Opinion of the Court Service, who were retired on or before June 30, 1922, shall not be less than that provided for the officers and warrant officers of these services of equal rank and length of service, retired subsequent to that date." The reference must therefore be to the provisions of the act of June 10, 1922, for officers and warrant officers retired subsequent to June 30, 1922, since the officer in the instant case is entitled to receive from and after May 8, 1926, not less than the retired pay provided for an officer of equal rank and length of service retired subsequent to that date, with the provision, however, that it shall not "operate to reduce the pay of any officer or warrant officer now on the retired list." The act of June 10, 1922, makes provision for the pay of retired officers, section 17 of the act being as follows: 66 SEC. 17. That on and after July 1, 1922, retired officers and warrant officers shall have their retired pay, or equivalent pay, computed as now authorized by law on the basis of pay provided in this act: Provided, That nothing contained in this act shall operate to reduce the present pay of officers, warrant officers, and enlisted men now on the retired list or officers or warrant officers in an equivalent status of any of the services mentioned in the title of this act. Active duty performed after June 30, 1922, by an officer on the retired list or its equivalent shall not entitle such officer to promotion: * Retired officers of the Army, Navy, Marine Corps, Coast Guard, and Coast and Geodetic Survey below the grade of brigadier general or commodore and retired warrant officers and enlisted men of those services shall, when on active duty, receive full pay and allowances." * * The retired pay is therefore "to be computed as now authorized by law," but on the basis of pay provided by the act. The law had long provided, by section 1274, Revised Statutes, that "officers retired from active service shall receive 75 per centum of the pay of the rank upon which they were retired." The pay of the rank of major upon which this officer was retired was fixed by the act of May 11, 1908, 35 Stat. 106, 108, at $3,000.00 per annum. In addition he was entitled to longevity pay because of being within the exception already stated in the act of March 2, 1903. The officer was retired with less than 14 years of active service to his credit and would not come within the fourth pay Opinion of the Court period prescribed by the act of June 10, 1922, unless there be added the additional active service rendered after his retirement. And adding the periods of his active service after retirement to that rendered before his retirement, there results active service for more than 17 years, which would bring the officer into the fourth pay period, the base pay of which is $3,000. We think there can be no doubt that the officer should be credited with all active service before and after the date of his retirement. See 5 Comp. Gen. 1038. But the contention is that the length of service with which the officer is to be credited is not alone active service but should include the periods while he was on the retired list, though not in active service, and this would bring him within the fifth pay period. To this contention we can not assent. There is nothing in section 17 of the act of June 10, 1922, that sustains it and the provision to be found in section 1 of the act, 42 Stat. 627, that "For officers in the service on June 30, 1922, there shall be included in the computation all service which is now counted in computing longevity pay "does not refer to or include officers on the retired list. It has reference to officers on the active list. Clearly, when Congress says that nothing contained in the act shall authorize an increase in the pay of officers on the retired list on June 30, 1922, it can not be supposed that in the next sentence, save one, the Congress was providing a method whereby there would be an increase in the pay of these same officers. To give the quoted language any meaning it must be referred to its context, where the act is dealing with pay of officers in the active service. And when the act of May 8, 1926, is considered, it being the act relied upon as securing to the plaintiff rights conferred by the act of 1922 upon retired officers, it appears that equalization of pay is with officers retired subsequent to June 30, 1922. The retirement thus contemplated is from active service. The act of 1922 prescribes pay periods and base pay for each; also-it provides longevity pay for officers in the active service. Aided by the act of May 8, 1926, it regulates the pay of retired officers, but neither act authorizes the retired officer to go from one pay period into another solely because of length of time elapsing since his retirement. The advance Reporter's Statement of the Case ment from one pay period to another can be based only on active service. The base pay of the fourth pay period is the same amount as that prescribed by the act of May 11, 1908. The plaintiff is not entitled to the base pay of the fifth pay period, and, having been paid as much as an officer retired subsequent to June 30, 1922, and of equal rank and length of service would receive, the petition should be dismissed. And it is so ordered. Moss, Judge; GRAHAM, Judge; and BOOTH, Judge, concur. CORTEZ OIL COMPANY v. THE UNITED STATES1 [No. F-396. Decided January 9, 1928] On the Proofs Income and excess-profits taxes; oil and gas-mining lease of Indian lands. Income from the sale of oil and gas produced from leases upon homestead and surplus Indian lands is subject to income and excess-profits taxes. Heiner v. Colonial Trust Co., 275 U. S. 232. Same; deductions for depletion and depreciation from invested capital. In ascertaining income and excess-profits taxes under the revenue act of 1918, deductions for depletion and depreciation from invested capital are proper. The Reporter's statement of the case: Mr. Wayne Johnson for the plaintiff. Messis. Lyle 1. Alverson and Mark J. Ryan and Johnson & Shores were on the briefs. Mr. Alexander H. McCormick, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant. The court made special findings of fact, as follows: I. The plaintiff is, and at all times material to the issues herein was, a corporation organized and existing under and by virtue of the laws of the State of Oklahoma, engaged in the production and sale of crude oil, with its principal office and place of business at Tulsa, Oklahoma. 1 Certiorari denied. Reporter's Statement of the Case II. At all times during the year 1920 substantially all of the stock of Alvarado Oil Company and Balboa Oil Company, corporations organized and existing under the laws of Oklahoma, and all of the stock of plaintiff were owned and controlled by the same interests, and by reason thereof plaintiff and the said Alvarado Oil Company and the said Balboa Oil Company were affiliated corporations within the meaning of section 240 of the revenue act of 1918 and were so considered by the Commissioner of Internal Revenue for the purpose of income and excess-profits taxes of the year 1920. III. On February 25, 1921, pursuant to sections 239, 240, and 241 of the revenue act of 1918, the plaintiff and its affiliated corporations, viz, Alvarado Oil Company and Balboa Oil Company, filed with the United States Collector of Internal Revenue for the District of Oklahoma their consolidated income and excess-profits tax return for the calendar year 1920. IV. On said return the net income, invested capital, income tax, excess-profits tax, and total tax were reported as follows: Net income___ Invested capital Income tax-- Excess-profits tax Total tax $285, 773. 49 2, 158, 363. 81 26, 175. 26 22, 020. 88 48, 196. 14 V. In accordance with the provisions of section 250 of the revenue act of 1918, the plaintiff paid said total tax of $48,196.14 to the United States Collector of Internal Revenue for the District of Oklahoma in four installments as follows: On February 24, 1921. On June 10, 1921. On September 13, 1921. On December 14, 1921-- $12, 049. 04 12, 049. 03 12,049. 03 12, 049. 04 VI. Thereafter, upon examination and audit of said consolidated income and excess-profits tax return, the Commissioner of Internal Revenue increased plaintiff's net income to $337,115.76 and decreased the consolidated invested capital to $956,749.76 and thereupon, in February, 1926, assessed against the plaintiff additional income and excess-profits Reporter's Statement of the Case taxes for the year 1920 in the amount of $57,916.92, whereupon the United States collector of internal revenue for the District of Oklahoma, pursuant to the statutes of the United States in such cases made and provided, served notice upon plaintiff of said additional assessment and demanded payment of said additional taxes. VII. In compliance with said notice and demand the plaintiff paid said additional taxes of $57,916.92 to the said collector on March 11, 1926. VIII. Of the entire net income of $337,115.76 upon which the tax of $48,196.14 and the tax of $57,916.92 were assessed and paid as aforesaid, the sum of $302,925.11 was derived by the plaintiff and its said affiliated corporations from the sale of oil and gas produced from the homestead and surplus lands duly allotted and conveyed on December 10, 1908, under the provisions of the acts of Congress approved March 1, 1901, 31 Stat. 861, and June 30, 1902, 32 Stat. 500, to Sandy Fox, a duly enrolled full-blood Creek Indian. IX. Said lands were allotted and conveyed to Sandy Fox as aforesaid pursuant to an agreement negotiated between the United States and the Creek Tribe of Indians, which agreement and an agreement supplemental thereto were ratified and confirmed by and incorporated in the said acts of March 1, 1901, and June 30, 1902. X. True copies of the homestead deed and the allotment deed, whereby said lands were allotted and conveyed as aforesaid appear in the record and are not contradicted. XI. At all times during the year 1920, said homestead and surplus lands were owned by the said Sandy Fox and were subject to all the conditions, restrictions, and exemptions provided in the said acts of Congress of March 1, 1901, and June 30, 1902, and to all the provisions of chap. 1876 of the act of Congress approved April 26, 1906, 34 Stat. 137, and chap. 199 of the act of Congress approved May 27, 1908, 35 Stat. 312. XII. During the year 1920 the said homestead and surplus lands were operated for oil and gas purposes by the plaintiff and its said subsidiaries under an oil and gas mining lease duly executed by the guardian of the said Sandy Fox and approved by the Secretary of the Interior. |