substantive evidence. In New York, Chicago & St. Louis R. R. Co., 26 B. T. A. 1229, the contention was advanced "that since there was but a lump sum settlement made after full discussion of many items, petitioner has the right to break down the ultimate figure according to its own choice, and that such allocation must be recognized as fact by the Commissioner," and in disposing of the contention, we said:

That the petitioner has the right to choose its own accounting in this respect, within the scope of the Interstate Commerce Commission's supervision, can not be gainsaid by the Commissioner or by the Board; but it is equally clear that no accounting adopted by the petitioner has a sanction greater than the Commissioner's duty to determine its taxable income in accordance with effective revenue law. What a carrier may do in its accounting classification as a private industry or even as a regulated interstate carrier is apart from its subservience as a taxpayer to the requirements of the revenue law. Old Colony R. R. Co. v. Commissioner, 284 U. S. 552. Therefore in this proceeding the significance of the amount in question is not determinable by reference to the views of the petitioner's own officers as to a convenient or satisfactory accounting for the item or their interpretation of the settlement or its component factors, nor with reference to the conversations with the Railroad Administration during the course of the negotiation as to the extent of the controversy. The last were swallowed up in the final lump sum settlement, and the former are important only in so far as they are supported by substantive evidence.

Even if it could be conceded that the Director General's and the respondent's allocations of the final settlements are wrong, and that the petitioner and its Federal controlled affiliates did not receive any allowances for the disputed items, there is nothing in the record which would justify the allocation of the $7,461,286.55 as an additional allowance for undermaintenance. There is no evidence that the undermaintenance suffered by the properties of the Federal controlled companies was greater, in terms of dollars and cents, than $11,966,199.35, the amount which the parties have stipulated is the least the Director General allowed for undermaintenance. Substantive evidence is lacking, therefore, to support the petitioner's allocation of the sum in question to undermaintenance. No inference may be safely drawn from a comparison of the petitioner's and the Director General's allocations, which show them to be in apparent accord upon all other items contained therein; for the claims, aggregating over $52,000,000, contain innumerable items which do not appear in either allocation, and we know nothing about the merits of those items. We may not assume that none of these last mentioned items were included in the final settlement. It is evident, therefore. that we can not accept the petitioner's allocation of the $7,461,286.55 to undermaintenance.

While there is some evidence sufficient to create a substantial doubt as to the entire accuracy of the respondent's allocation of the $7,461,268.55 allowance, we can not correct the situation, since we are wholly

without substantive evidence upon which to base any conclusion as to what would constitute a proper allocation. Confessedly, the allowance was received by the companies in the final settlements with the Director General; and the respondent determined that the whole of it must be reflected, in one form or another, in the computation of taxable net income. Under the circumstances, it was not enough for the petitioner to prove that the respondent's allocation is wrong; it was duty bound to prove what is right, but in that respect it failed. So, even though the allowance may not have been made in respect of the specific items alleged by the respondent, it is evident that we can. not disturb his determination that the allowance itself must be reflected in its entirety in the computation of the taxable net income.

(B) This question has been designated by the parties as undermaintenance. Petitioner urges that the respondent has erroneously disallowed $11,966,199.35 of the total deductions for maintenance of way, structures, and equipment during the last 10 months of 1920, a period immediately following the period of Federal control. This amount is part of the petitioner's actual expenditure for the period accounted for as maintenance, but the disallowance is based on the respondent's determination that to this extent the petitioner's ostensible maintenance cost was really not its own, but a burden assumed by the Director General. The question is wholly within the field of deductions. The exact question of fact is, therefore, whether or not the petitioner and its affiliates charged to operating expenses, or maintenance, in the last 10 months of 1920 any expenditures made to overcome the undermaintenance of their properties during Federal control, for which they were later reimbursed by the Director General. The facts of undermaintenance of the properties during Federal control and of the Director General's allowance of $11,966,199.35 in final settlements, to compensate the companies for such undermaintenance, are established by the stipulation.

We have already said that the maintenance expenditures during the last 10 months of 1920 were not greater, in fact were less, than the equated and adjusted expenditures for maintenance of an average ten months of the test period; and that notwithstanding these expenditures the properties were not in as good condition at the end of 1920 as on March 1 of that year when they were returned by the Director General. These facts, the petitioner contends, bring its case squarely within the decisions of this Board in Missouri Pacific R. R. Co., 22 B. T. A. 267; Norfolk Southern R. R. Co., 22 B. T. A. 302; Kansas City Southern Ry. Co., 22 B. T. A. 949; and Chicago & North Western Ry. Co., 22 B. T. A. 1407. In all of the cited cases the Board considered, as controlling, the comparative expenditures for maintenance as between the last 10 months of 1920 and prior

periods, in its analysis of the proof to determine whether or not undermaintenance of the Federal control period was overcome, or whether the carriers' maintenance expenditures in the 1920 period included expenditures to rehabilitate the property which might not be deducted from gross income. Thus, in Kansas City Southern Ry. Co., supra, and Chicago & North Western Ry. Co., supra, we applied the accounting test and found that those carriers had overcome the undermaintenance of Federal contral in 1920 to the extent only that on a properly equated comparative basis their maintenance expenditures in the last 10 months of 1920 exceed the normal expenditures for an average ten months of the test period, and in Missouri Pacific R. R. Co., supra, and Norfolk Southern R. R. Co., supra, we similarly applied the accounting test and found that those carriers, on a properly equated comparative basis, failed to any extent in the last 10 months of 1920 to make expenditures for maintenance exceeding the normal maintenance expenditures, in the one case as compared to a period of 10 years prior to Federal control, in the other case, as compared to an average 10 months of the test period. Blindly applying the accounting test in the case at bar, the inevitable conclusion would be that the undermaintenance of the Federal control period was not made good or overcome by the expenditures for maintenance during the last 10 months of 1920.

There are in the instant case, however, certain other material facts which can not be lightly brushed aside; and it is these facts which distinguish it from the cited cases, other than the Missouri Pacific case, of which we shall have more to say later. In the cited cases there were no findings by the Board comparable to the stipulation of the parties here, that:

Petitioner concedes that during the last 10 months of the year 1920 it repaired many of the worst conditions of undermaintenance in its way, structures, and equipment existing when its properties were returned, and that it charged the cost of such repairs to operating expenses and deducted same from taxable income.

This stipulation makes it evident that any blind and slavish adherence to the accounting test in this case would lead to a conclusion contrary to actual fact.

It may well be conceded upon the evidence that whatever was done in the last 10 months of 1920 to make good or overcome the undermaintenance of the Federal control period was at the expense of less pressing items of current maintenance; and because of this situation the petitioner, relying upon our decision in the Missouri Pacific case, contends that the accounting test should govern our conclusions In the case referred to, the finding was made that "No part of the undermaintenance of the Federal control period was made good

during the period from March 1 to December 31, 1920", and in the course of our opinion we stated as follows:

The proof upon this issue is very lengthy and we do not propose to discuss it in detail. The petitioner produced as witnesses the men whose duty it was to oversee the maintenance of the properties, men who were thoroughly familiar with the petitioner's properties at the time they were taken over, at the time returned, and during all of 1920. Their testimony was in substance that the average condition of maintenance of the properties at the close of 1920 was no better than on March 1, 1920. In detail they explained what was done and why more was not done. Counsel for the Commissioner points out that their testimony discloses that many of the worst conditions existing when the roads were returned were corrected as soon as possible. While this was done, the testimony is that it was at the expense of less pressing items of current maintenance. Amounts available for maintenance were expended where most needed. Primary lines were improved while the secondary lines suffered still further undermaintenance. It is quite evident that the question can not be solved merely by looking at particular items of maintenance or undermaintenance. The real question is whether the average condition of maintenance was improved during 1920. The testimony of these witnesses was supported by detailed statistical studies which disclosed that after adjusting the purchasing power of the dollar in terms of labor and materials and giving effect to the increase in traffic, the amount expended for maintenance in 1920 was practically the same as the average amount expended for the period 1910 to 1920 and was less than the average amount expended in the years designated in the Federal Control Act as the test period * *. It is upon the testimony of those in charge of maintenance work during the taxable years, based upon their personal knowledge of the property and its physical condition, supported by the other evidence mentioned above, that we reach our conclusion that no part of the expenditures made during 1920 is to be accounted for as made to overcome undermaintenance of the Federal control period.

We thereupon reversed the Commissioner's action in refusing to allow the deduction of the full amount expended for maintenance in 1920. Except for the finding of fact already quoted, the two cases are, in all other essential respects, analogous; and if our conclusion in the cited case was sound, a like conclusion must be reached here.

From our knowledge of the entire question of undermaintenance, broadened now by the experience gained in the consideration of later cases, we do not hesitate to say that our decision on the matter of undermaintenance in the case of Missouri Pacific R. R. Co., supra, was erroneous. The accounting test, conceived originally in the Federal control standard contracts between the Director General and the controlled carriers as a means by which to measure the standard of maintenance performed by the Director General during Federal control, and later adopted as a means for testing the normality of carriers' maintenance expenditures in the guaranty period in determining the amount to be paid by the Government under the guaranty provisions of section 209 of the Transportation Act, 1920, is simply a statistical comparison in which the labor and material units used

in maintenance work of the last 10 months of 1920 are compared with like units so used in an accepted normal period, usually the test period, the units of both periods being expressed in dollars and cents properly equated on a comparative basis, to determine whether the amount of maintenance accomplished in the first mentioned period is greater or less than normal; and, if proper equation factors have been used to reflect the difference in the purchasing power of the dollar, and the amount and use of the properties maintained, as between the two periods, the test well fulfills its purpose. Alone, it will not reveal whether maintenance accomplished in the 1920 period was current maintenance, with the cost falling upon the carrier, or maintenance which belonged to, and which the Director General should have performed in, the Federal control period, and for which the carrier was later reimbursed by the Director General; and the fact that the maintenance expenditures of the 1920 period were no greater than the average of an accepted normal period does not prove that the expenditures were for current maintenance or that they were borne by the carrier. The instant case is a fitting illustration of the point; the maintenance expenditures of the 1920 period were less than the average of the test period, but the parties have stipulated that some part of the undermaintenance of the Federal control period was made good or overcome in the 1920 period, and, for all that the record shows, the petitioner and its affiliates were fully compensated for every condition of undermaintenance of the Federal control period. These facts clearly indicate that the accounting test can not be relied upon as a means for determining whether or not undermaintenance of the Federal control period was made good in the 1920 period.

The fact that there was no improvement in the average condition of maintenance by the expenditures of the 1920 period is of no importance; that, like the accounting test, indicates only that not more than the usual and normal amount of maintenance was accomplished in the period, or that such maintenance as was performed was not greater than current necessity required. The real question here is, Was the maintenance performed in the 1920 period, or some portion thereof, that which actually belonged to the Federal control period for which the petitioner was reimbursed by the Director General?; and that can not be answered by a mere comparison of maintenance conditions at the beginning of the period with the conditions existing at the end of the period, as was held in the Missouri Pacific case, but requires an examination of particular items of maintenance performed. Concededly, in another case, the requirement might burden the taxpayer with a difficult, and perhaps a well-nigh impossible, task, since it is by no means an easy matter to