same, in context where the landowner, seeking a depreciation allowance, argued in favor of capitalization and the Commissioner argued against
How later courts described this case
- same, in context where the landowner, seeking a depreciation allowance, argued in favor of capitalization and the Commissioner argued against
Written by the judges who cited it.
The opinion
NORTHCOTT, Circuit Judge
(dissenting). I cannot concur in the foregoing opinion for the reason that it appears clear to me that no part of the consideration passing from the coal company in its contract with the railroad in this ease can in any way be considered as invested capital under the provisions of the act of Congress (section 326 of the Revenue Act of 1918). That part of the section which is applicable provides:
“(a) That as used in this title the term ‘invested capital’ for any year means * * * (3) paid-in or earned surplus and undivided profits. * * * ”
The $250,000 claimed by the company to have been invested, never passed through the hands of the company, was never credited to surplus or undivided profits, and was only a vague and indefinite benefit surrendered by the company in the price of its coal as sold to the railroad company. Under the reasoning of the La Belle Iron Works Case, 256 U. S. 377 , 41 S. Ct. 528 , 65 L. Ed. 998 , to receive the benefits of an invested capital expenditure, the investment must appear clearly and conclusively, and must not be the result of surmise or “hoped-for gains.”
Under its contract with the railroad, the coal company acquired no asset, either tangible or intangible, other than the right to use the spur track, in which right the coal company participated along with the general public, under the laws governing common earners.
The railroad company could, with much more reason, charge the cost of constructing the track in question to its capital account, and to allow the Gauley Mountain Coal Company to do likewise would be permitting a double charge to capital account, and result in an injustice to the government.
It does not appear from the record just how much of the consideration for the contract entered into between the Gauley Mountain Coal Company and the railroad company consisted of the fact that the coal company was securing a sale for a large and fixed quantity of coal to a customer of the highest credit rating, with assurance of prompt payment, a consideration which frequently leads companies to cut the price of their product.
Congress could have provided that such a transaction as the one here set out could be charged up to invested capital, but in its wisdom it has not seen fit to do so, and, in order to secure this privilege, the Gauley Mountain Coal Company must bring itself squarely within the provisions of the act of Congress. This it has not done.