Canton Cotton Mills v. United States

LITTLETON, Judge.

Plaintiff seeks a refund of income tax paid for 1936. It kept its books and prepared its tax returns by the accrual method of accounting. Plaintiff claims that certain deductions disallowed by the Commissioner of Internal Revenue were ordinary and necessary business expenses deductible in 1936 under Section 23(a) of the Revenue Act of 1936, 49 Stat. 1648, 1658, 26 U.S.C.A. § 23(a). 1

Plaintiff claims that it should have been allowed to deduct $105,609.75 which it reimbursed to its customers in 1936. The reimbursements arose in the following manner. Plaintiff, which operates a…