidated appeals on stipulated facts present the novel question of whether a corporate taxpayer which elected under 26 U.S.C.A. § 33 of the Internal Revenue Code of 1954*fn1 to take foreign taxes withheld or paid as a credit against federal income tax liability rather than as a deduction from gross income, may subsequently take such foreign taxes as a deduction for purposes of computing tax liability under the Corporate Net Income Tax Act (Act), Act of May 16, 1935, P.L. 208, as amended, 72 P.S. § 3420a et seq.*fn2
Westinghouse Electric Corporation and Rohm and Haas Company (Appellants) are appealing from orders of the Board of Finance and Revenue (Board) dated August 27, 1975, rejecting a petition for refund
[ 28 Pa. Commw. Page 433]
by Westinghouse for the calendar year 1969 and a petition for refund by Rohm and Haas for the calendar year 1970. For those years, Appellants elected in their consolidated federal returns to take as credits against their federal income tax liability foreign taxes withheld by or paid to foreign governments. 26 U.S.C.A. § 33. Appellants then filed their Pennsylvania corporate net income tax returns for those years in which returns said foreign taxes were not taken as deductions and Appellants' corporate net income taxes paid accordingly.
Postdating the settlements of Appellants' returns, on March 10, 1972, the director of the Bureau of Corporate Taxes issued Memorandum No. 83 (No. 83) allowing corporate taxpayers to take under the Act as a deduction foreign taxes withheld or paid, notwithstanding how the taxpayer elected to treat them under the IRC.*fn3
Claiming the benefits of No. 83, Appellants filed Petitions for Refund.*fn4 It is from the denial by the Board of these petitions that these appeals have been brought.
Appellants' common contentions may be briefly stated. First, it is argued that the corporate net income tax by the terms of the Act is levied solely upon net income actually received by the corporate taxpayer so that foreign taxes withheld or paid are not within the Act's scope. Second, Appellants contend that there is no provision in the Act subject to a construction that would prohibit taking as a deduction foreign ...