For the prosecutor, Ralph E. Lum (Chester W. Fairlie, of counsel).
For the respondents, Walter D. Van Riper, Attorney-General (Benjamin C. Van Tine, Deputy Attorney-General, of counsel).
For the intervenors, Delaware, Lackawanna and Western Railroad Company and Lehigh Valley Railroad Company, Maximilian M. Stallman and Edward A. Markley.
Before Justices Case, Bodine and Porter.
The opinion of the court was delivered by
PORTER, J. This writ brings before us for review the assessment by the State Tax Commissioner of the franchise excise tax against the prosecutor, New York, Susquehanna and Western Railroad Company, for the year 1943 and the judgment of the State Board of Tax Appeals, confirming the said assessment.
The statute under which this assessment was made is chapter 291, Pamph. L. 1941, as amended by chapter 169, Pamph. L. 1942 (R.S. 54:29A-14). It provides for a railroad franchise tax based on the net railway operating income of interstate systems having roads in this state, the allocation of such income taxable in New Jersey being in the proportion which its total track mileage in New Jersey bears to all tracks over which the system operates.
methods of railroad accounting are systematized generally in the business and are recognized as uniform in state and federal tax legislation. In computing the tax the State Tax Commissioner adopted as the basis the methods of accounting as required by the Federal Interstate Commerce Commission (hereinafter referred to as commission).
The prosecutor says that its net railway operating income for 1943 was the sum of $642,363, on which the tax should be based. The state disallows two items on which the net income is based, one of $75,366.92 for depreciation on road and structures, and the other of $198,679 claimed as railway tax accruals. The State Tax Commissioner does not dispute the correctness of these items but disallowed them because they were not reported, as he alleges they should have been, in the prosecutor's report to the Interstate Commerce Commission. The statute supra, section 14, provides that deductions for depreciation shall be allowed and uses this language: "Depreciation charges shall in no instance, however, exceed the amount claimed by the railroad for depreciation in its report or reports to the Interstate Commerce Commission and fixed, or if none was claimed then as fixed, by the Interstate Commerce Commission in determining the net railway operating income of the railroad for the year under consideration." The state contends that the report to the commission did show items of depreciation but did not include this item of $75,366.92. Therefore, it is now precluded from claiming it as a deduction because the items of deduction have been settled or fixed by the report to the Interstate Commerce Committee under the quoted section of the statute. We think not. The clear legislative intent is to tax on the basis of net railway income and to allow the specified items of deduction. The state admits that had this item been included as an item of depreciation in the federal report, it would have been allowed. We do not think that the omission of the item in the report is conclusive. The commission does not determine ...