The Commissioner determined a deficiency of $56,769.39 in the petitioner's excess profits tax for the calendar year 1940. He also, in that same notice, denied the petitioner's contention that it was entitled to relief under section 722 of the Internal Revenue Code. The petitioner presses only two of its assignments of error. The first is that the Commissioner erred in determining excess profits tax liability on a calendar year basis rather than on the basis of a fiscal year ended June 30, 1940, and the second is that the Commissioner erred in failing to grant relief under section 722 of the Internal Revenue Code. The Commissioner challenges the jurisdiction of the Court to consider and decide whether or not the petitioner is entitled to any relief under section 722.

FINDINGS OF FACT.

The petitioner is a corporation which was incorporated under the laws of the State of New York in 1933. Its certificate of incorporation authorized it to own and operate vessels carrying passengers and freight from any port in the United States to any other port, domestic or foreign. One certificate of stock was issued. That was issued for 100 shares to the Prudential Steamship Corporation, apparently as security for a loan. Lillian Stephanidis owned two-thirds of the stock of Prudential and Nicholas D. Allen owned the other one-third. The petitioner was completely inactive and apparently no more than an empty shell from some time in 1935 until July 1939.

Stephen D. Stephanidis, Paul Costallat, Benjamin Young, and Nicholas D. Allen, all experienced in the steamship business, were considering the formation of a corporation in 1939 to acquire a steamship. They decided to use the petitioner instead of forming a new corporation. They particularly wanted its name.

A meeting of the officers and directors was held on July 21, 1939, at which the minutes of the last previous meeting, held on May 22, 1935, were read and approved. New officers were elected and it was resolved to purchase the steamship Erica Reed. The ship was purchased in August 1939 for $97,500. Repairs costing $6,180.35 were made to the vessel and its name was changed to Eastern Trader.

The authorized capital of the petitioner was increased from $10,000 to $60,000 and the number of shares from 100 to 600 in 1939. The certificate for 100 shares held by Prudential was surrendered and 150 shares of the petitioner's stock were issued to each of the following: Stephanidis, Costallat, Young, and Allen. The shares of Stephanidis were issued in the name of his wife, Lillian, at his request. All of the shares were issued solely for services of the four men in obtaining loans and in connection with the acquisition of the ship.

The petitioner, after purchasing and repairing the ship, operated

it until June 7, 1940. The operations during 1939 resulted in a loss of $4,658.52, and the operations during 1940 resulted in a loss.

The petitioner entered into a contract on March 15, 1940, for the sale of the vessel to the British Government for $400,000. Final payment was made to the petitioner and the vessel was transferred to the British Government on June 7, 1940. The net profit from the sale was $287,494.59.

The petitioner filed franchise tax returns with the State of New York for all years and paid the taxes due thereon. It also filed Federal capital stock tax returns for all years and paid whatever taxes were due, if any. It filed income tax returns for 1933, 1934, and 1935 on a calendar year accrual basis. It did not file any income tax returns for the years 1936, 1937, and 1938.

The petitioner addressed a letter to the Commissioner of Internal Revenue on May 2, 1940, requesting permission to file tax returns on the basis of a fiscal year ended June 30, 1940. The Commissioner replied on June 12, 1940, granting permission to change to a fiscal year effective June 30, 1940, provided that the petitioner file returns on a calendar year basis for the years 1937, 1938, and 1939, and that it file a return for the period January 1 to June 30, 1940. The petitioner's books were closed as of December 31, 1939, after the receipt of the letter from the Commissioner. Thereafter, the petitioner filed income and excess profits tax returns upon a calendar year accrual basis for the years 1939 and 1940. The return for 1940 was filed in March 1941 with the collector of internal revenue for the second district of New York. The petitioner has not paid any excess profits tax for 1940. It has never filed a claim for refund of excess profits tax for 1940 or had such a claim denied by the Commissioner.

The petitioner filed an application for relief under section 722 of the Internal Revenue Code with the Commissioner on March 14, 1942. The Commissioner, in his notice of deficiency dated September 29, 1942, as stated above, notified the petitioner of the denial of its contention that it was entitled to relief under section 722. The petition in this case was filed on December 26, 1942.

OPINION.

MURDOCK, Judge: The excess profits tax here in question (subchapter E) was first imposed by section 710 (a) of the Internal Revenue Code. See section 201, Second Revenue Act of 1940. It was imposed "for each taxable year beginning after December 31, 1939." The petitioner is endeavoring to show that it had a fiscal year beginning prior to December 31, 1939, and ending on June 30, 1940. It would thus avoid most, if not all, excess profits tax liability,

since it operated only seven days after June 30, 1940. It requested permission to file its tax reports upon a fiscal year basis. Permission was granted effective June 30, 1940, but the petitioner never took advantage of that permission. The reason is clear. The permission was upon condition that it file a return for the calendar year 1939 and a return for the short period January 1, to June 30, 1940. That latter period would be a period beginning after December 31, 1939, and would be subject to the excess profits tax of section 710 (a). The petitioner never obtained permission to file a tax return for a fiscal year beginning prior to December 31, 1939, and ending on June 30, 1940. Obviously, what the petitioner wanted was permission to file a return for a period from the beginning of its operations in 1939 and ending on June 30, 1940. Its application was made on May 2, 1940. That request was not timely under the Commissioner's regulations (see Regulations 103, sec. 19.46-1), and the Commissioner acted reasonably and within his regulations in granting the request effective June 30, 1940, and upon the conditions which he imposed. Furthermore, and this in itself is determinative, the petitioner never filed a tax return for a period beginning prior to December 31, 1939, and ending thereafter, but, instead, filed its excess profits tax return for the calendar year 1940 in accordance with the period for which it closed its books. Thus, it does not have a leg to stand on in opposing the Commissioner's determination of its excess profits tax liability on the basis of the calendar year 1940. Since the deficiency determined by the Commissioner is not otherwise attacked, it must be approved.

The next contention of the petitioner is that it is entitled to relief under section 722. The Commissioner contends that the proceeding should be dismissed in so far as it seeks relief under section 722. He cites Uni-Term Stevedoring Co., 3 T. C. 917, and Pioneer Parachute Co., 4 T. C. 27. Solution of this question requires consideration of the legislative history of section 722 (d) (formerly (e)) and of section 732 of the code. Section 732 is the section which expressly confers jurisdiction on this Court (formerly the Board of Tax Appeals) over issues relating to relief under section 722. The principal purpose of section 722 (d) has been to fix a period of limitations within which claims for relief must be made, but it may also have conferred upon this Court jurisdiction in certain cases not covered by section 732. Therefore, the two sections should be considered together.

The original subchapter E excess profits tax provisions came into the Internal Revenue Code through section 201 of the Second Revenue Act of 1940. The only reference to the Board of Tax Appeals was in section 722, which was as follows:

SEC. 722. ADJUSTMENT OF ABNORMALITIES IN INCOME AND CAPITAL BY

THE COMMISSIONER.

For the purposes of this subchapter, the Commissioner shall also have authority to make such adjustments as may be necessary to adjust abnormalities affecting income or capital, and his decision shall be subject to review by the United States Board of Tax Appeals.

There was no elaboration to show how the relief system was to work. Those provisions were in effect until March 7, 1941, at which time the Excess Profits Tax Amendments of 1941 replaced the original with a wholly new section 722. Those amendments were made effective as of the date of the enactment of the Excess Profits Tax Act of 1940. The only reference to the Board of Tax Appeals in the new section 722 occurred in paragraph (e) thereof. That provision fixed a period of limitations within which applications for relief had to be made. It first required the taxpayer to compute its tax and file its excess profits tax return without the application of section 722, and then provided a general rule that the benefits of the section could not be obtained unless the taxpayer applied to the Commissioner for those benefits within six months from the date of filing the return. An exception was provided to this general rule allowing a taxpayer to claim the benefits of the section in its petition to the Board of Tax Appeals if the Commissioner mailed a notice of deficiency without having issued a preliminary notice thereof or if he mailed a notice of deficiency within 90 days after the date of his preliminary notice. One important purpose of the exception was that a taxpayer who asked for no relief from the tax shown on its return had to be given some time within which to make an application for relief after it had been notified that a deficiency was going to be or had been determined. But where the application was thus filed and was not filed within six months after the date for filing the return, the benefits of the section were limited to the amount of the deficiency.

Section 722 was further amended by section 222 of the Revenue Act of 1942, approved October 21, 1942. The only change material here, aside from changing the provisions from paragraph (e) to paragraph (d), was the additional requirement that the taxpayer "pay" its excess profits tax computed without the application of section 722.

That new paragraph (d) was further amended by Public Law 201, 78th Cong., ch. 346, 1st sess., approved Dec. 17, 1943. It entirely changed the period for filing applications or claims for relief and was made applicable with respect to taxable years beginning after December 31, 1939. That part of it material hereto was as follows:

(d) APPLICATION FOR RELIEF UNDER THIS SECTION.-The taxpayer shall compute Its tax, file its return, and pay the tax shown on its return under this subchapter without the application of this section, except as provided in section 710 (a) (5). The benefits of this section shall not be allowed unless the taxpayer within the

period of time prescribed by section 322 and subject to the limitation as to amount of credit or refund prescribed in such section makes application therefor in accordance with regulations prescribed by the Commissioner with the approval of the Secretary.

Section 322 is the general section authorizing refunds and credits "where there has been an overpayment of any tax." The period of limitation for the filing of claims for refund fixed in that section is within three years from the time the return was filed or within two years from the time the tax was paid, whichever period expires later.

The principal purpose of section 722 (d), as shown by its legislative history, was to provide a reasonable period of limitations within which applications or claims for relief under section 722 had to be made. The period was extended from time to time, and, finally, when it included a two-year period after payment of the tax, there was no necessity for any reference to petitions to the Board of Tax Appeals, and, consequently, all reference to the Board or to the Tax Court was eliminated.

The Excess Profits Tax Amendments of 1941, referred to earlier, added to the code for the first time section 732, entitled "Review of Abnormalities by Board of Tax Appeals." It parallels, to a degree, section 272, which conferred jurisdiction in deficiency cases but not in 722 cases. Uni-Term Stevedoring Co., supra. Section 732 expressly conferred jurisdiction on this tribunal in certain cases under section 722. Paragraph (a) thereof provides, inter alia: "If a claim for refund of tax under this subchapter for any taxable year is disallowed in whole or in part by the Commissioner" he shall send a notice thereof by registered mail and the taxpayer may file a petition. with the Board of Tax Appeals for a redetermination of the excess profits tax. That amendment likewise was made effective as of the date of the enactment of the Excess Profits Tax Act of 1940. changes material hereto have been made in those provisions.

No

The petition herein was filed on December 26, 1942, which was prior to Public Law 201, approved December 17, 1943, the last amendment of section 722 (d). However, that amendment was expressly made applicable to taxable years beginning after December 31, 1939. The year here involved is such a taxable year, the calendar year 1940. Section 722 (d) as thus amended makes no reference to the Board of Tax Appeals or to the Tax Court, and the only subchapter E excess profits tax provisions conferring jurisdiction upon this Court in 722 cases are contained in section 732. Those provisions, standing alone, do not give this Court jurisdiction over the 722 issue in this proceeding. Prerequisites to such jurisdiction are computation and payment of the excess profits tax without reference to section 722, the filing of a claim for refund of that tax, in accordance with section 322, and a