1. In the computation of net income in the case of mines, §
114(b)(4) of the Revenue Act of 1934 permits deductions for
depletion on a percentage basis provided that the taxpayer in
making his "first return" under the Act elects to avail of that
basis.
Held that an amended return, filed after the
expiration of the statutory period for filing the original return,
including such extension of the period as the Commissioner was
empowered to grant, was not a "first return" within the meaning of
the section. P.
311 U. S.
57.
2. That, in the circumstances of this case, the construction
thus given the statute works a hardship on the taxpayer, may be the
basis of an appeal to Congress for relief, but not to the courts.
P.
311 U. S.
59.
3. The judgment of the Circuit Court of Appeals affirming the
decision of the Board of Tax Appeals in this case was correct, and
must be sustained whether or not the court gave a wrong reason for
its action. P.
311 U. S.
59.
110 F.2d 655 affirmed.
Page 311 U. S. 56
Certiorari, 310 U.S. 619, to review the affirmance of a decision
of the Board of Tax Appeals which, on petition for redetermination
of income tax, upheld the Commissioner's ruling denying percentage
depletion.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This case is here on certiorari to resolve the conflict of the
decision below (9 Cir., 110 F.2d 655) with
C.H. Mead Coal Co.
v. Commissioner, 106 F.2d 388.
Petitioner is engaged in the business of mining gold at Flat,
Alaska. The winter mail service to and from that remote place was
so uncertain, and slow that, in order to avoid delinquency in
income tax returns, petitioner's officers were accustomed to use
the forms for an earlier year. Consequently petitioner's original
return for the calendar year 1934 was filed on a 1933 form which
had been mailed to petitioner by the Collector at Tacoma,
Washington. This return was executed on January 2, 1935, and
reached Tacoma on January 29, 1935. When it was executed,
petitioner did not know of the provision [
Footnote 1] in the Revenue
Page 311 U. S. 57
Act of 1934, 48 Stat. 680, allowing percentage depletion. But
petitioner did know that, unless the law had been changed, it was
not entitled to depletion, as it had no basis for cost depletion.
The Collector, in sending the 1933 forms, had not advised
petitioner with respect to percentage depletion. And it was found
that, if petitioner had known of the statutory provision for
percentage depletion, it would have elected to take advantage of
it. Petitioner first actually learned of the provision in August,
1935. On March 3, 1936, petitioner filed an amended return for 1934
upon which a deduction of percentage depletion was taken, and it
asked for a refund. The Board of Tax Appeals, 39 B.T.A. 1243,
upheld the Commissioner's ruling denying percentage depletion, and
the Circuit Court of Appeals affirmed.
Sec. 114(b)(4) of the 1934 Act required the taxpayer to elect in
his "first return" whether the depletion allowance was to be
computed with or without regard to percentage depletion. The method
so elected is applicable not only to the year in question, but to
all subsequent taxable years.
We think that petitioner's amended return, filed on March 3,
1936, was not a "first return" within the meaning
Page 311 U. S. 58
of § 114(b)(4). By § 53(a)(1) of the 1934 Act, the return was
due on or before March 15, 1935. By § 53(a)(2), the Commissioner
was empowered to grant a reasonable extension for filing returns,
[
Footnote 2] but, so far as
applicable here, not exceeding six months.
Haggar Co. v.
Helvering, 308 U. S. 389,
would compel the conclusion that, had the amended return been filed
within the period allowed for filing the original return, it would
have been a "first return" within the meaning of § 114(b)(4). But
we can find no statutory support for the view that an amendment
making the election provided for in that section may be filed as of
right after the expiration of the statutory period for filing the
original return.
We are not dealing with an amendment designed merely to correct
errors and miscalculations in the original return. Admittedly the
Treasury has been liberal in accepting such amended returns even
though filed after the period for filing original returns.
[
Footnote 3] This, however, is
not a case where a taxpayer is merely demanding a correct
computation of his tax for a prior year based on facts as they
existed. Petitioner is seeking by this amendment not only to change
the basis upon which its taxable income was computed for 1934, but
to adopt a new method of computation for all subsequent years. That
opportunity was afforded as a matter of legislative grace; the
election had to be made in the manner and in the time prescribed by
Congress. The offer was liberal. But the method of its acceptance
was restricted. The offer permitted an election only in an original
return or in a timely amendment. An amendment for the purposes of §
114(b)(4) would be timely only if filed within the
Page 311 U. S. 59
period provided by the statute for filing the original return.
No other time limitation would have statutory sanction. To extend
the time beyond the limits prescribed in the Act is a legislative
not a judicial function.
Strong practical considerations support this position.
If petitioner's view were adopted, taxpayers, with the benefits
of hindsight, could shift from one basis of depletion to another in
light of developments subsequent to their original choice. It seems
clear that Congress provided that the election must be made once
and for all in the first return in order to avoid any such shifts.
And to require the administrative branch to extend the time for
filing on a showing of cause for delay would be to vest in it
discretion which the Congress did not see fit to delegate.
Petitioner urges that this result will produce a hardship here.
It stresses the fact that it had no actual knowledge of the new
opportunity afforded it by § 114(b)(4) of the 1934 Act, and that
equitable considerations should therefore govern. That may be the
basis for an appeal to Congress in amelioration of the strictness
of that section. But it is no ground for relief by the courts from
the rigors of the statutory choice which Congress has provided.
Finally, petitioner asserts that we cannot consider the question
of the timeliness of the amended return, since, before the Board of
Tax Appeals and the Circuit Court of Appeals, respondent urged only
that petitioner's claim was based upon an amended, rather than an
original, return. But even on the assumption that that issue did
not embrace the question of timeliness, the Circuit Court of
Appeals was justified in affirming the decision of the Board of Tax
Appeals. Where the decision below is correct, it must be affirmed
by the appellate court though the lower tribunal gave a wrong
reason for its action.
Helvering v. Gowran, 302 U.
S. 238,
302 U. S.
245-246.
Affirmed.
[
Footnote 1]
Section 114(b)(4) provided:
"The allowance for depletion under section 23(m) shall be, in
the case of coal mines, 5 percentum, in the case of metal mines, 15
percentum, and, in the case of sulphur mines or deposits, 23
percentum, of the gross income from the property during the taxable
year, excluding from such gross income an amount equal to any rents
or royalties paid or incurred by the taxpayer in respect of the
property. Such allowance shall not exceed 50 percentum of the net
income of the taxpayer (computed without allowance for depletion)
from the property. A taxpayer making his first return under this
title in respect of a property shall state whether he elects to
have the depletion allowance for such property for the taxable year
for which the return is made computed with or without regard to
percentage depletion, and the depletion allowance in respect of
such property for such year shall be computed according to the
election thus made. If the taxpayer fails to make such statement in
the return, the depletion allowance for such property for such year
shall be computed without reference to percentage depletion. The
method, determined as above, of computing the depletion allowance
shall be applied in the case of the property for all taxable years
in which it is in the hands of such taxpayer, or of any other
person if the basis of the property (for determining gain) in his
hands is, under section 113, determined by reference to the basis
in the hands of such taxpayer, either directly or through one or
more substituted bases, as defined in that section."
[
Footnote 2]
See Treasury Regulations No. 86, Arts. 53-1 - 53-4
inc.
[
Footnote 3]
See, for example, Treasury Regulations No. 86, Art.
43-2, governing the filing of amended returns for the purpose of
deducting losses which were sustained during a prior taxable year.
Cf. Union Metal Mfg. Co., 1 B.T.A. 395.