Manning v. Seeley Tube & Box Co., 338 U.S. 561 (1950)

Manning v. Seeley Tube & Box Co.

No. 70

Argued November 17-18, 1949
Decided February 6, 1950
338 U.S. 561

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

Respondent corporation filed a federal tax return for 1941 and timely paid the amount of the tax shown thereon. In 1943, after respondent had been adjudged a bankrupt, the Commissioner of Internal Revenue, using the accelerated procedure applicable in bankruptcy cases, assessed a deficiency in the 1941 tax with interest from the date the tax was properly due to the assessment date. Respondent subsequently filed its return for 1943, which disclosed a net operating loss for that year. Under the carry-back provision of the Internal Revenue Code, this loss was sufficient to abate completely respondent’s tax liability for 1941.

Held: respondent was not entitled to a refund of the interest which had been assessed on the tax deficiency. Pp. 562-571.

(a) The subsequent cancelation of the assessed deficiency by operation of the carry-back provision did not cancel respondent’s obligation to pay the interest assessed on the deficiency. Pp. 565-566.

(b) Enactment of the carry-back provision in 1942 did not change the basic statutory policy that the United States is to have the possession and use of the lawful tax at the date it is properly due. Pp. 566-567.

(c) The conclusion that the carry-back provision does not retroactively alter the duty of the taxpayer to pay his full tax promptly is supported by § 3771(e) of the Code, which prohibits a taxpayer who does pay a tax which is subsequently abated by a carry-back from claiming interest from the Government for the intervening period. Pp. 567-568.

(d) Where a deficiency and interest have been validly assessed under any applicable statutory procedure, a subsequent carry-back with an abatement of the deficiency does not abate the interest previously assessed on that deficiency. Pp. 569-570.

172 F.2d 77, reversed.

In an action against the Collector of Internal Revenue to recover an amount withheld as interest on a tax deficiency which was subsequently abated, the District Court gave judgment for the Collector. 76 F.Supp. 937. The Court of Appeals reversed. 172 F.2d 77. This Court granted certiorari. 337 U.S. 955. Reversed, p. 571.