SCOTUS Reports

Tag: Base Period Earnings

  • Jackson-Raymond Co. v. Commissioner, 23 T.C. 826 (1955): Excess Profits Tax Relief and Reconstruction of Base Period Earnings

    23 T.C. 826 (1955)

    To claim excess profits tax relief under Section 722, a taxpayer must establish a fair and just amount representing normal earnings to be used as a constructive average base period net income, resulting in excess profits credits based on income greater than those allowed by the invested capital method.

    Summary

    The Jackson-Raymond Company, a uniform apparel manufacturer, sought excess profits tax relief under Section 722 of the Internal Revenue Code of 1939. The company argued that the invested capital method resulted in an excessive tax due to the importance of intangible assets and its abnormally low invested capital. The Tax Court, however, denied relief, finding the company failed to establish a reliable basis for reconstructing its normal base period earnings. The court emphasized the difficulty in determining the company’s position in the shirt manufacturing industry during the base period, especially given its specialization in military apparel during wartime, a condition that did not exist during the base period.

    Facts

    Jackson-Raymond Company was a Pennsylvania corporation formed in February 1941. Its primary business was the design, purchase of materials, and sale of uniform apparel, primarily shirts, for the military. The manufacturing itself was outsourced to contractors. The company’s key personnel had extensive experience in the apparel industry, with particularly valuable contacts. In 1944, the company began producing civilian shirts. The company sought relief under section 722, claiming a constructive average base period net income. However, the Commissioner computed the excess profits credits based on the invested capital method, which the company argued was inadequate.

    Procedural History

    The case was heard in the United States Tax Court after the Commissioner of Internal Revenue denied the company’s claims for excess profits tax relief. The company sought refunds for its excess profits tax payments for the tax years ended November 30, 1941, through November 30, 1945, based on section 722. The Tax Court reviewed the case, heard the evidence, and ultimately issued a decision in favor of the Commissioner, denying the company the requested relief.

    Issue(s)

    Whether the petitioner is entitled to relief under Section 722(c) of the Internal Revenue Code of 1939.

    Holding

    No, because the petitioner failed to establish a fair and just amount representing normal earnings to be used as a constructive average base period net income.

    Court’s Reasoning

    The court first acknowledged that the company may have qualified for relief under Section 722(c)(1) because the services of its principal officers made important contributions to income. However, the court held that to be entitled to any relief, the company needed to establish a constructive average base period net income that would result in an income-based excess profits credit higher than the invested capital method credit. The court examined the reconstruction proposed by the petitioner, which was based on assumptions about the company’s position in the shirt manufacturing industry had it been in existence during the base period. The court found the reconstruction unreliable because it was based on comparisons to the industry which focused mainly on dress shirts. The court noted the company’s business was focused on military apparel during the war years, creating a unique situation that could not be reliably reconstructed. The court found the petitioner’s business success was tied to wartime conditions, making it difficult to determine what would have happened during the base period.

    Practical Implications

    This case is important for understanding the requirements for obtaining relief under the excess profits tax provisions of the Internal Revenue Code, specifically Section 722. It highlights the importance of providing sufficient and reliable evidence to support a reconstruction of base period earnings, the case also demonstrates the difficulty of establishing a base period net income where a company’s business was heavily influenced by specific, non-recurring market conditions, such as a war. Attorneys working on similar cases should focus on providing detailed comparative data and evidence to support the reconstruction of the base period income. It also highlights the need to demonstrate a direct correlation between the factors used in the reconstruction and the actual economic environment during the base period.

  • Brown Paper Mill Co. v. Commissioner, 23 T.C. 47 (1954): Requirements for Excess Profits Tax Relief Under Section 722 of the Internal Revenue Code of 1939

    23 T.C. 47 (1954)

    To qualify for excess profits tax relief under Section 722 of the Internal Revenue Code of 1939, a taxpayer must demonstrate that its average base period net income is an inadequate standard of normal earnings due to specific qualifying events, such as temporary economic circumstances or changes in the character of the business, and must establish a fair and just constructive average base period net income exceeding the credit otherwise available.

    Summary

    In this case, the Tax Court considered the Brown Paper Mill Company’s claims for relief from excess profits tax under Section 722 of the Internal Revenue Code of 1939. The court addressed whether the company qualified for relief based on alleged temporary economic circumstances and changes in the character of its business during the base period (1936-1939). The court found that the company did not prove its base period earnings were depressed due to temporary economic events, particularly an increase in paper mill capacity. However, the court granted relief due to changes in the ratio of nonborrowed capital to total capital and the installation of new machinery, but limited relief to the extent that capital was retired and costs were reduced. The court also addressed several other tax issues, including the treatment of licensing fees for machinery and adjustments for capital stock taxes.

    Facts

    Brown Paper Mill Company (Petitioner) was a corporation engaged in the manufacture and sale of unbleached kraft paper and board. The company sought relief from excess profits taxes for the years 1940 through 1945 under Section 722 of the Internal Revenue Code of 1939. The company claimed that its average net income during the base period was an inadequate standard of normal earnings due to temporary economic circumstances, including increased competition due to new paper mills, and changes in the character of its business, such as changes in capital structure and the installation of new machinery (Sutherland pulp refiners and McDonald dehydrators). The Commissioner of Internal Revenue (Respondent) denied the relief, leading to the Tax Court proceedings.

    Procedural History

    The case began with the Commissioner of Internal Revenue determining deficiencies in the petitioner’s income and excess profits taxes and disallowing claims for relief under Section 722. The petitioner filed claims with the Commissioner and, after their denial, filed petitions in the United States Tax Court. The Tax Court consolidated the various petitions and heard the case, leading to the court’s decision.

    Issue(s)

    1. Whether the petitioner qualified for excess profits tax relief for all years in controversy because its average net income during the base period was an inadequate standard of its normal earnings, due to temporary economic events or circumstances unusual to the petitioner or to the industry of which it was a part, within the meaning of Section 722 (b)(2) of the Internal Revenue Code of 1939.

    2. Whether the petitioner qualified for excess profits tax relief because of a change in the character of petitioner’s business during or immediately prior to the base period, within the meaning of Section 722 (b)(4).

    3. If qualified for Section 722 relief, whether petitioner has established a fair and just constructive average base period net income in excess of the credit to which it is entitled without reference to Section 722.

    4. Whether amounts paid during the base period years for rights to use certain machines were properly deducted as license fees during those years and not subject to capitalization and depreciation as cost of acquiring capital assets.

    5. Whether petitioner is entitled under section 734, Internal Revenue Code of 1939, to an adjustment in 1939 income tax for certain amounts which were deducted in determining petitioner’s base period net income credit for excess profits tax purposes for the years in controversy, but disallowed as ordinary deductions in 1939.

    Holding

    1. No, because the petitioner did not prove that the alleged temporary economic events resulted in an inadequate standard of normal earnings during the base period.

    2. Yes, because the petitioner qualified for relief under Section 722 (b)(4) for excess profits years 1941-1945 due to a change in its ratio of nonborrowed to total capital during the base period. Yes, because the petitioner qualified for relief under Section 722 (b)(4) for the change in the method of operation caused by the Sutherland refiners and the McDonald dehydrators.

    3. Yes, the court reconstructed the base period net income based on the changes in capital ratio and method of operation.

    4. Yes, the amounts paid were properly deducted as license fees.

    5. Yes, the court held the inconsistencies should be corrected under Section 734.

    Court’s Reasoning

    The court first addressed whether the petitioner’s earnings were depressed due to temporary economic circumstances, as defined in Section 722(b)(2). The court determined that the increase in the number of southern kraft mills during the base period was not a temporary event, but part of a steady and permanent economic development. The court noted that the petitioner failed to establish that the conditions were temporary, and that the resulting drop in prices was not unusual or temporary. The court considered evidence of price drops but found that the company could not show that the conditions would have improved after 1939. The court then analyzed whether there was a change in the character of the business, under Section 722(b)(4). The court found that there were qualifying events in the changes in capital ratio and in the installation of machinery. The court reasoned that the changes in capital structure and in the production process, from the installation of new refiners and dehydrators, substantially affected the petitioner’s business. The court provided for an adjustment to reconstructed earnings for the changes in capital structure and in the method of operation and allowed the deductions for license fees as expenses.

    Practical Implications

    This case underscores the importance of demonstrating both a qualifying event and the causal relationship between that event and the inadequacy of base period earnings. It clarifies the requirements for qualifying for relief under Section 722. The ruling emphasizes that the taxpayer must establish that the change was substantial and that it had a significant impact on the company’s normal earnings. It also provides guidance on the types of evidence and arguments that a taxpayer must present to establish a claim for relief. The case shows that the court would reconstruct base period earnings if the petitioner could show how the earnings had been altered during the base period. The petitioner needed to offer evidence that a permanent improvement was made and that the results would be different after the alleged changes.

  • Morrow-Thomas Hardware Co. v. Commissioner, 22 T.C. 781 (1954): Establishing Inadequate Base Period Earnings Due to Economic Depression

    22 T.C. 781 (1954)

    A taxpayer may be entitled to relief under Internal Revenue Code §722 if they can demonstrate that their base period earnings were depressed due to temporary economic circumstances that were unusual for the taxpayer’s business and caused an inadequate standard of normal earnings, such as an extended drought.

    Summary

    Morrow-Thomas Hardware Company (Petitioner) sought relief from excess profits taxes, claiming their base period earnings were depressed due to drought and dust storms, unusual in their trade territory. The U.S. Tax Court determined that the Petitioner’s business was indeed affected by the drought. However, the court also determined that the Petitioner’s business and sales volume was higher than that of the previous 4 years. The court determined that the Petitioner was not entitled to the higher constructie average base period net income because of the inability to prove that its sales decreased or that its expenses increased because of the weather. The court ultimately granted the Petitioner relief and a constructie average base period net income by an amount that factored in lost sales due to the weather, which it estimated as $25,000.

    Facts

    Morrow-Thomas Hardware Company, a wholesale and retail hardware business in Amarillo, Texas, claimed relief from excess profits taxes, citing depressed earnings during its base period due to an extended drought and dust storms in the 1930s. The business’s operations, primarily serving the farming and ranching sectors, were negatively impacted by the weather conditions. The Commissioner of Internal Revenue denied the relief. The company’s base period covered the years 1936 through 1939. The company had a retail business and a wholesale business.

    Procedural History

    The taxpayer filed claims for relief and refund, which were denied by the Commissioner. The taxpayer then brought the case to the U.S. Tax Court.

    Issue(s)

    1. Whether the petitioner’s business was depressed during the base period due to temporary economic circumstances unusual to it within the meaning of § 722(b)(2) of the Internal Revenue Code?

    2. Whether the petitioner’s average base period net income is an inadequate standard of normal earnings?

    3. Whether the petitioner was entitled to a fair and just amount representing normal earnings to be used as a constructive average base period net income.

    Holding

    1. Yes, because the prolonged drought, crop failures, and dust storms created temporary economic circumstances unusual in the taxpayer’s trade territory.

    2. Yes, because the drought and dust storms meant the petitioner’s average base period earnings were not an adequate measure of its normal earning potential.

    3. Yes, because the court could estimate a fair and just amount of normal earnings for the taxpayer based on evidence presented to it.

    Court’s Reasoning

    The Tax Court applied § 722 of the Internal Revenue Code to determine whether the taxpayer was entitled to relief from excess profits taxes. The court examined the facts to determine if the taxpayer’s average base period net income was an inadequate standard of normal earnings. The court found that the drought and dust storms constituted unusual temporary economic circumstances. The court found the petitioner’s base period sales volumes to be higher than in any other four consecutive year period, which is why it was not entitled to the increased constructive average base period net income. In determining the amount of relief, the court looked at what sales the taxpayer lost and factored that lost sales into its calculations.

    Practical Implications

    This case is significant because it shows when a taxpayer may be entitled to excess profits tax relief under the I.R.C. § 722. Legal practitioners should be mindful of the following:

    • The court’s willingness to consider the impact of unusual economic conditions on a taxpayer’s earnings.
    • The importance of providing evidence to demonstrate the connection between the economic conditions and the business’s performance.
    • The fact that the taxpayer has the burden of proof to establish the amount of a fair and just amount of income.

  • Miami Beach Kennel Club, Inc. v. Commissioner, 21 T.C. 1953 (1953): Defining ‘Commencement of Business’ and ‘Change in Character’ for Excess Profits Tax Relief

    Miami Beach Kennel Club, Inc. v. Commissioner, 21 T.C. 1953 (1953)

    To qualify for excess profits tax relief under Section 722(b)(4) of the Internal Revenue Code based on ‘commencement of business’ or ‘change in character of business’, the commencement or change must occur ‘immediately prior to the base period’ and must be the direct cause of inadequate base period earnings.

    Summary

    Miami Beach Kennel Club sought relief from excess profits tax, arguing its base period earnings were not representative of normal earnings due to commencing business or changing its character immediately before or during the base period. The Tax Court denied relief, holding that the kennel club commenced business well before the base period and that improvements made were normal business developments, not a change in character. The court emphasized that the ‘commencement’ or ‘change’ must be the direct cause of inadequate base period earnings, which was not proven. Furthermore, the court held it lacked jurisdiction to consider standard excess profits credit issues raised by the Commissioner’s amended answer.

    Facts

    Petitioner, Miami Beach Kennel Club, was organized in 1930 and constructed a greyhound racing track. Initially, the property was leased to operators. Petitioner operated the track continuously from the 1933-34 racing season onwards. The base period for excess profits tax calculation began on October 1, 1936. Petitioner claimed that improvements and changes in operations made before and during the base period entitled it to excess profits tax relief under Section 722(b)(4) of the Internal Revenue Code, asserting it either commenced business or changed its character immediately prior to or during the base period.

    Procedural History

    The Tax Court was tasked with reviewing the Commissioner’s disallowance of Miami Beach Kennel Club’s application for relief under Section 722. The Commissioner belatedly moved to amend his answer to claim deficiencies and overpayments related to standard excess profits tax credit issues, which the petitioner objected to.

    Issue(s)

    1. Whether Miami Beach Kennel Club commenced business ‘immediately prior to the base period’ within the meaning of Section 722(b)(4) of the Internal Revenue Code.
    2. Whether Miami Beach Kennel Club changed the character of its business ‘immediately prior to the base period’ within the meaning of Section 722(b)(4) of the Internal Revenue Code.
    3. Whether changes made by Miami Beach Kennel Club ‘during the base period’ constituted a change in the character of its business under Section 722(b)(4).
    4. Whether the Tax Court had jurisdiction to consider the ‘standard issue’ of excess profits tax credit raised by the Commissioner’s amended answer in a proceeding initiated by a Section 732 notice of disallowance of Section 722 relief.

    Holding

    1. No, because Miami Beach Kennel Club had been operating its greyhound racing track for three fiscal years before the base period began, establishing its business well before the relevant timeframe.
    2. No, because the improvements made prior to the base period, such as installing electrically illuminated starting boxes and odds boards, were considered normal business improvements and not a fundamental change in the character of the greyhound racing business.
    3. No, because the changes during the base period, including grandstand remodeling and installation of a heating plant and photo-finish camera, were deemed routine business improvements to maintain competitiveness and did not fundamentally alter the business’s character or directly cause inadequate base period earnings.
    4. No, because the Tax Court’s jurisdiction in this proceeding, initiated under Section 732 for review of Section 722 relief disallowance, does not extend to ‘standard issues’ of excess profits tax liability under Subchapter E, which require a separate notice of deficiency under Section 272.

    Court’s Reasoning

    The court reasoned that ‘immediately prior to the base period’ requires a temporal proximity and a causal link between the commencement or change and the inadequacy of base period earnings. The court found that Miami Beach Kennel Club’s business was established well before the base period. Referencing regulations and prior cases like Monarch Cap Screw & Manufacturing Co. and Acme Breweries, the court emphasized that businesses operating for several years before the base period do not qualify as commencing business ‘immediately prior’.

    Regarding the ‘change in character’ claim, the court distinguished between routine business improvements and fundamental changes. The court stated, “A change in character, within the intent of the statute, must be a substantial departure from the preexisting nature of the business.” Improvements like starting boxes and odds boards were considered part and parcel of the greyhound racing business, not a change in its character. Similarly, base period improvements were viewed as normal business developments to maintain competitiveness, not changes causing inadequate earnings. The court noted that attendance records did not support the claim that these changes dramatically increased capacity or earnings beyond normal business growth influenced by broader economic trends.

    Regarding jurisdiction, the court followed Mutual Lumber Co., holding that a Section 732 notice limits jurisdiction to Section 722 relief claims, excluding ‘standard issues’ of excess profits tax liability which require a Section 272 deficiency notice. The court rejected the Commissioner’s attempt to introduce new standard issues via an amended answer, deeming it untimely and beyond the court’s jurisdictional scope in this specific proceeding. The court emphasized the separate jurisdictional bases of Sections 272 and 732.

    Practical Implications

    Miami Beach Kennel Club clarifies the stringent requirements for obtaining excess profits tax relief based on ‘commencement of business’ or ‘change in character’. It underscores that businesses must demonstrate a genuine commencement or fundamental change immediately preceding the base period, directly causing inadequate earnings. Routine business improvements, even if they enhance profitability, are insufficient. This case reinforces the importance of establishing a clear causal link between the alleged commencement/change and the claimed earnings inadequacy. For tax practitioners, it highlights the need to meticulously document and demonstrate substantial, non-routine changes that fundamentally alter a business’s nature and earning capacity to qualify for Section 722(b)(4) relief. It also serves as a reminder of the Tax Court’s jurisdictional limitations in Section 732 proceedings, preventing the introduction of standard tax liability issues in relief claim cases.

  • Southern California Edison Co. v. Commissioner, 19 T.C. 945 (1953): Excess Profits Tax Relief and Abnormal Base Period Earnings

    Southern California Edison Co. v. Commissioner, 19 T.C. 945 (1953)

    A taxpayer can obtain excess profits tax relief under Section 722 of the Internal Revenue Code if its average base period net income is an inadequate standard of normal earnings due to unusual and temporary economic circumstances or changes in business character, but the corrections must be made within the framework of the base period itself.

    Summary

    Southern California Edison Co. sought excess profits tax relief for 1942-1945 under Section 722, arguing its base period earnings (1936-1939) were depressed due to the loss of city customers (Los Angeles, Burbank, Glendale) to Boulder Dam power and increased capacity due to its own commitment to take Boulder power. The Tax Court held the company qualified for relief under Section 722(b)(2) due to temporary economic circumstances from the loss of city customers and fringe customers. It further held that the loss of these customers constituted an “unusual” circumstance. While the company was committed to taking Boulder power, it failed to prove this commitment led to increased earnings during the base period. The Court also allowed adjustments for excessive depreciation and interest deductions during the base period.

    Facts

    Southern California Edison, a public utility, generated and distributed electricity in Southern California. In 1930, it contracted to take power from Boulder Dam. When Los Angeles and other cities switched to Boulder power in 1936-1937, Edison lost them as customers. In 1939, Edison sold part of its distribution system to Los Angeles, losing 43,704 customers and $1.5 million in annual revenue. Edison claimed its base period earnings were depressed by these events and its commitment to take Boulder power starting in 1940.

    Procedural History

    Southern California Edison Co. applied for excess profits tax relief, arguing its average base period net income was an inadequate standard of normal earnings. The Commissioner denied the application. The Tax Court reviewed the Commissioner’s decision.

    Issue(s)

    1. Whether the loss of city customers and fringe customers constitutes temporary economic circumstances unusual to the taxpayer under Section 722(b)(2)?

    2. Whether the commitment to take Boulder power qualifies as a change in the character of the business under Section 722(b)(4), entitling the taxpayer to relief?

    3. Whether the excessive depreciation and interest deductions during the base period require correction in reconstructing average base period net income?

    Holding

    1. Yes, because the loss was significant compared to prior losses and the company’s earning capacity was only temporarily decreased.

    2. No, because the company did not demonstrate that the increased capacity from Boulder power would have resulted in increased earnings during the base period.

    3. Yes, because these factors created abnormalities in the base period net income that must be corrected to accurately reflect normal earnings.

    Court’s Reasoning

    The Tax Court found the loss of the three cities and fringe customers constituted “temporary economic circumstances unusual” under Section 722(b)(2), citing the severity of the loss and that the company’s earnings capacity was only temporarily decreased. The court rejected the IRS’s argument that these losses were not temporary, emphasizing that the statute focuses on the taxpayer’s earning capacity, not whether a specific customer is lost forever. Regarding the Boulder power commitment, the court held that Section 722 relief requires a showing that the increased capacity would have led to increased earnings during the base period, not a projection of future earnings. The court emphasized that the base period (1936-1939) serves as the framework for determining normal earnings. The court stated: “The constructive average base period net income which is authorized by the statute represents net income determined for the base period, after making the permissible adjustments for the abnormalities.” As for depreciation and interest, the court relied on E.P.C. 6 and E.P.C. 13, which state that all abnormalities affecting normal earnings should be corrected, regardless of whether they independently qualify for relief under Section 722. The court found that the higher depreciation rates and interest deductions abnormally reduced net income and required correction.

    Practical Implications

    This case clarifies the scope of Section 722 relief for excess profits tax, emphasizing that the focus is on correcting abnormalities within the base period to determine normal earnings. It highlights the importance of demonstrating a direct link between qualifying events and their impact on earnings during the specific base period years. The case provides guidance on how to apply the “temporary” requirement under Section 722(b)(2) and the limits of projecting future earnings in Section 722(b)(4) commitment cases. It also confirms that all abnormalities affecting base period net income, whether independently qualifying for relief or not, must be corrected in reconstructing average base period net income. Later cases cite this case for its interpretation of the push-back rule and the consideration of post-base period events.

  • Lamar Creamery Co., 8 T.C. 928 (1947): Limiting Excess Profits Tax Relief to Base Period Conditions

    Lamar Creamery Co., 8 T.C. 928 (1947)

    Section 722 of the Internal Revenue Code of 1939, providing excess profits tax relief, is limited to considering conditions and events existing during the base period and excludes those arising after that period.

    Summary

    Lamar Creamery Co. sought relief from excess profits taxes under Section 722, arguing that its base period earnings were not representative due to a move and expansion late in 1939. The Tax Court denied the relief, finding that even if the company’s projected earnings based on December 1939 were accurate, adjustments revealed overstated income and understated expenses for that month. More critically, the court emphasized that Section 722 precludes considering events occurring *after* the base period to justify relief, thus barring the company from relying on its post-expansion performance to reconstruct base period earnings. The court upheld the invested capital credit allowed by the Commissioner.

    Facts

    Lamar Creamery Co. moved to a new location and expanded its operations in late 1939, near the end of the base period for calculating excess profits taxes. The company claimed that its earnings during the base period were not representative of its normal earning capacity due to this disruption and sought relief under Section 722 of the Internal Revenue Code of 1939. The company attempted to project its earnings as if the expansion had been in place throughout the base period, using December 1939 as a representative month.

    Procedural History

    Lamar Creamery Co. petitioned the Tax Court for a redetermination of its excess profits tax liability. The Commissioner had denied the company’s claim for relief under Section 722. The Tax Court reviewed the case and ultimately upheld the Commissioner’s determination, denying the company’s claim for relief.

    Issue(s)

    Whether the Tax Court erred in denying the taxpayer’s claim for relief under Section 722 of the Internal Revenue Code of 1939, where the taxpayer argued that its base period earnings were not representative due to a move and expansion near the end of the base period, and attempted to project its earnings based on its post-expansion performance.

    Holding

    No, because Section 722(a) precludes considering events or conditions arising *after* the base period in determining whether the base period earnings were an inadequate standard of normal earnings.

    Court’s Reasoning

    The Tax Court scrutinized the taxpayer’s projection of earnings based on December 1939, finding that expenses were understated and income was overstated for that month. Significant adjustments were required for management salaries, rent, liquor and beer costs, and an inventory adjustment. The court stated, “bearing in mind the admonition of section 722 (a) against resorting to ‘events or conditions’ after that month…nothing is left upon which to support a finding that the invested capital credit allowed by respondent has resulted ‘in an excessive and discriminatory tax’ on petitioner’s earnings, even in its new establishment.” The court emphasized that Section 722(a) does not permit consideration of events or conditions *after* the base period. The court’s reasoning was based on a strict interpretation of the statutory language and a concern that allowing consideration of post-base period events would open the door to speculative and unreliable projections.

    Practical Implications

    This case highlights the strict limitations on claiming excess profits tax relief under Section 722. It establishes that taxpayers cannot rely on events or conditions occurring after the base period to demonstrate that their base period earnings were not representative. This decision shaped how taxpayers could present their claims for relief, emphasizing the importance of focusing on abnormalities existing *within* the base period itself. Later cases applying Section 722 had to carefully distinguish between events occurring during and after the base period. The case underscores the importance of accurate financial records and the need to justify any adjustments made to reported income and expenses during the base period. For legal practitioners, this case serves as a cautionary tale about the burden of proof and the limited scope of permissible evidence when seeking excess profits tax relief.