to the United States of America. Ibid.
This was the construction given the Renegotiation Agreement by the United States Court of Appeals in the earlier case. United States v. Failla, 3 Cir., 219 F.2d 212. It was therein held, at page 214: 'The renegotiation agreement, however, did not determine or fix the amount of the tax credit which was to be applied against the excessive profits as it did in respect of the excessive profits themselves. On the contrary it expressly stated that the computation of the tax credit was to be made by the Bureau of Internal Revenue at the request of the Contractors. Thus the agreement, which was made by the Contractors with the governmental agency empowered to renegotiate their excessive profits and which dealt specifically with the amount of the profits to be eliminated, delegated to another and more appropriate governmental agency, the Bureau of Internal Revenue, the task of determining the amount of decrease in their income taxes with which the Contractors were to be credited in the light of the elimination of the excessive profits from their taxable income for the year in question.' (Emphasis by the Court.)
The elimination of the excessive profits made necessary the recomputation of the tax liability of each taxpayer for the year in question. It is admitted by the United States of America that the recomputation of the said tax liability was made pursuant to Section 3806, supra, and 'was based in part' on the application of Section 6 of the Current Tax Payment Act of 1943. 26 U.S.C.A. (Internal Revenue Acts, Beginning 1940) pages 406 et seq. The actual tax credits allowed each of the taxpayers was thus determined.
The taxpayers here contend that the recomputation thus made was erroneous. It is argued that the amount of allowable tax credits should have been determined without regard to the Current Tax Payment Act of 1943. The argument is predicated upon a narrow and strained construction of the Renegotiation Agreement. Although the taxpayers availed themselves of the 'forgiveness feature' of the Act in the preparation of their returns for the fiscal year 1943, they new protest its application in the determination of their allowable tax credits. We are of the opinion that the contention is without merit.
2, 3$ The general purpose of the Current Tax Payment Act of 1943 was to place the individual taxpayer on a current basis for the taxable years after 1942. Section 6 thereof by its express language was applicable to 'the tax imposed by Chapter 1 of the Internal Revenue Code upon any individual * * *.' The specific purpose of the Section was to afford the individual taxpayer a measure of relief from the burden of paying in one year the accrued taxes of two years, to wit, 1942 and 1943. This was achieved by the application of the 'forgiveness feature' therein contained. While the provisions of the Section did not amend the Internal Revenue Code, they prescribed the method to be applied in the computation of the tax imposed by Chapter 1 thereof; the Section was applicable, of course, only to the specific tax periods 1942-1943.
We are of the opinion that the correct recomputation of the tax liability for the year 1943 and the determination of the tax credits allowable under Section 3806, supra, required the application of Section 6 of the Current Tax Payment Act of 1943. It seems obvious that where, as here, the taxpayers had availed themselves of the advantageous provisions of the said Act, a determination of tax credits allowable under Section 3906, supra, without regard to the said provisions, would have resulted in a windfall. The purpose of Section 3906, supra, was to permit an equitable adjustment of the tax liability upon the repayment of excessive profits; its purpose was not to allow a windfall.
The tax credits allowable under Section 3806 of the Internal Revenue Code, supra, were correctly determined. The complaint will be dismissed and judgment may be entered accordingly.
The only issue raised by the affirmative defense interposed by the United States of America is moot.
The Reconstruction Finance Corporation is not a proper party to this action.
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