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U.S. Supreme Court

Grant v. Hartford & New Haven Railroad Company, 93 U.S. 225 (1876)

Grant v. Hartford & New Haven Railroad Company

93 U.S. 225


The expression "profits used in construction" (within the meaning of the one hundred and twenty-second section of the Internal Revenue Act of June 30, 1564, 13 Stat. 284) does not embrace earnings expended in repairs for keeping the property up to its normal condition, but has reference to new constructions adding to the permanent value of the capital, and when these are made to take the place of prior structures, it includes only the increased value of the new over the old, when in good repair.

This action was brought by the Hartford & New Haven Railroad Company against Henry A. Grant, Collector of Internal Revenue for the First District of Connecticut, to recover the sum of $2,785.65 income tax, and $139.28 penalty, paid to him under protest in January, 1868. The controversy arose upon the question of the company's income for the two fiscal years ending Aug. 31, 1867. During that period they expended from their earnings $55,712.60, in constructing over the Farmington River at Windsor a new stone bridge, to be used in place of a wooden bridge which was deemed insecure; and they charged the amount to current expenses. The assessor of internal revenue for the district insisted that this sum should have been charged to account of construction, and was fairly to be regarded as "profits used in construction," within the meaning of the one hundred and twenty-second section of the Act of June 30, 1864, and, therefore, he made a special assessment of the amount. The company having appealed to the Commissioner of Internal Revenue without effect, this action was brought.

A jury having been waived, the cause was tried by the court, which found specially an agreed statement of facts. From this it appears that the amount charged to current expenses during each of the two years in question (including together the said sum of $55,712.60) was not greater than the proper ordinary current expenses and depreciation of the entire property, and that the company returned the entire balance of their gross earnings over and above said expenses, in the shape of dividends and surplus, and paid the regular tax thereon.

Page 93 U. S. 226

Judgment having been rendered in favor of the company, the collector sued out this writ of error.

Page 93 U. S. 227

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