(c) From time to time during such period in 1947 and 1948 some or all of such steps had to be taken because of the power shortage.

(d) As a result of shutting down the electrochemical plant, which, under normal conditions produced substantially all of Oxford's requirements of chlorine and caustic soda, Oxford purchased chemicals on the open market to make up such shortages for the months of December 1947 and January, February, and March of 1948.

(e) As a result of shutting down the groundwood pulpmill and the shutdown of equipment in the soda and sulphite pulpmill, Oxford was unable to produce all its requirements of those pulps. Under normal circumstances, it had an excess available for sale at a wholesale value of $ 114 per ton. It purchased pulps on the open market to make up the shortages for the months of December 1947 and January, February, and March of 1948.

(f) The above interruptions of mill operations caused an increase in the cost of manufactured groundwood pulp and an increase in 33 T.C. 943">*955 the cost of manufacturing of paper due to the required substitution of the more expensive soda pulp in lieu of manufactured1960 U.S. Tax Ct. LEXIS 197">*221 groundwood pulp for the months of December 1947 and January, February, and March of 1948.

(g) Mill operations were further interrupted to the extent that paper machines were operated at reduced speeds and, at various times during the months of December 1947 and February and March of 1948, were actually shut down resulting in the loss of paper production which had a wholesale value of about $ 190 per ton in 1947 and 1948.

During the drought period, Oxford's steam generator was used to produce the following power:

The turbine's average production for each of the above periods includes times when it was not operating at all, or was operating at a reduced level because of mechanical difficulties. It required several hours to bring the turbine up to full production and likewise several hours for cooling off after its use ceased.

During December of 1947 and February and March of 1948, Oxford was unable to maintain its estimated and budgeted rate of paper production; and failed to produce tons of paper, the production of1960 U.S. Tax Ct. LEXIS 197">*222 which had been estimated and budgeted for on the basis of its current capacity for production, as follows:

During the drought period, Oxford had to purchase various amounts, in tons, of chlorine, caustic, and groundwood pulp to replace the amounts that it had estimated and budgeted would have been produced by itself had sufficient power been available, as follows:

33 T.C. 943">*956 Oxford's comparative1960 U.S. Tax Ct. LEXIS 197">*223 earnings, before adjustment by respondent, for the years 1942 through 1951, are as follows:

33 T.C. 943">*957 Petitioner does not claim the existence of any abnormalities affecting its production, output, or operations during the years 1947 and 1948 other than the drought found above.

Oxford's normal production, output, or operation for 1960 U.S. Tax Ct. LEXIS 197">*226 either 1947 or 1948 was not interrupted or diminished because of the occurrence, either immediately prior to, or during such years, of events unusual and peculiar in Oxford's experience.

OPINION.

In computing its excess profits tax for the years 1950 and 1951, the petitioner claims the benefit of section 442, relating to abnormalities during the base period (1946-1949). Insofar as here applicable, the requirements of section 442 under which the petitioner must establish its qualification for relief are as follows:

SEC. 442. AVERAGE BASE PERIOD NET INCOME -- ABNORMALITIES DURING BASE PERIOD.

(a) In General. -- If a taxpayer which commenced business on or before the first day of its base period establishes that, for any taxable year within, or beginning or ending within, its base period:

(1) normal production, output, or operation was interrupted or diminished because of the occurrence, either immediately prior to, or during such taxable year, of events unusual and peculiar in the experience of such taxpayer, or

(2) the business of the taxpayer was depressed because of temporary economic circumstances unusual in the case of such taxpayer,

The petitioner here claims qualification solely under section 442(a)(1) and not under (a)(2). Moreover, the parties agree and the facts substantiate that the petitioner commenced business on or before the first day of its base period, as required by the section.

Taxpayers which qualify under section 442(a) are entitled to relief computed under subsequent subsections. The computation of the amount of such relief is automatic in nature, involving the use of industry base period rates of return provided by section 447. In this connection, brief reference to the legislative history of section 442 is useful to an understanding of the nature and purpose of the relief provisions under the so-called Korean war excess profits tax.

In its report on the Excess Profits Tax Act of 1950, ⁶ the Committee on Finance stated, in part:

9. General relief

(a) Provisions of World War II law. -- Section 722, the general relief provision of the World War II law, was designed to aid hardship cases by providing such corporations with a substitute, or constructive average, 1960 U.S. Tax Ct. LEXIS 197">*228 base period net 33 T.C. 943">*958 income. Section 722 dealt with three principal classes of cases -- (1) corporations which had suffered some adversity during their base period, (2) corporations which had made changes during the base period resulting in an increase in their profit potentials, and (3) corporations which were not in existence during the base period and, therefore, had no base period net income at all.

In each instance the section provided that a hypothetical base period earnings credit be "tailor made" for the particular taxpayer and that certain assumptions be made in connection with the case. Each case was a problem in research, and the legal or tax result generally was intertwined with complicated accounting and economic problems. Almost every factor which had any influence on the particular business was pertinent to the case and the time and expense involved in reconstructing the average base period earnings credit were tremendous.

These complex relief provisions of the World War II law have resulted in extended delay in the settlement of relief claims which discriminated against taxpayers who had neither the time nor the financial resources necessary for the establishment1960 U.S. Tax Ct. LEXIS 197">*229 of their cases. Moreover, the determination of what the taxpayer's base period income would have been in the absence of the claimed abnormality was largely a matter of subjective judgment, and a great deal of complaint has arisen on this account. Hence this bill reduces to a minimum the amount of administrative discretion involved in the adjustment of the hardship cases which may be expected to arise under an excess profits tax.

* * * *

(c) General relief provisions in the bill. -- The bill provides autotmatic formulas for each of the most important types of cases which arose under section 722 of the World War II law. These formulas permit an objective computation of the amount of relief granted in each case, thus avoiding the practice of making the extent of the relief dependent upon an attempted analysis of all the varying factors in the individual case with the resulting uncertainty, delays, and disparity of treatment among taxpayers which characterized tthe application of the general relief provisions of the World War II law.

(i) Abnormalities during the base period

Section 722(b)(1) and (2) of the prior law provided relief when the income of the taxpayer's base period years1960 U.S. Tax Ct. LEXIS 197">*230 was substantially abnormal because of a physical interruption to production, such as a fire, strike, or flood, or because of a depression in the business of the taxpayer resulting from temporary economic circumstances unusual in the case of the taxpayer, such as a severe price war. Your committee's bill provides relief in these same areas. However, the bill does not retain that part of section 722(b)(2) which provided relief in cases where the business of the taxpayer was depressed because the industry of which the taxpayer was a member was depressed due to temporary economic events unusual to such industry. Provision is made in another portion of the bill for the relief of taxpayers whose industry was depressed during the base period.

There is no doubt but that the drought in Maine in the latter part of 1947 and the early part of 1948 is 1960 U.S. Tax Ct. LEXIS 197">*231 the type of abnormality with respect to which section 442 is designed to provide relief. This conclusion is borne out by the language of the committee report quoted above and likewise by the respondent's regulations ⁷ wherein it is stated:

33 T.C. 943">*959 Unusual and peculiar events contemplated in section 442(a)(1) consist primarily of physical rather than economic events or circumstances. Such physical events include floods, fires, explosions, strikes, and other exceptional and uncommon circumstances hindering production, output, or operation.

Moreover, we are satisfied that the drought was so severe as to constitute an event "unusual and peculiar in the experience of such taxpayer," as required by the statute. Of course, any paper manufacturer dependent for its mill operation upon waterpower must expect that the operation will be affected adversely from time to time by water shortages. Nevertheless, the facts disclose that the drought in question here was of greater intensity and1960 U.S. Tax Ct. LEXIS 197">*232 of longer duration than any other that Oxford had experienced during its considerable history.

A far more difficult question is presented by the determination of whether, for either 1947 or 1948, Oxford's "normal production, output, or operation was interrupted or diminished" because of the drought. While the statute provides automatic procedures for the determination of the amount of relief to which an eligible taxpayer is entitled, the statute is less effective in this regard with respect to the eligibility tests. In commenting upon this fact in its report on the Revenue Act of 1951, ⁸the Finance Committee stated:

These tests frequently may involve extremely difficult evidentiary problems, particularly with respect to a determination of the extent that any single event has affected the taxpayer's normal production, output or operation.

However, the report continues:

The philosophy upon which the existing relief provisions, including section 442, were developed was that automatic formulas, both as to eligibility requirements and as to the extent of the relief granted, are preferable to the approach of the World War II law with its requirement of subjective analysis and decision. 1960 U.S. Tax Ct. LEXIS 197">*233 Your committee believes it is desirable to maintain this approach of present law. * * *

The petitioner claims that normal production, output, or operation is what it would have produced with its facilities as they then existed (at the time of the abnormality) but for the effect of the abnormality. Thus, the petitioner maintains that it is not proper to compare actual production figures for the drought-affected months with actual production figures for prior months because the latter would not include the production potential of such new equipment as No. 11 paper machine which did not start producing on its "rebuilt" basis until February of 1947 and did not reach full capacity until sometime later, not clearly ascertainable from the record. In effect, the petitioner "reconstructs" what it considers its production would have been in the absence of the claimed abnormality and then 33 T.C. 943">*960 treats the reconstructed production as "normal" for the purpose 1960 U.S. Tax Ct. LEXIS 197">*234 of establishing a departure from normal.

The theory advanced by the petitioner requires the very type of "reconstruction" which lay at the heart of section 722 and which was rejected explicitly by the Congress in its development of the general relief provisions of the Korean war excess profits tax. It is contrary to the philosophy implicit in those provisions. Moreover, it is clearly contrary to the respondent's regulations ⁹ which provide as follows:

Normal production, output, or operation, means the level of production, output, or operation customary for the taxpayer, determined on the basis of the actual experience of the taxpayer up to the time the unusual and peculiar event occurred.

In view of the rather general language of the statute with respect to eligibility and in light of the congressional intention to impart certainty, insofar as practical, to the relief provisions of the 1950 Act, the specific language of the regulations quoted above is reasonable and a valid exercise1960 U.S. Tax Ct. LEXIS 197">*235 of the regulatory power. Indeed, the petitioner does not question its validity. The regulations ¹⁰ likewise provide that "[the] interruption or diminution must be significant and not trivial."

The respondent would have us find that any production losses which may have occurred in the drought months were due to inefficient utilization of facilities, primarily the petitioner's failure to operate the steam turbine at full rated capacity. Thus, in his computations of the amount of power which the petitioner actually had available during the drought months, as compared to what it actually employed, the respondent includes the turbine at its rated capacity of 7,500 kilowatts. The "rated capacity" is presumably the capacity attached to the machine by its manufacturer at the time of its installation. Such a figure is not a realistic measure of true capacity in 1947-1948. The record amply supports the petitioner's contention that every effort was made to utilize to the fullest extent1960 U.S. Tax Ct. LEXIS 197">*236 the practical capacity of the turbine.

The welter of computations and reconstructions submitted by the parties to show theoretical power availabilities, actual power consumptions, the excess of one over the other, and so forth, may be useful in determining the effects of the drought upon Oxford's operations during the period October 11, 1947, to March 17, 1948, and, thus, in establishing whether during that time there was an interruption or diminution in production, output, or operations of which the drought was the proximate cause. However, we are convinced that the statute requires something more than this.

33 T.C. 943">*961 Section 442(a) requires unequivocally that a taxpayer seeking its benefit establish that its normal production, output, or operation "for any taxable year" within the base period was interrupted or diminished. It is true that the phrase "for any taxable year" appears in the introductory clause alone, but its location is due presumably to the usual drafting technique of placing in such an introductory clause all elements common to the subordinate parts in order to avoid their unnecessary repetition therein. Giving effect to the plain meaning of these words, as1960 U.S. Tax Ct. LEXIS 197">*237 applied to the facts before us, Oxford must establish that its production was less than normal in either 1947 or 1948, or both, considering each year as a whole. ¹¹

This construction is in accord with our Opinion in Fulton Foundry & Machine Co., 26 T.C. 953">26 T.C. 953 (1956), the only other case involving section 442 to be considered by this Court. In that case, we had before us a similar question involving the existence of an interruption or diminution of normal production, output, or operation. Implicit in our entire discussion of that1960 U.S. Tax Ct. LEXIS 197">*238 issue was the assumption that the issue turned upon a comparison of production of 1 year as a whole with that of other years. For example, we declared (at p. 957):

For all that the record shows, what petitioner produced in the critical year 1947 was normal for it. If we take the fiscal years 1945, 1946, 1948, and 1949, constituting 2 years on each side of the one in question, n3 we find that the average production in tons (the only unit of production available to us) was about 6,410, whereas the production during 1947 was over 6,900. There is no indication here that petitioner's 1947 production was less than normal. The same result follows if we compare the 1947 production with any other years shown by the record, except the fiscal year 1946. But on these figures there is much more reason to believe that that year was above normal than that all the other years were below. n4 * * * [Footnotes omitted.]

Any other construction of the statute would lead to such anomalous results as to be patently absurd. It does not follow from the occurrence of an abnormality during a year that the year as a whole was abnormal. Indeed, a taxpayer may have suffered an abnormal interruption or 1960 U.S. Tax Ct. LEXIS 197">*239 diminution of its production, output, or operations at some point during a particular year and yet that year as a whole may still prove the most successful in the taxpayer's history. It is inconceivable that Congress intended that a taxpayer be entitled to the benefit of relief in such a case. In this connection, it must be recalled that the amount of relief available under the Korean war excess profits tax is not arrived at by a reconstruction of what the 33 T.C. 943">*962 taxpayer would have earned absent the claimed abnormality. If such were the case, it might be argued that, even in the example referred to above, the taxpayer would only receive the benefit of earnings which were theoretically normal in any event. However, under the statute before us, the amount of relief is computed automatically on the basis of the actual rate of return for the period involved of the taxpayer's industry classification, a rate of return which bears only an arbitrarily assumed relationship to the taxpayer's actual experience.

Assuming, arguendo, that petitioner has established an interruption or diminution in its normal production during part of 1947 and part of 1948, as a result of the drought, 1960 U.S. Tax Ct. LEXIS 197">*240 we are satisfied that petitioner has failed to establish that its total production in either of those years was not substantially normal when measured against its actual experience. Moreover, it is comparative production and not profits which determines eligibility. 26 T.C. 953">Fulton Foundry & Machine Co., supra.In the instant case, production is best measured in terms of the production of finished paper, petitioner's principal product. (Relative production of other selected products is not substantially different.) As set forth in our Findings of Fact, Oxford's actual production of finished paper in tons was greater in 1947 than in 1946, greater in 1948 than in 1947, and greater in 1949 than in 1948. Expressed as percentages, it will be found that paper production in 1947 increased about 6 per cent over 1946; that in 1948 increased about 13 per cent over 1947; and that in 1949 increased about 2 per cent over 1948.

On these facts alone, we could not find that either 1947 or 1948 was below Oxford's normal experience. However, as we have pointed out, petitioner seeks to overcome this evidence by reconstructing what Oxford would have produced with its facilities1960 U.S. Tax Ct. LEXIS 197">*241 as they then existed and then comparing such reconstructed production with actual production. Entirely aside from the speculative character of the reconstruction, we reject petitioner's approach as contrary in principle to the announced intention of Congress, as implemented by the applicable regulations, to avoid just such evidentiary problems. ¹²

In rejecting the petitioner's contention, we do not necessarily preclude the possibility that under particular circumstances the facts may so establish the existence of a pattern of growth1960 U.S. Tax Ct. LEXIS 197">*242 ¹³ that production 33 T.C. 943">*963 in one year, although higher than that in prior years, may be below "normal" in the sense that it represents a substantial departure from the pattern established by the taxpayer's actual experience. However, in the instant case, while the facts disclose a growth of Oxford's business throughout the base period (and continued into the excess profits period), there is no discernible pattern upon which to base such a conclusion.

We hold that petitioner has failed to establish that, for either 1947 or 1948, its normal production, output, or operation was interrupted or diminished for the purpose of section 442(a)(1). In view of this holding, it is unnecessary to consider whether petitioner computed its relief under the proper subsection.

Decision will be entered for the respondent.