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be interpreted to mean that there be "a logical connection
between main claim and the recoupment claim." Electric Storage
Battery Co. v. Rothensies, 152 F.2d 521, 524 (3d Cir. 1945),
revd. 329 U.S. 296 (1946).
In reversing on this issue, the Supreme Court stated that
equitable recoupment
has never been thought to allow one transaction to be
offset against another, but only to permit a
transaction which is made subject of suit by a
plaintiff to be examined in all its aspects, and
judgment to be rendered that does justice in view of
the one transaction as a whole. [Rothensies v.
Electric Storage Battery Co., 329 U.S. at 299.]
In Rothensies v. Electric Storage Battery Co., supra, it is
clear that the case involved separate transactions, separate
items, and separate taxable events; the time-barred overpayments
arose from the erroneous treatment of many separate sales of
batteries as subject to excise taxes,10 and the income tax
deficiency arose from the failure to include the refunded open-
year excise taxes in gross income under the tax benefit rule.11
The time-barred refunds of the 1919 through mid-1922 excise taxes
and the inclusion of the refunded taxes that were paid in 1922
10Therefore, the excise taxes paid in the time-barred years
were not paid on the same item or in the same transaction, but on
the same type of item or transaction.
11See Andrews, "Modern-Day Equitable Recoupment and the 'Two
Tax Effect': Avoidance of the Statute of Limitation in Federal
Tax Controversies", 28 Ariz. L. Rev. 595, 610 (1986).
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