"tax

By section 10 of the act of March 2, 1867, c. 169, (14 St. at Large, 475,) it was enacted that section 19 of the said act of 1866 be amended "by adding the following thereto:" "And no suit for the purpose of restraining the assessment or collection of tax shall be maintained in any court." In the Revised Statutes this amendment of and addition to section 19 of the act of 1866 is made a section by itself, (section 3224,) separated from that of which it is an amendment, and to which it is an addition, and reads thus: "No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court." The word "any" was inserted by the revisers. This enactment in section 3224 has a no more restricted meaning than it had when, after the act of 1867, it formed a part of section 19 of the act of 1866, by being added thereto. The first part of section 19 related to a suit to recover back money paid for a alleged to have been erroneously or illegally assessed or collected," and the section, after thus providing for the circumstances under which such a suit might be brought, proceeded, when amended, to say that "no suit for the purpose of restraining the assessment or collection of tax shall be maintained in any court." The addition of 1867 was in pari materia with the previous part of the section, and related to the same subject-matter. The "tax" spoken of in the first part of the section was called a "tax" sub modo, but was characterized as a "tax alleged to have been erroneously or illegally assessed or collected." Hence, when, on the addition to the section, a "tax" was spoken of, it meant that which is in a condition to be collected as a tax, and is claimed by the proper public officers to be a tax, although on the other side it is alleged to have been erroneously or illegally assessed. It has no other meaning in section 3224. There is therefore no force in the suggestion that section 3224, in speaking of a "tax," means only a legal tax; and that an illegal tax is not a tax, and so does not fall within the inhibition of the statute, and the collection of it may be restrained.

The statute clearly applies to the present suit, and forbids the granting of relief by injunction. It is distinctly alleged in the bill that the appellee claims that the appellant owes to the United States the amounts assessed for taxes,-both the tax assessed against the appellant and that assessed against Irwin & Snyder. The bill also shows sufficiently that the assessment had relation to the business of the appellant as a manufacturer of tobacco, and to his liability to tax, under the internal revenue laws, in respect to such business. The instructions of the internal revenue department in regard to the preparation of assessment lists provided that where an assessment was reported against a manufacturer of tobacco for having removed any taxable articles from his manufactory without the use of the proper stamp, or for not having duly paid such tax by stamp at the time and in the manner provided by law, the entry in the column headed “article or occupation" should be "Stamp Tax, Tob.," with liberty to use

the initials "S. T." as an abbreviation for "stamp tax." The instructions stated that "Tob." is an abbreviaton for "tobacco.' Resort may be had to these instructions to show the meaning of the abbreviations in the assessment list. Read by the light of the instructions, the list shows a tax which the appellant might be liable to pay, and one which the commissioner had general jurisdiction to assess against him.

The inhibition of section 3224 applies to all assessments of taxes, made under color of their offices, by internal revenue officers charged with general jurisdiction of the subject of assessing taxes against tobacco manufacturers. The remedy of a suit to recover back the tax after it is paid is provided by statute, and a suit to restrain its collection is forbidden. The remedy so given is exclusive, and no other remedy can be substituted for it. Such has been the current of decisions in the circuit courts of the United States, and we are satisfied it is a correct view of the law. Howland v. Soule, Deady, 413; Pullan v. Kinsinger, 2 Abb. (U. S.) 94; Robbins v. Freeland, 14 Int. Rev. Rec. 28; Delaware R. Co. v. Prettyman, 17 Int. Rev. Rec. 99; U. S. v. Black, 11 Blatchf. C. C. 543; Kissinger v. Bean, 7 Biss. 60; U. S. v. Pacific Railroad, 4 Dill. 69; Alkan v. Bean, 23 Int. Rev. Rec. 351; Kensett v. Stivers, 18 Blatchf. C. C. 397.1 In Cheatham v. U. S. 92 U. S. 85, 88, and again in State Railroad Tax Case, Id. 575, 613, it was said by this court that the system prescribed by the United States in regard to both customs duties and internal revenue taxes, of stringent measures, not judicial, to collect them, with appeals to specified tribunals, and suits to recover back moneys illegally exacted, was a system of corrective justice intended to be complete, and enacted under the right belonging to the government to prescribe the conditions on which it would subject itself to the judgment of the courts in the collection of its revenues. In the exercise of that right it declares, by section 3224, that its officers shall not be enjoined from collecting a tax claimed to have been unjustly assessed, when those officers, in the course of general jurisdiction over the subject-matter in question, have made the assessment and claim that it is valid. The decree of the circuit court is affirmed.

1S. C. 10 Fed. Rep. 517.

INTERNAL REVENUE ACT-NET PROFITS-ACCRUED INTEREST.

By the internal revenue act, as amended in 1866, a tax was imposed upon "all profits of any railroad company carried to the account of any fund, or used for construction." Certain so-called subsidy bonds were issued by the United States to the Sioux City & Pacific Railroad Company, upon which a certain amount of interest accrued yearly, which the company would be liable to pay upon the maturity of the bonds. This interest was to be met by a fund in the nature of a sinking fund. Held, that the taxable earnings of the railroad could not be reduced by the deduction of the amount of the accrued interest.

In Error to the Circuit Court of the United States for the District of Iowa.

E. S. Bailey, for plaintiff in error.

Sol. Gen. Phillips, for defendant in error.

BRADLEY, J. This was an action brought by the United States against the Sioux City & Pacific Railroad Company to recover certain arrears of taxes alleged to have accrued from November, 1868, to September, 1871, inclusive. The first count of the declaration states that for the 11 months ending September 30, 1868, the gross receipts of the company from passengers were $51,786.12, on which it became liable to pay a tax of 23 per cent., or $1,294.55; and that the undivided net earnings of the company for the same period, which were carried

to the construction fund or account, were $43,889.39, on which the company became liable to pay a tax of 5 per cent., amounting to $2,194.41; that the company paid the tax on gross receipts, but refused to pay the tax on net earnings carried to construction account. Three other counts for the following years showed an aggregate arrearage (including that stated in the first count) of over $11,000. There were four other counts for penalties, to which the statute of limitations was pleaded, and which are not the subject of controversy. Issue being taken on the first four counts, the parties entered into a stipulation for the purpose of showing the precise matter in dispute. This stipulation, after stating the title of the cause, was as follows: 11 nh

"The parties to the above-entitled action hereby stipulate to waive a jury on the trial thereof. For the purpose of the trial of this action the following facts are admitted:

"(1) All the material facts alleged in the first count of the petition are true, subject to the following statement and exception, to-wit: The amount of interest accrued during the period mentioned in said count on the subsidy bonds, (so-called) issued by the United States to said defendant in pursuance of the act of congress entitled 'An act to aid in the construction of a railroad and telegraph line from the Missouri river to the Pacific ocean, and to secure to the government the use of the same for postal, military, and other purposes', approved July 1, 1862, and the amendments thereto, was the sum of thirty-six thousand dollars ($36,000.) If the said sum of $36,000 is subject in law to be deducted from the gross receipts of the defendant, in order to ascertain the net earnings thereof for the period named, then the amount of the net earnings liable to a tax of five per cent., is the sum of seven thousand eight hundred and eighty-eight and 39-100 dollars ($7,888.39,) and the tax on the same is three hundred ninety-four and 41-100 dollars ($394.41,) instead of the sum of $2,194.41, as claimed in said count."

Similar admissions were made with regard to the other counts, and the stipulation concluded as follows:

If the court is of the opinion that the interest which accrued on the said subsidy bonds for the several periods named is subject to be deducted from the gross receipts in order to ascertain the net earnings, then the plaintiff is entitled to recover

On the first count, only

On the second count, only

On the third count, only

And on the fourth count,

Total

$ 394 51 52 60 1,434 37 221 81

$2,103 29

But if on the other hand the court should be of the opinion that the said interest accrued on said bonds is not subject to be deducted, the plaintiff is entitled to receive

SIOUX CITY & P. R. Co. v. UNITED STATES.

567

Upon this state of facts the court gave judgment for the latter sum, and the company has brought this writ of error to review said judgment. We think that the judgment was right. The accruing interest on the subsidy bonds loaned by the government to the company is payable by the company at a future day, to-wit, at the maturity of the bonds; and if a sufficient amount of the company's annual net earnings is laid aside (as it should be) to meet that interest, when it shall become due, the amount so laid aside would be directly within the scope of the internal revenue act, as it stood when the net earnings in question arose. The 122d section of that act, as amended in 1866, imposed a 5 per cent. tax, not only on all payments of interest due on bonds and on all dividends declared by any rail. road or canal company, but also on "all profits of such company carried to the account of any fund, or used for construction." The profits here referred to are the profits arising from the operation of the road or canal without deduction of interest paid to its bondholders, or dividends paid to its stockholders, and correspond to the phrase "net earnings" used in the stipulation of the parties in this case. U. Pacific R. Co. v. U. S. 99 U. S. 402. The expression in the act, "profits carried to the account of any fund," would cover the exact case here if any portion of such net earnings had been carried to a fund created for meeting the interest to be paid on the subsidy bonds. It is very clear, therefore, that whether the whole of said net earnings were carried to construction account (as admitted in the stipulation) or a part of it were carried to account of such accruing interest fund, it would be expressly taxable by the internal revenue act.

The same result, we think, would have followed had the interest in the subsidy bonds been payable by the company semi-annually as it fell due; for although the words of the internal revenue act, as that act stood when the transactions in question occurred, (14 St. 138,) imposed the 5. per cent. tax upon interest due and payable by a railroad or canal company only where such company was indebted for "money for which bonds or other evidence of indebtedness have been issued, payable in one or more years after date, upon which interest is stipulated to be paid, or coupons representing the interest;" which words may be regarded as literally referring only to "bonds or other evidence of indebtedness" issued by the company itself; yet, if the company had been obliged to pay the interest accruing on the subsidy bonds semi-annually as the same fell due, said bonds would have been, in effect, the bonds "or other evidence of indebtedness" of the company. Though in form government bonds, the subsidy act makes them a mortgage lien on the property of the company, and ultimately payable by the company, principal and interest, (12 St. at Large, 492, 493;) and if an obligation had been imposed by the statute to pay both principal and interest as they respectively fell due, it would have made them substantially and in effect, the bonds of the company, and fairly taxable under the internal revenue act. Be