¶1Internal revenue <@=>I9<I)—Car equipment trust certificates are not taxable as “certificates of indebtedness” issued by trustee.
¶2Car equipment trust certificates, issued by a trust company under the Philadelphia plan, under which railroad cars were purchased and leased to a railroad, and which certificates provided for the payment by the trustee to the holder of a stipulated sum only -out of the rentals under the car lease, were not “certificates of indebtedness” of the trustee, within Revenue Act of 1918 (Comp. St. Ann. Supp. 1919, § 6318p), imposing a stamp tax on such certificates.
¶3[Ed. Note.—For other definitions, see Words and Phrases, Certificate of Indebtedness.]
¶4In Error to the District Court of the United States for the Eastern District of Pennsylvania; Oliver B. Dickinson,-Judge.
¶5Action at law by the Fidelity Trust Company against Ephraim Rederer, Collector of Internal Revenue, to recover tax paid under protest. Judgment for defendant, and plaintiff brings error.
¶6Reversed and remanded.
¶7See, also, 276 Fed. 51.
¶8*1010H. Gordon McCouch and James McMullan, both of Philadelphia, Pa., for plaintiff in error.
¶9George W. Coles, U. S. Atty., of Philadelphia, Pa., and J. Paul McElree, Asst. U. S. Atty., of Westchester, Pa. (Nelson T. Hartson and Chester A. Gwinn, both of Washington, D. C., of counsel), for defendant in error.
¶10Before BUEEINGTON and DAVIS, Circuit Judges, and Mc-KEEHAN, District Judge.
¶12This case concerns the assessment of a stamp tax on car equipment trust certificates issued under what is known as the Philadelphia plan. The government assessed and collected such tax, basing its right so to do on the provision of the Revenue Act of 1918, quoted in the. margin.1 The plaintiff, having paid the tax under protest, brought suit against the collector to recover the same back; but the court held it had been properly assessed, and entered judgment for the defendant. Thereupon the plaintiff sued out this writ, and the question involved is whether the equipment trust certificates here concerned fall within the purview of the statute as being “certificates of indebtedness … issued by any corporation with interest coupons … known .generally as corporate securities.”
¶13Turning to that question, we note that the certificate issued by the plaintiff, a copy of which is printed in the margin,2 does not evidence, *1011or certify to, any indebtedness owing by the plaintiff to the bearer, nor is it the coupon contract usually accompanying corporate securities, to pay periodic interest indebtedness. On the contrary, it is simply a certificate of the right of its holder to participate in a rental payable under a certain lease which lease restricts the right of the certificate holder to payment solely—
“from and out of the deferred rentals when paid as provided for in a lease of 500 steel ears made by Fidelity Trust Company, trustee, to Interstate Railroad Company, bearing date the 2d day of February, 1920, which rentals are payable to the trustee for the benefit of the holders of this and other certificates amounting at par to $900,000, to which lease and the agreement hereinbefore mentioned reference is made for a statement of the rights of the holders of such certificates.”
¶14These certificates are issued under what is known as the Philadelphia plan, which was devised many years ago to provide for such a legal bailment of railroad equipment as would allow railroads to hold possession and use property owned by third parties. The legal method of financing such transactions was subscription to a fund (in this case, $900,000) which was handled by a trustee company and used to buy railroad equipment (in this case, 500 steel cars), which *1012were then leased to a railroad (in this case, the Interstate Railroad Company) at an annual rental, the cars meanwhile being marked “Fidelity Trust Company, Trustee, owner and lessor.”
¶15It will thus be seen that, when the transaction is viewed as a whole, as must be the case, and the certificate in question measured from •that standpoint, no indebtedness is involved or obligation incurred by the trustee to the holder, but it is simply a certificate of the holder’s right to proportionate participation in a rental when paid.
¶16Car trust certificates, such as here involved, have been so long and so largely used in the financial world, and are so vital a factor in the financing and equipment of railroads, that it would seem that Congress, had it intended taxing them, would have so covered them by specific designation, or by proper generic description, as to leave no question of its-intent.
¶17In our judgment, the law and facts are with the plaintiff, and the judgment of the. District Court is therefore reversed, and the . cause remanded to said court for further procedure in accordance with this opinion.