Mandate conformed to April 20, 1940
See 111 F.2d 144. [308 U.S. 389, 390] Messrs. Thomas M. Wilkins, of Washington, D.C., and Lloyd E. Elliott, of Dallas, Tex., for petitioner.
Miss Helen R. Carloss, Sp. Asst. to Atty. Gen., for respondent.
Mr. Justice STONE delivered the opinion of the Court.
Decision in this case turns on the question whether a capital stock tax return filed pursuant to 215 of the National Industrial Recovery Act of 1933, 48 Stat. 195, 207, may be amended within the time fixed for filing the return. [308 U.S. 389, 391] Sections 215 and 216 of the National Industrial Recovery Act impose interrelated taxes on domestic corporations, namely an annual capital stock tax and an annual tax on profits in excess of 12 1/2 per cent of the capital stock, calculated on the basis of the value of the capital stock as fixed by the corporation's return for the first year in which the tax is imposed.
Section 215(a) imposes on domestic corporations an annual tax with respect to carrying on or doing business for any part of the taxable year at the rate of '$1 for each $1,000 of the adjusted declared value of its capital stock.' Section 215(f) provides that 'For the first year ending June 30 in respect of which a tax is imposed by this section upon any corporation, the adjusted declared value shall be the value, as declared by the corporation in its first return under this section (which declaration of value cannot be amended), as of the close of its last income-tax taxable year ending at or prior to the close of the year for which the tax is imposed by this section .... For any subsequent year ending June 30, the adjusted declared value in the case of a domestic corporation shall be the original declared value' as changed by certain prescribed capital adjustments occasioned by increases and decreases of capital occurring after 'the date as of which the original declared value was declared.' Section 216(a) imposes an annual tax upon so much of the net income of a corporation taxable under $215(a) as is in excess of 12 1/2 per cent of the 'adjusted declared value of its capital stock ... as of the close of the preceding income-tax taxable year (or as of the date of organization if it had no preceding income-tax taxable year) ....'
It will be observed that by 215(a) and (f) the declared value of capital stock which is made the basis of computation of both taxes is not required to conform either to the actual or to the nominal capital of the taxpaying [308 U.S. 389, 392] corporation; and that the declared value for the first taxable year, with the addition or subtraction of specified items of subsequent capital gains or losses is made the basis of the computation of both taxes in later years. The taxpayer is thus left free to declare any value of capital stock for its first taxable year which it may elect, but since the declared value for the first year is a controlling factor for the computation of taxes for later years, the statute provides that the declaration once made cannot be amended. Because of the method of computation, increase or decrease in the declared value of capital, and of the corresponding tax, produces, as the case may be, a decrease or an increase in the tax on excess profits.
In August, 1933, petitioner, a Texas corporation, mistakenly believing that it was required to state the par value of its issued capital stock in its tax return, filed a timely return for the year ending June 30, 1933, declaring the value of its entire capital stock to be $120, 000 and paid the tax of $120. The date for filing returns for that year having been extended to September 29, 1933, T.D. 4368, 4386, petitioner before that date filed an amended return, declaring the value of its capital stock to be $250,000. On March 15, 1934, petitioner filed its income and excess profits tax return for the calendar year 1933. The Commissioner, having refused to accept the amended capital stock return, gave notice of a deficiency in the excess profits tax calculated upon the basis of the capital stock value of $120,000 as declared in petitioner's original return.
The Board of Tax Appeals determined that petitioner's capital stock and excess profits tax should be computed on the basis of $120,000 capital stock value as originally stated instead of $250,000 stock value declared in its amended return, found a deficiency, and entered its order accordingly. 38 B.T.A. 141. The Circuit Court of [308 U.S. 389, 393] Appeals for the Fifth Circuit affirmed, holding that 215(f) by its terms precluded any amendment of the tax return for the first year even though made within the time allowed for filing the return. 104 F.2d 24. We granted certiorari October 9, 1939, 308 U.S. 533 , 60 S.Ct. 93, 84 L.Ed. --, to resolve a conflict of the decision below with that of the Court of Appeals for the Sixth Circuit in Glenn v. Oertel Co., 97 F.2d 495, and that of the Court of Claims in Philadelphia Brewing Company v. United States, 27 F.Supp. 583.
The Commissioner founds his argument in support of the decision below upon a literal reading of the introductory sentence of 215(f) already quoted, which, he argues, precludes even a timely amendment of the tax return for the first year, and upon the administrative and Congressional interpretation of the statute. He insists that the phrase 'first return' in the clause 'declared value shall be the value, as declared by the corporation in its first return under this section (which declaration of value cannot be amended)', means the first paper filed by the taxpayer as a return, and that these words plainly forbid any amendment of the declared value of the capital stock, even though made within the time allowed for filing the return.
In making these contentions the Commissioner concedes that the amount of the declared value of capital fixed for the first year is a matter of indifference to the Government since the statute leaves the taxpayer free to declare any amount which its fancy may choose and that for any reduction in capital stock tax effected by the declaration of a low value of the capital stock there is an accompanying increase in excess profits taxes. He concedes that if petitioner had filed but a single return on the date of filing the amended return, stating the value of the capital stock as $250,000 instead of $120,000, the Government would have been concluded by the taxpayer's declaration and that it has long been the practice [308 U.S. 389, 394] of the department, in the cases of other types of tax to accept an amended return, filed within the period allowed for filing returns, as the return of the taxpayer for the taxable year. He concedes also, as he logically must, that the argument leads to the conclusion that a mistake in the declaration of value whether of law or of fact, however, serious and excusable, cannot be corrected by a timely amendment of the return.
All statutes must be construed in the light of their purpose. A literal reading of them which would lead to absurd results is to be avoided when they can be given a reasonable application consistent with their words and with the legislative purpose. Hawaii v. Mankichi, 190 U.S. 197 , 23 S.Ct. 787; United States v. Katz, 271 U.S. 354 , 46 S.Ct. 513; Sorrells v. United States, 287 U.S. 435, 446 , 53 S.Ct. 210, 214, 77 LEd. 413, 86 A.L.R. 249; Burnet v. Guggenheim, 288 U.S. 280, 285 , 53 S.Ct. 369, 370, 77 L,.ed. 748; Armstrong Paint & Varnish Works v. Nu-Enamel Corp., 305 U.S. 315, 332 , 333 S., 59 S.Ct. 191, 199, 200. Here the purpose of the statute is unmistakable. It is to allow the taxpayer to fix for itself the amount of the taxable base for purposes of computation of the capital stock tax, but with the proviso that the amount thus fixed for the first taxable year shall be accepted, with only such changes as the statute prescribes for the purpose of computing the capital stock and excess profits taxes in later years. Congress thus avoided the necessity of prescribing a formula for arriving at the actual value of capital for the purpose of computing excess profits taxes, which had been found productive of much litigation under earlier taxing acts, see Sen.Rep. 52, 69th Cong., 1st Sess., pp. 11-12; cf. Ray Consolidated Copper Co. v. United States, 268 U.S. 373, 376 , 45 S.Ct. 526, 527. At the same time it guarded against loss of revenue to the Government through understatements of capital, by providing for an increase in excess profits tax under 216 ensuing from such understatements.
It is plain that none of these purposes would have been thwarted and no interest of the Government would have [308 U.S. 389, 395] been harmed had the Commissioner, in conformity to established departmental practice, accepted the petitioner's amended declaration. It is equally plain that by its rejection petitioner has been denied an opportunity to make a declaration of capital stock value which it was the obvious purpose of the statute to give, and that denial is for no other reason than that the declaration appeared in an amended instead of an unamended return. We think that the words of the statute, fairly read in the light of the purpose, disclosed by its own terms, require no such harsh and incongruous result.
Section 215 nowhere mentions amendment of returns or amended returns. It speaks of 'declared value' for the first tax year and provides that the 'declaration of value' cannot be amended. The 'declaration of value' is that of the corporation in its 'first return under this section'. The 'first return' as the context shows is the return for the first tax year of the taxpayer and the characterization of the return as 'first' is obviously used to distinguish the return made for the first year from the return 'for any subsequent year' in which the 'adjusted declared value' is required by the same section to conform to a formula based on the 'declared value' for the first year and which, for that reason, 'cannot be amended'.
Article 24 of Treasury Regulations 64 (1933 ed.), under 215(f) of the National Industrial Recovery Act, in force when the petitioner filed its amended return, did not call for any different construction from that which we have indicated is the correct one. The article made no mention of the 'first return'. It pointed out merely that the original declared value would be the basis of the tax for the first and later years, and stated 'This value once having been declared may not subsequently be changed either by the corporation or by the commissioner.' This evidently refers to the parenthetical clause of 215(f) 'which declaration ... cannot be amended' which phrase concededly does not preclude an effective declaration of value in a timely amended return.