A-8383, MAY 23, 1930, 9 COMP. GEN. 484

A-8383: May 23, 1930

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PROVIDING FOR THE PAYMENT OF INTEREST ON AMOUNTS WITHHELD FOR APPLICATION AGAINST AN INDEBTEDNESS WHICH IS SUBSEQUENTLY FOUND TO BE INVALID. INTEREST WILL BE ALLOWED ON AMOUNTS REPRESENTING REFUND ON INTERNAL REVENUE TAXES CERTIFIED FOR ALLOWANCE BY THE COMMISSIONER OF INTERNAL REVENUE FROM THE DATE ACTION BY THE GENERAL ACCOUNTING OFFICE IS TAKEN TO WITHHOLD OR APPLY THE AMOUNT TO AN INVALID INDEBTEDNESS TO THE DATE PAYMENT OF THE AMOUNT WITHHELD IS MADE TO THE TAXPAYER. NO INTEREST IS ALLOWABLE FROM THE DATE THE REFUND SCHEDULE IS CERTIFIED FOR PAYMENT BY THE COMMISSIONER OF INTERNAL REVENUE UNDER THE INTERNAL REVENUE LAWS IN EFFECT PRIOR TO THE ACT OF MAY 28. TO THE DATE ACTION TO WITHHOLD PAYMENT IS TAKEN BY THE GENERAL ACCOUNTING OFFICE.

A-8383, MAY 23, 1930, 9 COMP. GEN. 484

INTEREST ON AMOUNTS WITHHELD UNDER ACT OF MARCH 3, 1875 UNDER THE ACT OF MARCH 3, 1875, 18 STAT. 481, PROVIDING FOR THE PAYMENT OF INTEREST ON AMOUNTS WITHHELD FOR APPLICATION AGAINST AN INDEBTEDNESS WHICH IS SUBSEQUENTLY FOUND TO BE INVALID, INTEREST WILL BE ALLOWED ON AMOUNTS REPRESENTING REFUND ON INTERNAL REVENUE TAXES CERTIFIED FOR ALLOWANCE BY THE COMMISSIONER OF INTERNAL REVENUE FROM THE DATE ACTION BY THE GENERAL ACCOUNTING OFFICE IS TAKEN TO WITHHOLD OR APPLY THE AMOUNT TO AN INVALID INDEBTEDNESS TO THE DATE PAYMENT OF THE AMOUNT WITHHELD IS MADE TO THE TAXPAYER. NO INTEREST IS ALLOWABLE FROM THE DATE THE REFUND SCHEDULE IS CERTIFIED FOR PAYMENT BY THE COMMISSIONER OF INTERNAL REVENUE UNDER THE INTERNAL REVENUE LAWS IN EFFECT PRIOR TO THE ACT OF MAY 28, 1928, 45 STAT. 876, TO THE DATE ACTION TO WITHHOLD PAYMENT IS TAKEN BY THE GENERAL ACCOUNTING OFFICE. UNDER THE PROVISIONS OF THE ACT OF MARCH 3, 1875, 18 STAT. 481, THERE IS NO AUTHORITY FOR THE ALLOWANCE OF INTEREST ON AMOUNTS INVOLVED IN CLAIMS NOT ALLOWED BY LEGAL AUTHORITY UPON PRESENTATION TO THE GENERAL ACCOUNTING OFFICE AND WITHHELD BY IT FOR APPLICATION AGAINST AN ALLEGED INDEBTEDNESS WHICH IS SUBSEQUENTLY FOUND TO BE INVALID.

DECISION BY COMPTROLLER GENERAL MCCARL, MAY 23, 1930:

REVIEW HAS BEEN REQUESTED ON SETTLEMENT NO. 0220654, DATED JANUARY 2, 1930, WHEREIN THERE WAS ALLOWED ONLY $91.37 ON THE CLAIM OF THE AMERICAN BOSCH MAGNETO CORPORATION FOR INTEREST UNDER THE ACT OF MARCH 3, 1875, 18 STAT. 481, ON ITEMS ALLOWED IN CERTAIN OTHER SETTLEMENTS.

IN THE REQUEST FOR REVIEW IT IS URGED THAT INTEREST IS PAYABLE UNDER THE DECISION IN THE UNITED STATES V. LAGRANGE GROCERY COMPANY, 31 FED. REP. (2D) 297, ON THE ITEMS OF $655.55 AND $1,461.86 ALLOWED UNDER SETTLEMENTS OF FEBRUARY 19, 1929.

THE OPINION IN THE LAGRANGE GROCERY COMPANY CASE, 31 FED.REP. (2D) 297 CITED IN THE REQUEST FOR REVIEW IN THIS CASE DOES NOT SUPPORT THE CONTENTION THAT INTEREST IS PAYABLE ON THE TWO ITEMS OF $655.55 AND $1,461.86. IT WILL BE NOTED FROM THE OPINION OF THE COURT IN THAT CASE THAT THE ONLY ITEM ON WHICH THE COURT ALLOWED INTEREST WAS A REFUND OF TAXES WHICH HAD BEEN ALLOWED BY THE COMMISSIONER OF INTERNAL REVENUE WHO HAS AUTHORITY OF LAW TO ALLOW CLAIMS FOR REFUND OF TAXES. IN OTHER WORDS, UNDER APPLICABLE STATUTES, THE COMMISSIONER OF INTERNAL REVENUE IS AUTHORIZED TO SETTLE AND ALLOW CLAIMS FOR REFUND OF TAXES AND SUCH CLAIMS WERE REGARDED AS CLAIMS ALLOWED BY LEGAL AUTHORITY WITHIN THE REQUIREMENTS OF THE ACT OF MARCH 3, 1875. SUCH IS NOT THE CASE WITH RESPECT TO THE ITEMS OF $655.55 AND $1,461.86. WHILE IT IS TRUE BOTH AMOUNTS MAY HAVE ARISEN ON ACCOUNT OF PROPERLY CERTIFIED VOUCHERS, THE CERTIFICATION OR APPROVAL OF A VOUCHER BY AN ADMINISTRATIVE OFFICER IS NOT THE ALLOWANCE OF A CLAIM BY LEGAL AUTHORITY. SUCH ACTION IS MERELY TO INDICATE THAT, IN SO FAR AS THE ADMINISTRATIVE OFFICE IS CONCERNED, THERE IS NO OBJECTION TO THE PAYMENT OF THE CLAIM IF IT BE OTHERWISE LEGAL AND PROPER. THE ADMINISTRATIVE OFFICERS WHO APPROVE AND CERTIFY SUCH VOUCHERS HAVE NO LEGAL AUTHORITY TO ALLOW THE CLAIMS. SUCH CLAIMS ARE FOR ADJUDICATION AND SETTLEMENT BY THIS OFFICE UNDER THE PROVISIONS OF SECTION 236, REVISED STATUTES, AS AMENDED BY SECTION 305 OF THE ACT OF JUNE 10, 1921, 42 STAT. 24. THERE IS NO DIFFERENCE IN PRINCIPLE, IN SO FAR AS THE ACT OF 1875 IS CONCERNED, BETWEEN THE SETTLEMENT OF SUCH CLAIMS AND THE SETTLEMENT OF THE CLAIMS AND THE SETTLEMENT OF THE CLAIMS FOR THE ITEMS AGGREGATING $12,715.31 AND $2,375.01--- ON WHICH THE CLAIMANT HAS CONCEDED IT IS NOT ENTITLED TO INTEREST.

IN THE SETTLEMENT MADE BY THIS OFFICE UNDER DATE OF JANUARY 2, 1930, THERE WAS ALLOWED INTEREST AT THE RATE OF 6 PERCENTUM PER ANNUM ON TAX REFUNDS OF $2,001.24 AND $103.36 FROM AUGUST 23, 1924, AND NOVEMBER 10, 1924, RESPECTIVELY, THE DATES ON WHICH THE COMMISSIONER OF INTERNAL REVENUE APPROVED SUCH REFUNDS, TO MAY 18, 1925, THE DATE ON WHICH ACTION WAS TAKEN BY THIS OFFICE TO APPLY SAID AMOUNTS TO THE ALLEGED INDEBTEDNESS OF THE CLAIMANT CORPORATION. IT NOW APPEARS THAT SUCH SETTLEMENT WAS ERRONEOUS. UNDER THE PROVISIONS OF THE ACT OF MARCH 3, 1875, 18 STAT. 481, NO INTEREST ACCRUED ON THESE ITEMS PRIOR TO THE DATE ACTION WAS TAKEN BY THIS OFFICE TO WITHHOLD AND APPLY THE AMOUNTS OF TAX REFUNDS AGAINST THE ALLEGED INDEBTEDNESS. IN A DECISION OF MAY 8, 1930, A-3788, BY THIS OFFICE, INVOLVING A SIMILAR MATTER, IT WAS SAID:

* * * THE PERIOD ELAPSING BETWEEN THE DATE A SCHEDULE FOR TAX REFUND IS CERTIFIED FOR ALLOWANCE BY THE COMMISSIONER OF INTERNAL REVENUE, AND THE DATE ACTION IS TAKEN BY THIS OFFICE, EITHER CERTIFYING FOR PAYMENT OR FOR WITHHOLDING, IS TO BE REGARDED AS IN THE SAME STATUS AS THE PERIOD ORDINARILY REQUIRED FOR ACTION BY THIS OFFICE IN THE SETTLEMENT OF ANY ANY CLAIM. DURING SUCH PERIOD THERE IS NO WITHHOLDING UNDER THE ACT OF 1875 OR OTHERWISE, BUT MERELY THE REASONABLE AND NECESSARY DELAY INCIDENT TO THE SETTLEMENT OF THE CLAIM. OWING TO THE RESEARCH AND STUDY INVOLVED IN THE ADJUDICATION OF SOME CLAIMS AND THE PRESS OF OTHER WORK IT IS NOT UNUSUAL FOR SEVERAL MONTHS TO ELAPSE BETWEEN THE DATE A CLAIM IS FILED IN THIS OFFICE AND THE DATE IT IS FINALLY SETTLED EVEN WHEN NO COUNTERCLAIM IS INVOLVED, AND WHILE, UNDER THE REVENUE ACT OF MAY 29, 1928, 45 STAT. 876, PROVISION IS MADE FOR THE ALLOWANCE OF INTEREST TO A DATE NOT MORE THAN 30 DAYS PRECEDING THE DATE OF THE REFUND CHECK, SAID PROVISION IS NOT RETROACTIVE, AND, AS STATED IN DECISION OF THIS OFFICE OF JANUARY 10, 1930, IN THIS CASE, THE QUESTION AS TO THE RUNNING OF INTEREST IN SUCH CASES PRIOR TO MAY 29, 1928, WAS DEFINITELY SETTLED BY THE CASE OF THE GIRARD TRUST COMPANY V. UNITED STATES, 270 U.S. 163. * * *

WHILE IT DOES APPEAR THAT IN THE LAGRANGE GROCERY COMPANY CASE INTEREST WAS COMPUTED FROM THE DATE THE SCHEDULE OF REFUND OF TAXES WAS CERTIFIED FOR ALLOWANCE BY THE COMMISSIONER OF INTERNAL REVENUE INSTEAD OF FROM THE DATE OF THE SETTLEMENT APPLYING THE AMOUNT OF THE SCHEDULE TO THE INDEBTEDNESS, SUCH A COMPUTATION WAS NOT IN ACCORDANCE WITH THE REASONING OF THE COURT'S OPINION AND IT IS NOT BELIEVED THAT SUCH A COMPUTATION WAS INTENDED BY THE COURT. BUT BE THAT AS IT MAY, THIS OFFICE CANNOT RECOGNIZE SAID CASE AS ESTABLISHING THE PRINCIPLE THAT A WITHHOLDING UNDER THE ACT OF 1875 CAN OPERATE TO GIVE RISE TO A CLAIM FOR INTEREST FROM THE DATE THE CLAIM IS FILED IN THIS OFFICE OR FROM ANY OTHER DATE PRIOR TO THE DATE OF THE OFFICIAL DETERMINATION BY THIS OFFICE THAT THE THE AMOUNT FOUND DUE ON THE CLAIM, OR A PART THEREOF, SHALL BE WITHHELD ON ACCOUNT OF THE INDEBTEDNESS. IN THIS CONNECTION IT MAY BE STATED THAT IT WAS THE ESTABLISHED PRACTICE FROM THE TIME OF THE ENACTMENT OF THE ACT OF 1875, TO THE CHANGE IN THE ACCOUNTING ORGANIZATION UNDER THE ACT OF JUNE 10, 1921, REFERRED TO IN THE OPINION IN THE LAGRANGE CASE, TO ALLOW INTEREST IN THE CASE OF THE WITHHOLDINGS UNDER THE ACT OF 1875 ONLY FROM THE DATE OF THE ACTION TAKEN BY THE SECRETARY TO EFFECT THE WITHHOLDING, WHICH DATE WAS NEVER PRIOR TO THE DATE OF THE CERTIFICATE OF SETTLEMENT ISSUED BY THE ACCOUNTING OFFICER AND MIGHT BE A YEAR OR MORE AFTER THE CLAIM WAS FILED IN THE ACCOUNTING OFFICE. CLEARLY THERE IS NOTHING IN THE ACT OF JUNE 10, 1921, TO GIVE A GREATER RIGHT TO INTEREST UNDER THE ACT OF 1875 THAN OBTAINED UNDER SAID ACT OF 1875 TO THE ENACTMENT OF THE ACT OF 1921.

THE ACTION APPLYING THE TAX REFUNDS TO THE ALLEGED INDEBTEDNESS IN THE PRESENT CASE WAS TAKEN BY THIS OFFICE UNDER DATE OF MAY 18, 1925, AND IT APPEARS THAT THE AMOUNT APPLIED WAS IN THE SUM OF $2,468.04 MADE UP OF TAX REFUNDS FOR THE YEARS 1924 AND 1925, AGGREGATING $2,104.60 PLUS INTEREST THEREON, UNDER THE INTERNAL REVENUE LAW, TO THE DATE OF THE COMMISSIONER'S ACTION, $363.44. SUBSEQUENTLY, THE INDEBTEDNESS TO WHICH THIS AMOUNT WAS APPLIED HAVING BEEN FOUND INVALID THE ENTIRE AMOUNT OF $2,468.04 WAS PAID TO THE CLAIMANT CORPORATION UNDER CERTIFICATE OF THIS OFFICE DATED FEBRUARY 19, 1929. IN VIEW OF THESE FACTS, INTEREST UNDER THE ACT OF MARCH 3, 1875, SUPRA, IS PAYABLE TO THE CORPORATION AT THE RATE OF 6 PERCENTUM PER ANNUM ON THE AMOUNT OF $2,468.04 FROM MAY 18, 1925, TO FEBRUARY 19, 1929.

ACCORDINGLY, THE SETTLEMENT OF JANUARY 2, 1930, WILL BE REVISED TO ALLOW INTEREST UPON THE AMOUNT AND FOR THE PERIOD AS HEREIN INDICATED LESS THE AMOUNT OF $91.37 ALLOWED IN SAID SETTLEMENT. THE DISALLOWANCE OF THE CLAIM IS SUSTAINED.