Page:Federal Reporter, 1st Series, Volume 10.djvu/626

 Qli FBDEKAL EEPOETEB. �121 provides that "any bank which shall neglect or omit to make a return of dividends or additions to its surplus or contingent funds as often as once in six months, shall make a list or return in duplicata, under oath, to the assessor of the amount of profits which have accrued or been earned and received by such bank during the six months preceding." In ascertaining the "amount of profits which have ac- crued or been earned or received," every loss which bas oecurred in its legitimate business shouid be takcn into account. A loss through the crime of one of its offioers by defalcation or embezzlement is as much a loss incident to its business as a loss through the robhery of its funds by some person not connected with the bank, or a loss through forged checks or altered bonds, or through bad debts, or a destruction of its property. It cannot be supposed that the term "profits," in section 121, just quoted, means gross receipts on the profit side of its ledger without deductions for expenses in carrying on the business, and losses of whatever nature to which it is exposed in the legiti- mate prosecution of its business. By "profits" is meant its net prof- ita after all such losses and expenses are deducted. Had its losses by embezzlement been known to the bank at the time of its returns in 1866, theymight, therefore, have beeti properly deducted from the returns for that year. They were not so deducted, and they equal the full amount alleged in the complaint not to have been returned, which it appears was deducted by the bank on account of the state tax which it had paid on account of the stockholders. Even, thf re- fore, if the bank had no right to deduct the state tax which it had paid, it would still be true, as alleged in the second defence, that the bank had made full return of all its profits for that year as required by section 121. This defence of the answer is, therefore, held good; and it applies to the years 1866, 1867, and 1868 as a complete de- fence to the full amount claimed. �As regards the amount claimed for the year 1870, the only defence demurred to relates to the deduction for the state tax. The answer is not clear in its statements regarding the mode in which the state tax was paid, whether "out of its funds" generally, or out of divi- nends previously declared; nor does it aver with any clearness or certainty whether any dividends at all were declared, although that fact is rendered extremely probable from other facts stated, and has been assumed by both sides as a fact in their briefs. But assuming that to be the fact, the only cause of action which could arise under the law would be under section 120 for a duty on "dividends" or "additions to surplus or contingent funds." That section and section ��� �