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to the income tax, the Supreme Court stated:
This is because recoupment is in the nature of a
defense arising out of some feature of the transaction
upon which the plaintiff's action is grounded. Such a
defense is never barred by the statute of limitations
so long as the main action itself is timely. [Id. at
262.]
Although the "single transaction" requirement was mentioned
in Bull v. United States, supra, it was the stated ground for
decision in Rothensies v. Electric Storage Battery Co., supra.
In that case, the taxpayer erroneously paid excise taxes on the
sale of electric storage batteries from April 1919 to April 1926.
In July 1926, the taxpayer filed a claim for refund for the
periods of mid-1922 to 1926, the years not barred by the statute
of limitations, and received a refund in 1935. Although the
taxpayer had been deducting the payment of these taxes, it did
not include the refund in income. The Government determined a
deficiency in the taxpayer's 1935 income tax, and the taxpayer
paid the deficiency and sued for refund when its claim was
denied.
In both the trial court and the Court of Appeals for the
Third Circuit, the taxpayer asserted successfully that the income
tax for 1935 should be reduced by equitable recoupment for the
time-barred excise tax overpayments for the 1919 through mid-1922
years. In affirming the District Court, the Court of Appeals for
the Third Circuit stated that the same transaction element should
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