Bulova Watch Co. v. United States

                  SUPREME COURT OF THE UNITED STATES

Petitioner recovered a judgment in the Court of Claims against the United States for an overpayment of its excess profits taxes for the fiscal year ended March 31, 1942, in the amount of $ 211,899.28, plus interest thereon "as provided by law." 143 Ct. Cl. 342, 163 F.Supp. 633. Of the principal sum of the judgment, $ 150,016.21 was attributable to an unused excess profits credit carry-back from the succeeding year ended March 31, 1943.

Acting in accordance with the provisions of Section 3771 (e) of the Internal Revenue Code of 1939, the Commissioner computed and allowed statutory interest on the latter sum from June 14, 1945, the date on which petitioner filed its claim for refund, to April 25, 1959 -- 30 days prior to issuance of the refund check -- in the amount of $ 124,784.72. Thereafter, petitioner moved the Court of Claims for relief from the Commissioner's interpretation of the judgment, contending that interest should be computed, under the provisions of 28 U. S. C. Section 2411 (a), from the earliest date the overpayment could have been determined (the end of the fiscal year subsequent to the year involved, i. e., March 31, 1943), rather than from the date it filed its claim for refund (June 14, 1945) as provided in Section 3771 (e), and that it was thus entitled to the further sum of $ 51,252.69. The motion was denied, without opinion.

Because of the importance of the question involved to the proper administration of the internal revenue laws, and to settle a conflict between the lower federal courts upon the question, ¹ we granted certiorari. 364 U.S. 861.

The question thus presented is whether the date from which interest accrues on an overpayment of taxes attributable to an unused excess profits credit carry-back is governed by Section 3771 (e) ² of the Internal Revenue Code of 1939, or by 28 U. S. C. Section 2411 (a). ³

Petitioner contends that, because refund of the tax was not awarded administratively but by the "judgment of [a] court," the date from which interest runs is governed by the provisions of Section 2411 (a), and that it is thus entitled to interest from "the date of the payment" on the "overpayment" which, it argues, became ascertainable, and hence should be regarded as made, on March 31, 1943. ⁴ The Government, on the other hand, contends that Section 3771 (e) is a special statute relating exclusively to tax refunds attributable to the carry-back provisions of the internal revenue laws, and hence prevails, as respects the special subject of carry-backs, over the general provisions of Section 2411 (a). After a careful review of these and other statutes and their legislative history, we have concluded that the Government is right.

Section 3771 (e) of the 1939 Code deals specifically with the subject of interest on tax refunds attributable to the carry-back of a net operating loss or an unused excess profits tax credit, and is "an integral part of the carry-back provision[s]" of the internal revenue laws. Manning v. Seeley Tube & Box Co., 338 U.S. 561, 568. It specifically says that "if the Commissioner determines that any part of an overpayment is attributable to . . . [an] unused excess profits credit for a succeeding taxable year, no interest shall be allowed or paid with respect to such part of the overpayment for any period before the filing of a claim for credit or refund of such part of the overpayment or the filing of a petition with the Tax Court, whichever is earlier." The refund awarded here was solely "attributable to [an] unused excess profits credit for [the] succeeding taxable year." How, then, can petitioner be entitled to interest "for any period before the filing of a claim for credit or refund"?

Petitioner agrees that if its award had been made administratively by the Commissioner or the Tax Court, ⁵ rather than by the "judgment" of the Court of Claims, interest would not be allowable on the refund for any period prior to the filing of its claim. But it argues that the language of Section 2411 (a) -- "In any judgment of any court rendered . . . for any overpayment in respect of any internal-revenue tax, interest shall be allowed . . . upon the amount of the overpayment, from the date of the payment or collection thereof" ⁶ -- requires the allowance of interest "from the date of the payment or collection" of the tax when recovery is awarded by a District Court or, as here, by the Court of Claims. The effect of petitioner's contention thus is that Congress has made the starting date of interest in such cases dependent upon the forum selected by the taxpayer. Its argument would mean -- in fact, it frankly proceeds on the theory -- that a taxpayer, holding a refund claim attributable to an unused excess profits credit, could, by proceeding in a District Court or the Court of Claims, recover interest from the date when a claim for refund could have been filed, yet if he proceeded through the Tax Court he could not recover interest for any period prior to the actual filing of his claim, even though the Tax Court's final judgments (or orders) are subject to review by the United States Courts of Appeals and ultimately by this Court. In the light of the provisions of Section 3771 (e) and its legislative history, it is almost certain that Congress did not intend such an anomalous, nonuniform and discriminatory result.

Petitioner further contends that Section 2411 (a) is a later enactment than Section 3771 (e) and, for that reason, should take precedence over it. We do not believe that Section 2411 (a) can fairly be regarded as a later enactment than Section 3771 (e), for at the time Section 3771 (e) was enacted, in 1942, a predecessor provision of Section 2411 (a) had long been on the books. Save for the word "hereby" -- of no possible significance -- that predecessor provision (Section 177 (b) of the Judicial Code, 28 U. S. C. (1940 ed.) Section 284 (b)) was identical with the present Section 2411 (a). ⁷ But even if petitioner were correct in concluding that Section 2411 (a) is to be regarded as the later enactment, it would not necessarily take precedence over Section 3711 (e), for it is familiar law that a specific statute controls over a general one "without regard to priority of enactment." Townsend v. Little, 109 U.S. 504, 512. See, e. g., Ginsberg & Sons v. Popkin, 285 U.S. 204, 208; MacEvoy Co. v. United States, 322 U.S. 102, 107; Fourco Glass Co. v. Transmirra Corp., 353 U.S. 222, 228-229.

Section 3771 (e) specifically fixes the date from which interest shall run on carry-back refunds. It came into the law with the Revenue Act of 1942, which authorized carry-backs. A carry-back is an exceptional relief measure in that it permits a departure from the basic annual accounting rule. The carry-back provisions "were enacted to ameliorate the unduly drastic consequences of taxing income strictly on an annual basis. They were designed to permit a taxpayer to set off its lean years against its lush years, and to strike something like an average taxable income computed over a period longer than one year." Libson Shops, Inc., v. Koehler, 353 U.S. 382, 386.

The significant feature of a carry-back is that it permits an adjustment of an earlier liability upon the basis of subsequent events. It contemplates that the initial tax obligation was not incorrectly or mistakenly imposed but was actually due, but that an adjustment may be made upon the basis of the taxpayer's gain or loss in the succeeding year or years, and it is evident from the very terms of Section 3771 (e) that Congress thought it would be unfair to the Government to require it to pay interest on a claim brought about by such a retroactive adjustment prior to the time when the taxpayer took affirmative steps to bring home to the Commissioner that he is now in position to claim, and claims, a readjustment of his past admittedly correct tax liability. Section 3771 (e) does not, of course, deny interest on carry-back refunds. It only prohibits the accrual of interest prior to the time the taxpayer's claim therefor is filed with, and thus made known to, the Commissioner.

The report of the Senate Finance Committee on the bill that became Section 3771 (e) clearly discloses that these were Congress' purposes in adopting the section. It said:

     "A taxpayer entitled to a carry-back of a net operating loss or

In providing, in Section 6611 (f) of the 1954 Internal Revenue Code, that overpayments resulting from the carry-back of net operating losses "shall be deemed not to have been made prior to the close of the taxable year in which such net operating loss arises," Congress recognized that it was making a change from existing law. The relevant Committee Report ¹⁰ makes this clear. It said, in pertinent part, that:

     "Existing law denies interest on an overpayment caused by a carry

Affirmed.

MR. JUSTICE DOUGLAS dissents.

² Internal Revenue Code of 1939:

"Section 3771. Interest on Overpayments.

"Section 2411 [as amended by Section 120, Act of May 24, 1949, c. 139,

⁵ Petitioner points to the fact that in Lasky v. Commissioner, 352 U.S. 1027, the Tax Court was held to be an administrative agency.

⁶ Petitioner does not in fact claim interest from the date it actually paid its excess profits taxes for the year 1942 but, rather, from the end of the succeeding tax year that gave rise to the carry -back, i. e., March 31, 1943. See n. 4.

⁷ The history of 28 U. S. C. Section 2411 (a) and its predecessor provisions goes back to 1911. See Section 177 (b) of the Judicial Code, enacted in 1911 (c. 231, 36 Stat. 1141), as amended by the Revenue Act of 1921 (c. 136, 42 Stat. 227, Section 1324 (b)), as further amended by the Revenue Act of 1926 (c. 27, 44 Stat. 9, Section 1117). Further amendments occurred in 1928 (45 Stat. 791, Section 615) and in 1936 (49 Stat. 1648, Section 808). The 1948 codification omitted from the Judicial Code all reference to interest on tax overpayments, but, by a correction Act in 1949 (c. 139, 63 Stat. 89, Section 120), Congress restored the section to the Judicial Code as Section 2411 (a). The only difference between Section 177 (b) as it stood in 1942, and Section 2411 (a) as it stands today, is that the word "hereby" no longer appears. Thus, Section 3771 (e) is not only the specific enactment designed to control the subject of interest in carry-back cases, but it is also a later enactment than Section 2411 (a).

⁸ S. Rep. No. 1631, 77th Cong., 2d Sess., pp. 123-124.

⁹ That Congress did not propose to allow interest for any period prior to presentment of the claim is further confirmed by the provisions of Section 6 of the Tax Adjustment Act of 1945, c. 340, 59 Stat. 517, amending Section 3771 (e). Section 4 of that Act added a new section to the Internal Revenue Code, Section 3780, providing for tentative carry-back adjustments. The concurrent amendment of Section 3771 (e) specifies that interest shall not start to run prior to the date application is made for the tentative carry-back adjustments.

¹⁰ H. R. Rep. No. 1337, 83d Cong., 2d Sess., p. A418.

¹¹ Section 6601 (e) provides that if the amount of tax is reduced by a carry-back loss, the reduction shall not affect the interest payable thereon by the taxpayer for the period ending with the close of the year in which the loss arises. Section 292 (c) of the 1939 Code (added by Section 6 of the Tax Adjustment Act of 1945, c. 340, 59 Stat. 517) provided: "If any part of a deficiency is determined by the Commissioner to be attributable . . . to a carry -back to which an overpayment described in section 3771 (e) . . . in any other tax is attributable . . . no interest shall be assessed or paid under subsection (a) [providing that interest is payable on a deficiency from the date prescribed for the payment of the tax] with respect to such part of the deficiency for any period during which interest was not allowed with respect to such overpayment . . . ."