-39-
its own return, is consistent not only with the
intention of Congress * * * but also with
considerations of sound administrative procedure and
the generally accepted rule concerning the number of
returns which may be filed.
This terminal date, which the Board of Tax Appeals
first adopted in Taylor Securities v. Commissioner,
40 B.T.A. 696 (1939), is directed against those foreign
corporations which instead of being induced voluntarily
to advise the Commissioner of their domestic
operations, might find their interests best served by
filing no return whatever, and then waiting until such
time, if any, as the Commissioner discovers their
existence and acquires sufficient information about
their income on which to base a return. Unless they
are precluded from then obtaining the deductions and
credits under such circumstances, such foreign
corporation can, if detected, come in for the first
time after the Commissioner has made a return and
suffer no economic loss other than the general 25% late
filing penalty which applies to domestic as well as
foreign corporations.
Without prescribing an absolute and rigid rule
that whenever the Commissioner files a return for a
foreign corporation the taxpayer is completely and
automatically denied the benefit of deductions or
credits, we yet hold that the facts of the instant case
justify a disallowance of deductions which petitioner
might otherwise have been entitled to claim, had it
filed a timely return in compliance with the statutory
requirement. [Blenheim Co. v. Commissioner, 125 F.2d
at 910.]
The Court of Appeals for the Fourth Circuit also found in the
legislative history of section 217 of the Revenue Act of 1918
further support for that conclusion and its reading of the
statute to the effect that a foreign corporation was entitled to
deduct its expenses upon the filing of an accurate and complete
return:
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