TAXATION--INCOME TAX-EFFECT OF LOSS CARRY--BACK ON DEFICIENCY ASSESSMENT INTEREST CHARGES

In 1943 the Commissioner of Internal Revenue assessed deficiencies against respondent taxpayer in its 1941 income and excess profits taxes, adding interest from the date the tax was properly due to the assessment date. The taxpayer suffered a net operating loss in 1943 sufficient to abate completely all tax liability for 1941. When application for a refund of the amount paid and abatement of the deficiency was made, however, the commissioner deducted the interest assessed from the amount to be returned, claiming that the liability to pay interest on the deficiency was still outstanding. The district court held for the collector when the taxpayer brought suit for full refund, but was reversed by the court of appeals on the theory that if the taxpayer owed the government nothing, the interest on that debt was nothing. Held, reversed. Cancellation of the duty to pay a validly assessed deficiency does not cancel the duty to pay interest on such deficiency. Manning v. Seeley Tube & Box Co. of New Jersey, 338 U.S. 561, 70 S.Ct. 386 (1950)