BEFORE ROY NOBLE LEE, P.J.; ROBERTSON AND SULLIVAN, JJ.
ROBERTSON, JUSTICE, FOR THE COURT:
Today's appeal presents a question regarding the amount of tax credit which may be claimed by an affiliated group of corporations filing a consolidated income tax return where one of the corporations has paid a privilege tax. The question requires careful and intricate consideration of our income and privilege tax statutes and regulations. In the end we hold that the privilege taxpayer may claim the entire privilege tax credit, notwithstanding that the amount of the credit exceeds the privileged corporate subsidiary's income tax attributable to its Mississippi operations, and that this credit inures to the benefit of the affiliated group via the consolidated return.
General Motors Corporation (" GM "), a Delaware corporation, and all of its subsidiaries filed a consolidated Mississippi Corporate Income Tax Return for the year 1979 and timely paid the total amount of income tax shown thereon to be due. Included in the affiliated group filing the consolidated return was General Motors Acceptance Corporation (" GMAC "), a finance company doing business in the State of Mississippi.
After the consolidation of all taxable income of the
subsidiaries filing the consolidated return, and after computing the Mississippi income tax liability of the consolidated group, GM on behalf of the consolidated group took a credit against the tax so determined in the amount of $584,978. This credit represents the amount of 1979 Mississippi privilege tax levied against and paid by GMAC. This privilege tax credit against income tax was claimed under Section 27-21-9 of the Mississippi Code of 1972, as it existed prior to its amendment effective January 1, 1983.
In 1981, the Commissioner of Revenue performed an audit of GM's 1979 consolidated Mississippi Corporate Income Tax Return. The Commissioner's auditors reduced the privilege tax credit taken by GM's consolidated group from $584,978 to $138,166. The Commissioner determined that a credit in the amount of the full privilege tax paid was not allowable; rather, that the credit was limited to the income tax due by GMAC attributable to its Mississippi operations.
GM appealed to the Board of Review of the State Tax Commission that portion of the Commissioner's assessment of additional taxes caused by the disallowance of the full tax credit. Following a hearing, the Board of Review upheld the Commissioner's action. GM then appealed the action of the Board of Review to the full Commission which also affirmed.
GM appealed the action of the Commission to the Chancery Court of the First Judicial District of Hinds County, Mississippi. The Chancery Court considered this matter on stipulated facts and thereafter affirmed the assessment of additional income taxes made against GM by the Commission. GM thereafter perfected an appeal to this Court.
Without doubt, an affiliated group of corporations has the privilege of filing a consolidated corporate state income tax return in lieu of separate returns. Specifically, Miss. Code Ann. 27-7-37(2) (Supp.1979) provides that" an affiliated group of corporations shall have the privilege of making . . . a consolidated return with respect to the income tax imposed by this Article for the taxable year in lieu of separate returns. . . . "General Motors and its affiliates, one of which was GMAC, voluntarily filed a consolidated return for 1979. In that year, GMAC, one of GM's subsidiaries, paid to the State of ...