Commonwealth v. Westinghouse Electric Corp.

MANDERINO,

dissenting.

I dissent. The law of Pennsylvania as the majority correctly notes requires appellant, Westinghouse Electric Corporation, to pay a tax “upon each dollar of net income . received by . and accruing to” the appellant. The foreign taxes paid by the appellant can not possibly be said to have been received by or to have accrued to appellant.

The majority states that the sole inquiry is whether the foreign taxes were treated as taxable income on appellant’s Federal return. This is not the issue. It is true that the Pennsylvania statute defines “net income” as being the same as “taxable income” on the Federal return. The term “net income” in the Pennsylvania statute, is, however, modified by the words received by and accruing to. Thus, the Pennsylvania law says that all of the appellant’s taxable income for Federal purposes received by and accruing to the appellant is taxable in Pennsylvania.

If we are realistic, and successfully escape the semantics game, the amount of foreign taxes paid by the appellant were not received by and did not accrue to appellant.

The appellant, as the majority notes, could have properly deducted the foreign taxes on its Federal return. Federal law, however, allowed the appellant to take these foreign taxes, if it chose, as a tax credit rather than a deduction, this does not change the fact that the money paid for foreign taxes was an expense of doing business that was paid out in the same manner as foreign labor costs or foreign material costs.

The Pennsylvania law does not say that one is to be penalized simply because a choice was made under Federal *172 law for Federal tax purposes to treat foreign tax payments as a tax credit rather than a deduction.

The appellant should be entitled to deduct the foreign tax payments in arriving at its net income upon which Pennsylvania taxes are due.

I emphatically dissent.