ROANOKE MILLS CO. v. COMMISSIONER

ROANOKE MILLS CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

ROANOKE MILLS CO. v. COMMISSIONER

Docket No. 23221.

United States Board of Tax Appeals

18 B.T.A. 474; 1929 BTA LEXIS 2036;

December 11, 1929, Promulgated

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1. Claim for paid-in surplus based on the alleged value of certain water-power rights acquired from nonstockholder corporations denied.

2. Respondent reduced invested capital as of August 31, 1916, by the amount of alleged depreciation accruing from 1899 to 1916. Held, upon the evidence, that the reduction was in error.

3. March 1, 1913, value of certain water-power rights determined for depreciation purposes.

4. Reasonable allowance for depreciation of physical assets determined for the purpose of computing the net income in the taxable years 1917, 1918, 1920, and 1921.

E. S. Parker, Jr., Esq., and J. L. Elliott, C.P.A., for the petitioner.

E. C. Lake, Esq., for the respondent.

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SMITH

In this proceeding the petitioner seeks a redetermination of its tax liability for the fiscal years ended August 31, 1917, to August 31, 1921, inclusive. The respondent has determined deficiencies for the years 1917, 1918, 1920, and 1921 in the respective amounts of $8,683.17, $29,515.01, $37,979.68, and $2,186.47, and an overassessment for the year 1919 in the amount of $4,245.64. Since no deficiency has been determined for the taxable year ended August 31, 1919, and a consideration of the tax liability for that year is not necessary to determine any issues involved for other years, an order will be entered dismissing the proceeding with respect to such year.

The petitioner alleges error on the part of the respondent in his computation of its invested capital and in his failure to make proper allowances in computing its taxable income for exhaustion, wear and tear of property used in its business.

FINDINGS OF FACT.

The petitioner is a corporation organized and existing under the laws of the State of North Carolina, with its principal place of business at Roanoke Rapids. It is engaged in the business of manufacturing and selling cotton products. Its chief product is outing flannels.

Under date of February 18, 1897, the petitioner acquired by deed from the Carolina Construction Co., a North Carolina corporation, a mill site on the Roanoke River at Roanoke Rapids and certain water-power rights as hereinafter more fully described. The identical water-power rights and other property acquired by said deed had been conveyed to the Carolina Construction Co. by the Roanoke Rapids Power Co., a North Carolina corporation, formerly the Great Falls Water Power Manufacturing & Improvement Co., hereinafter referred to as the Power Co., by deed dated July 23, 1895. The deed of 1897 by express terms purported to "transfer" and "assign" to the petitioner all of the property, rights and privileges acquired by the Carolina Construction Co. under the said conveyance of 1895, subject to the terms and conditions thereof.

The Power Co. and the Carolina Construction Co. were organized by a group of North Carolina and Virginia business men composed of T. L. Emry, of Weldon, N.C., a land owner of large holdings in the vicinity of Roanoke Rapids; W. S. Parker, a merchant of Henderson, N.C.; W. M. Habliston, a merchant and banker of Petersburg and Richmond, Va., and Charles Cohen, a merchant of Petersburg, Va. Under the plan of its organization the Power Co. took over the lands, including the Roanoke Rapids power site, formerly owned by Emry.

Later on the above named parties, together with certain northern investors represented by John Armstrong Chaloner and Winthrop Chaloner, caused to be organized two corporations, the Roanoke Mills Co., the petitioner herein, and the United Industrial Co. The petitioner was organized to build and operate a cotton mill and was owned by the southern interests. The United Industrial Co. was organized to build and operate a paper-fiber mill and was owned by the northern interests. Neither the Power Co. nor the Carolina Construction Co. owned any of petitioner's stock. W. S. Parker, president of the petitioner company, was a stockholder of the Power Co. T. L. Emry was a stockholder and director in the petitioner company and a stockholder in the Power Co. W. M. Habliston was president of the Power Co. and a director and stockholder in both companies. Charles Cohen was a stockholder and director in both companies.

Under date February 18, 1897, there was conveyed to the petitioner by the Carolina Construction Co. the mill site and water rights hereinabove referred to, consisting, roughly, of a certain tract of land situated between the Roanoke River and the canal of the Power Co., designated as mill site No. 2, and the right to take in perpetuity from the canal sufficient water to produce at all times 500 horsepower. The above named W. M. Habliston, Charles Cohen, and T. L. Emry appear as parties to the said deed of 1897 by virtue of an option which they held under a prior contract to purchase and acquire said property and rights from the Carolina Construction Co. On July 23, 1895, the Power Co. had conveyed to the United Industrial Co. an adjacent tract of land between the canal and the river, designated as mill site No. 1, and the right to take in perpetuity from the canal sufficient water to produce at all times 500 horsepower. This right of the United Industrial Co. to take water from the canal was prior to the petitioner's right.

The mill site and the water-power rights were conveyed to the petitioner as an inducement and upon condition that it erect a cotton mill upon the site designated. There was no other consideration for the conveyance.

The petitioner thereafter erected its mill in accordance with the terms of the agreement and began operating. The Power Co. had previously erected wing dams at the opening of the canal capable of directing into the canal about one-fourth of the flow of the Roanoke River at that point. This was estimated to be sufficient water to produce at all times approximately 2,400 horsepower. The petitioner used its own equipment in converting the water into usable power.

Several years after, about the year 1903, there arose a dispute between the petitioner and the Power Co. in which the Power Co. claimed that the petitioner had been using a greater amount of water from the canal than the 500 horsepower which it was entitled to under the contract of 1897. A settlement of this dispute was reached about two years later, whereby the petitioner agreed to pay to the Power Co. $5,000 in full satisfaction of the Power Co.'s claim for the excess water used. At the same time, under date of February 21, 1905, the parties entered into a new agreement with respect to the petitioner's use of water from the Power Co.'s canal, the principal provisions of which were that, in lieu of the right to take water from the canal acquired by the petitioner under the aforesaid contract of 1897, the Power Co. granted the petitioner the right to take sufficient water from the canal to produce at all times 1,050 horsepower. The right to produce 600 of the 1,050 horsepower was granted in perpetuity. The right to take sufficient water to produce the remaining 450 horsepower was granted for a term of 100 years, commencing March 1, 1904, for which the petitioner agreed to pay an annual rental of $2,500 for the first year and $2,750 for each year thereafter.

At the same time a similar agreement was entered into between the Power Co. and the United Industrial Co. The petitioner's and the United Industrial Co.'s water-power rights were on a parity and were given priority over all other rights theretofore or thereafter to be granted. The agreement provided, further, that should the petitioner at any time take from the canal water in excess of the amount agreed upon, additional payment for such excess at the rate of $10 per horsepower per annum would be made to the Power Co. It stated specifically, however, that this provision did not constitute a sale of additional horsepower at the rate named.

During the period from 1906 to 1909 the Power Co. built a dam entirely across the Roanoke River near the mouth of the canal, of sufficient height to divert into the canal a minimum flow of the entire river at all times. The head was raised from 27 to 30 feet and the canal was cleaned out and widened to accommodate the excess flow of water. At or about the same time it built a hydroelectric plant to convert the water power into electric current for transmission to other users. It sold additional electric power to the petitioner at a per kilowatt rate equal to $18 per horsepower, and sold to the Rosemary Manufacturing Co., which had a plant some two miles distant, night power at a per kilowatt rate equal to $23 per horsepower. The electric power sold to the Rosemary Manufacturing Co. was to augment its steam power and was to be used only between the hours 6 p.m. to 6 a.m.

In his computation the respondent has included in petitioner's invested capital the amount of $60,000 representing the value of the water-power rights acquired by the petitioner under the contract of February 18, 1897, with the Carolina Construction Co. At the hearing of this appeal the respondent made the contention, amending his answer in conformity therewith, that the amount of $60,000 representing the value of the water-power rights acquired under the contract of 1897 was erroneously included in petitioner's invested capital and should now be excluded therefrom. Also, in his computation the respondent has allowed deductions on account of the exhaustion of the additional water-power rights acquired under the contract of 1905, based upon a March 1, 1913, bonus value thereof of $33,098.50 prorated over the remaining life of the contract (92 years).

The following is an analysis of depreciable asset accounts as shown on the petitioner's books for the fiscal years ended August 31, 1916, to August 31, 1921, inclusive:

	Total
Machinery:
Aug. 31, 1916, balance	$474,396.73
Additions 1917	65,263.23
Additions 1918	285,730.17
Additions 1919	53,679.78
Additions 1920	278,123.93
Additions 1921	202,752.66
Balance Aug. 31, 1921	1,359,946.50
Brick Buildings:
Aug. 31, 1916, balance	165,516.74
Additions 1917	104,487.86
Additions 1918	106,111.74
Additions 1919	45,313.45
Additions 1920	100,979.83
Additions 1921	120,136.25
Balance Aug. 31, 1921	642,545.85
Tenements:
Aug. 31, 1916, balance	97,560.48
Additions 1917	37,403.05
Additions 1918	60,461.57
Additions 1919	136,547.41
Additions 1920	61,766.11
Additions 1921	11,839.85
Balance Aug. 31, 1921	405,378.47
Equipment:
Aug. 31, 1916, balance	44,522.01
Additions 1917	32,646.39
Additions 1918	50,263.08
Additions 1919	15,599.10
Additions 1920	$55,504.54
Additions 1921	70,583.05
Balance Aug. 31, 1921	269,118.17
Power plant:
Aug. 31, 1916, balance	18,101.42
Additions 1917	373.96
Additions 1918	16,519.47
Additions 1919	210.71
Balance Aug. 31, 1921	35,205.56
Fire protection:
Aug. 31, 1916, balance	9,598.13
Additions 1917	15.50
Additions 1918	37,459.87
Additions 1919	7,907.94
Additions 1920	4,011.03
Additions 1921	11,312.62
	70,305.09
Electrical equipment:
Additions 1918	35,262.96
Additions 1919	3,206.17
Additions 1920	42,778.34
Additions 1921	37,217.30
Balance Aug. 31, 1921	118,464.77
Construction equipment:
Additions 1920	3,109.12

The principal items of machinery subject to depreciation during the taxable years under consideration were those used in the process of carding, spinning, spooling, warping, dyeing, weaving, and napping. Napping is the process of picking or loosening the fibre on woven goods to produce flannels. The machines for this work are composed of a large cylinder around which revolve 36 small cylinders. The small cylinders are wrapped tightly with a rubberized web cemented in position, in which are imbedded numerous small steel wires with the exposed ends hooked so as to catch the fibres of the cloth passing over them and form the naps. These machines require precise adjustment and considerable care in their upkeep. They have to be rewrapped or "reclothed" about every six years at a cost of from $250 to $300 for each machine. The bearings and other small working parts have to be replaced occasionally. The petitioner had 40 or 50 machines in 1917. They cost new about $2,000 apiece.

The petitioner used both the plain type and the dobby type looms. It had 350 looms installed in 1899. The dobby type looms were used for making figured materials and were considerably more complicated than the plain ones, some having as many as 16 harnesses, whereas the plain looms had only two. During the taxable years under consideration the petitioner's mill was equipped principally with Draper automatic looms with dobby attachments. All of the 350 looms in use in 1899 had been discarded prior to 1917.

The carding machinery was similar to that used in the napping process.

There were two units of the main mill buildings, one of which was erected about the year 1899 and the other about the year 1917. One was of brick construction with a Barrett specification type roof and the other was of concrete construction with a standard mill roof of composition on timber. The floors were of wood, some of which were laid on concrete. Some parts of the floors have been replaced several times within the past 30 years. The roof on the first unit has been patched several times and entirely replaced once. The heavy machinery was located on the top floor where the manufacturing process was begun.

In 1917 the petitioner's tenement houses numbered about 200 or 250. Some of them were built in 1897. They were constructed of second growth pine and cost originally about $500 each. They had shingled roofs which required replacing every five or six years. The houses were supported by sills resting on brick pillars above the ground surface. Frequent repairs had to be made to keep the houses in livable condition. Some of them have been practically rebuilt.

The power plant consisted of water wheels, flume, pen stock, head gate, and rope drive belts. There was also a steam plant used for heating purposes.

The equipment consisted of beltings, shafts, and other such items.

The fire protection consisted of water mains, hydrants, hose carts, hose, etc.

The electrical equipment consisted of motors, electrical wiring, starting boxes, switches, etc.

The construction equipment consisted of a concrete mixer, hoisting machine, picks, shovels, spades, and other small tools.

The average life of the assets of the petitioner under the conditions of operation of the mills for the years 1917 to 1921, inclusive, was as follows:

	Years
Machinery	14 2/7
Mill buildings	33 1/3
Tenant houses	20
Power plant	12 1/2
Equipment	10
Fire protection equipment	14 2/7
Electrical equipment (Mill No. 2)	10
Construction equipment	6 2/3

Prior to the tax years here involved the petitioner kept its plant and equipment in a state of good repair and in highly efficient working order. The cost of replacements and major repairs, as well as the cost of minor repairs, was charged to expense account. In or about 1917 a revenue agent examining the petitioner's books of account explained to the petitioner's officers that the cost of replacements and of extraordinary repairs, such as the reroofing of buildings, replacement of floors, etc., should not be charged to expense accounts and claimed as deductions from gross income in income-tax returns. The petitioner then set up on its books an account designated "extraordinary repairs," to which major repair items were thereafter charged and the cost of replacements was charged against depreciation reserve accounts.

From August 31, 1899, to August 31, 1916, the petitioner charged off in its books of account a total of $82,080 for depreciation. Of this amount $72,080 was charged to machinery account and $10,000 was charged to tenement account. Its supplies account and expense account, both of which were considered operating expenses for those years, aggregated $366,498.73 and $84,127.25, respectively. During those years the tenement houses were repaired and kept in good condition continuously and the cost thereof charged to rent account. The expenses for labor and wages in connection therewith were charged to wages. During the years 1917 and 1918 the petitioner in order to meet the demands of war-time trade operated its mill on an average of about 20 per cent overtime. At the same time it was losing many of its trained employees, whose places had to be filled largely by inexperienced workers. Weavers took the place of skilled mechanics in the repair of machinery. The machines were improperly cared for during this period and depreciation was sustained at a greater rate than in normal years. It was difficult to obtain repair parts for the machinery and the quality of such parts when obtained was often inferior.

The following statement shows the amount of depreciation claimed as a deduction from gross income in the income-tax returns filed by the petitioner for the tax years under review, the depreciation allowed by the respondent, and the depreciation disallowed:

Year	Depreciation claimed on return	Depreciation allowed	Depreciation disallowed
Aug. 31, 1917	$43,648.74	$37,610.65	$6,038.09
Aug. 31, 1918	81,806.66	54,974.21	26,832.45
Aug. 31, 1920	99,392.00	87,464.02	11,927.98
Aug. 31, 1921	148,736.86	107,091.17	41,645.69

In the computation of the amount allowed by the respondent he has used a composite rate of 4 per cent upon the book cost of the assets at the beginning of the year and a 2 per cent rate upon those acquired during the year, the theory being that the additions were owned for a period of 6 months. This is the same rate used by the respondent in computing allowable depreciation for the previous taxable periods from 1913 to 1916. No question is raised by the respondent as to the correctness of the costs of the several classes of assets shown by the petitioner's books as stated above.

The respondent has reduced petitioner's invested capital at August 31, 1916, by the amount of $120,293.68 representing an addition to depreciation reserve as of that date.

OPINION.

SMITH: The petitioner contends, first, that it is entitled to have included in its invested capital as paid-in surplus the amounts of $120,000 and $62,505 representing the alleged bonus value of the water-power rights acquired under the contracts of 1897 and 1905, respectively, with the Power Co. The respondent in his computation of the deficiencies herein has included in petitioner's invested capital an amount of $60,000 representing the value of the water-power rights acquired under the contract of 1897, but has not included in invested capital any amount in respect of the later contract of 1905. The respondent now affirmatively contends, and has so amended his answer, that the $60,000 item was improperly included in petitioner's invested capital and should be eliminated therefrom.

The pertinent parts of the revenue acts involved are found in section 207 of the 1917 Act and section 326 of the 1918 Act. These provisions, which are substantially alike in so far as affects the question in dispute, permit the inclusion in invested capital of all "paid-in or earned surplus." Our first question then is whether there was any paid-in or earned surplus in respect of the water-power rights acquired by the petitioner under the contracts of 1897 and 1905. We think not. Both of these transactions occurred between the petitioner and two other corporations, neither of which owned any of petitioner's stock. Under the earlier contract of 1897 from the Carolina Construction Co. the petitioner acquired valuable water rights, the only consideration being that it erect and operate its mill upon the site designated. Neither the Carolina Construction Co. nor the Power Co., through which it acquired the power rights conveyed to the petitioner, was a stockholder of the petitioner. We have heretofore held that contracts of this nature secured from a nonstockholder do not give rise to a paid-in surplus. Cf. ; ; . Although the evidence shows that there was an interrelationship between all of these corporations, that is, the Carolina Construction Co., the Power Co., and the petitioner, through mutuality of stock ownership, it does not show to what extent their stock was mutually owned. In fact, we have before us no evidence as to the specific stockholdings in any one of these corporations. In this respect we think that the evidence is insufficient to support the petitioner's contention that these corporations were "similarly" owned and that the conveyance of 1897 from the Carolina Construction Co. was in effect a conveyance to the petitioner from its own stockholders. Nor do we deem it material that certain stockholders of the petitioner, Habliston, Cohen, and Emry, joined in the conveyance from the Carolina Construction Co. by virtue of an option which they held on the water rights conveyed. Their option never having been exercised, the conveyance was, nevertheless, from the Carolina Construction Co. in its corporate capacity.

As to the conveyance of 1905 from the Power Co., whereby the petitioner acquired the right to the use of water to produce 450 additional horsepower, its position is less favorable, since in that agreement the water-power rights were conveyed in consideration of the payment of an annual rental per horsepower equivalent to at least a substantial part of its market value. There is evidence that this latter transaction was entered into at arm's length. The agreement which embodied the conveyance of the water-power rights terminated a dispute, threatening litigation, in which the Power Co. was pressing a claim against the petitioner for several thousand dollars for alleged excess water power used under its former agreement. This fact likewise argues against the petitioner's contention that the corporations here were similarly or mutually owned. Upon the facts shown, we think that the petitioner is not entitled to include in its invested capital any amount in respect of the water-power rights acquired either under the deed of 1905 or that of 1897.

The respondent has reduced petitioner's invested capital as of August 31, 1916, by the amount of $120,293.68 representing depreciation alleged to have been sustained in prior years over and above that shown by the petitioner's books of account. Petitioner contends that this reduction of its invested capital was unwarranted. The basis of this claim is that the petitioner's depreciable properties had always been kept in repair and in a highly efficient working order; that the cost of all major repair items such as the reroofing of the buildings, the replacement of floors, the replacement of parts of machines, the cost of reclothing nappers, etc., had been charged to operating expense in the years in which such costs were incurred and that, therefore, the capital account was not inflated by such costs and that the earned surplus shown by its books was not overstated by reason of not charging off a sufficient amount for depreciation. The petitioner shows that from August 31, 1899, to August 31, 1916, it expended a total of $366,498.73 for supplies, which included the cost of replacements, and $84,127.25 for expense account or cost of repairs, and that both of these accounts were charged to expense; that such amounts were exclusive of the cost of repairs on tenant houses which were charged to rent and wages account and that the charge-off of $82,080 for depreciation of physical assets, $72,080 of which was charged directly to machinery account and $10,000 to tenement account, offset depreciation actually sustained; furthermore, that none of the 350 looms with which the petitioner began operation in 1899 were in use at August 31, 1917, all having been discarded or exchanged for modern up-to-date looms. Upon this showing we think that the petitioner has overcome the presumption of the correctness of the respondent's action in adjusting its corporate surplus as of August 31, 1916, on account of depreciation for prior years and that the invested capital should not be reduced by the $120,293.68 alleged depreciation sustained in excess of that charged off by the petitioner. See ; ; ; ; ; ; .

The petitioner contends that it is entitled to an increase in the annual deduction allowed by the respondent on account of the exhaustion of the water-power rights acquired under the lease of 1905. The respondent has allowed an annual deduction of $359.77 computed upon a bonus value at March 1, 1913, of $33,098.50 spread ratably over the remaining life of the lease. The petitioner claimed no deduction from gross income in its income-tax returns in respect of the exhaustion of this lease. The respondent contends that inasmuch as the petitioner in its petition did not specifically allege any error with respect to the proper amount of exhaustion to be allowed upon this lease, the Board has no jurisdiction to determine the issue. The petitioner has, however, alleged that the respondent erred in disallowing amounts for depreciation for each of the taxable years and we think that the petitioner is entitled to prove depreciation upon any depreciable asset, even though the allegation of error with respect to the disallowance of a portion of the claimed depreciation did not cover this specific asset. The allegation of error that the respondent erred in disallowing a portion of the depreciation claimed on the return puts in issue the entire question as to the correct amount of exhaustion and depreciation allowable.

The deficiency notice which formed the basis of the petition in this case stated in part as follows:

5. The March 1, 1913 bonus value of the 100-year lease, based on the remaining life of 92 years, an indicated annual saving of $2,650.00 and interest at 8%, has been determined for depreciation purposes as $33,098.50. The allowable yearly depreciation over a period of 92 years is $359.77. (Article 162, Regulations 45 and Regulations 62.)

The computation of the respondent was based upon the theory that the water-power rights had a value of $15 per horsepower per year. The evidence shows that between 1906 and 1909 the Power Co. sold additional water power to the petitioner at the rate of $18 per horsepower and that it sold surplus water power to other users at a per kilowatt rate equal to $23 per horsepower. A competent witness for the petitioner testified that the March 1, 1913, value of the water power was between $20 and $25 per horsepower. Upon this basis we think that the respondent should have found the fair rental value of the water-power rights in question was $20 per horsepower on March 1, 1913, and that the exhaustion of the water-power rights should be computed accordingly. The method of computation of the March 1, 1913, bonus value of the water-power rights is not in question.

The petitioner contends that the respondent has allowed inadequate deductions for depreciation of physical assets in each of the years involved, in that he has computed the depreciation on most of the assets at too low a rate. The respondent has used a composite rate of 4 per cent throughout on all classes of property. The petitioner contends that, since its physical assets were segregated in its books according to proper classification, the respondent should not have used a flat rate as applied to all classes of property, but should have depreciated each group separately at the following rates:

	Per cent
Machinery	7
Mill buildings	3
Tenant houses	5
Power plant	8
Equipment	10
Fire protection equipment	7
Electrical equipment, Mill No. 2	10
Construction equipment	15

Petitioner submits that although the composite rate used by the respondent for years prior to the taxable year may have given an adequate depreciation deduction, it did not produce an adequate depreciation deduction for the years involved for the reason that the physical assets were operated under war-time conditions and operated considerably overtime.

Petitioner submits that it is an established policy to apply specific rates of depreciation to specific assets and that a flat or composite rate is justified only in a case where it is impossible to segregate the cost of assets; that such condition does not obtain in the instant case. The respondent, on the other hand, contends that it is not possible to apply specific rates to some of the classes of assets for the reason that the costs of the different assets within the same class are not properly segregated on the petitioner's books of account, and that in any event a composite rate reaches the same result provided it be high enough to provide a reasonable deduction for depreciation.

Although the Board has approved the use of composite rates in particular cases (, where a composite rate on the entire plant for the year 1920 was allowed at the rate of 6 1/2 per cent), we think that specific rates should be applied to specific assets where the cost of the specific assets is sufficiently accurately shown. Of course, assets within the same class often depreciate at different rates and the difficulty of applying specific rates to such assets is exemplified in the case of the power plant in this proceeding. Thus, it was testified with respect to the power plant that "bars" at the Roanoke Mills had been replaced every 7 years; that a penstock lasted 20 years; that petitioner's experience is that a water wheel has to be replaced every 10 years to get the best efficiency of operation.

The principal assets of the petitioner are its machinery, brick buildings, and tenant houses. The evidence adduced warrants a conclusion that 3 per cent is a proper rate to be applied to the brick buildings; that 7 per cent is a proper rate for the machinery account during the tax years under review, although 5 per cent is a proper rate for prior years; that 5 per cent is a proper rate for the tenant houses; 8 per cent for the power plant as a whole; 10 per cent for equipment; 7 per cent for the fire protection equipment; 10 per cent for the electrical equipment, and 15 per cent for the construction equipment.

In his brief the respondent objects to any adjustment of depreciation allowances and contends that, since the petitioner has not shown the March 1, 1913, value of its assets acquired prior to and on hand at that date, no proper basis for a recomputation of depreciation deductions has been provided. We think that this objection is untimely and not well taken. Nowhere in the pleadings or in the presentation of this case was any question raised by either party as to the basis for computing the deductions. The respondent has used the cost figures shown in the petitioner's books, which were admitted in evidence without objection from counsel and which appear to us fairly to represent what they purport. The petitioner has taken exception only to the rate used by the respondent. We think that the figures provided constitute the proper basis for the recomputation at the rates above specified.

Reviewed by the Board.

Judgment will be entered under Rule 50.

MURDOCK dissents.