In the District Court for Alabama-August 25, 1930-the United States sued the Gulf States Steel Company, principal, and National Surety Company, surety, petitioners here, upon a bond dated September 9, 1925, whereby they agreed to pay Snead, collector of internal revenue, so much of the additional income and profits taxes for 1917 assessed by him against the principal in 1921 'as is not abated.' Judgment on a verdict went for plaintiffs; the Circuit Court of Appeals affirmed; the matter is here by certiorari.
Petitioners say the sole question presented is whether the additional taxes were abated by the determination of the Board of Tax Appeals (July 10, 1928) in a proceeding brought by the Steel Company to review the Commissioner's final rejection of its demand for abatement. The Board held 'that the respondent is now barred by statute from collecting any part of the additional assessment made in April, 1921, and that there is no deficiency for the year 1917.' It directed entry of an order to that effect.
The petition for certiorari asserts: 'The sole question in this case is whether the final decision of the Board that there was no deficiency 'abated' the tax.' The following is the only specification of error relied on here: 'That the Court erred in holding that the claim for the deficiency of taxes was not abated by the final decision of the United States Board of Tax Appeals that there was no deficiency.' And in their brief counsel for petitioners say: 'The sole question in this case is whether the final decision of the Board that there was no deficiency 'abated' the tax.'
March 28, 1918, the Steel Company filed its income and excess profits tax return for 1917, and shortly thereafter paid the amount apparently due. In April, 1921, the Commissioner made a deficiency assessment of $153,815.30; May 6, 1921, the company filed claim and demand for abatement of this entire sum upon the ground that the additional assessment was unwarranted and illegal in so far as it resulted (1) from the failure to compute the invested capital by including the actual cash value of claimant's property on January 1, 1914; (2) from the action of the examiners in deducting only 7 per cent. of invested capital, instead of 8 per cent.; and (3) from disallowance of certain interest payments as part of invested capital.
March 13, 1923, fifteen days before the five-year statute would have barred collection of the deficiency assessment, the additional tax being wholly unpaid and the abatement claim undetermined, in order to secure delay and further consideration of objections, the taxpayer as principal, with the American Surety Company as surety, gave the collector a bond for $175,350, which recites:
'The condition of the above obligation is such that, if the said Gulf States Steel Company will indemnify the said W. E. Snead as Collector as aforesaid, or his successor in office, against all loss, cost, damage, and expense to which he may be put by reason of having allowed the said Gulf States Steel Company to withhold the payment to him, as such Collector, of the sum of One Hundred and Fifty-three Thousand Eight Hundred Fifteen and 30/100 Dollars ($153,815.30), claimed of it under the War Revenue Act of 1917, pending the filing, by the said Gulf States Steel Company of additional facts and information in support of a claim for the abatement of said amount heretofore filed by it, then this obligation to be null and void, otherwise, to be and remain in full force and effect.'
April 3, 1925, in order to obtain release of the American Surety Company from the above-described bond, also to make certain the payment of whatever the commissioner might thereafter finally declare to be payable under the deficiency assessment of 1921, the Steel Company executed a second obligation and pledged as security $200,000 United States Liberty loan bonds. This obligation recites:
