The opinion filed in this case on February 10, 1943, is hereby withdrawn, and the following substituted therefor:

The petitioning corporations seek a review of a decision of the United States Board of Tax Appeals, now Tax Court of the United States, sustaining respondent’s determination of deficiencies and penalties on income surtax for the tax years 1934, 1935 and 1936 under the personal holding company income tax provisions of the Revenue Acts of 1934 and 1936.

On June 1, 1939, the Commissioner of Internal Revenue mailed to the Technicraft Engineering Corporation, transferor, and Lane-Wells Company (a Delaware corporation), transferee, respectively, notices asserting various tax deficiencies, including deficiencies in personal holding company surtax income and 25 per cent penalties for failure to file personal holding company returns for the three tax years in question.

Both the transferor and the transferee duly filed petitions for review, upon which the Board entered its decisions against both sustaining the deficiencies and penalties.

The cases are brought to this court by petitions for review filed by the transferor and transferee. Pursuant to stipulation of the parties, this court ordered consolidation of the two appeals.

Petitioner Lane-Wells Company was formed in 1937 to take -over the business of petitioner Technicraft Engineering Corporation and its affiliated companies. In 1937, following a reorganization in which J-ane-Wells Company of Delaware acquired the stock of Technicraft, the latter conveyed all its assets to the Delaware Corporation and was dissolved.

A. The validity of the returns as affecting the time limiting statutes and penalties.

The Board found that Technicraft, in good faith, claimed in its returns that it was not a personal holding company. It found further that the returns, filed in due time, showed all the facts necessary for the respondent to compute the taxes as a personal holding company obligation.

However, the incomes were returned on Form 1120 for taxing corporations not holding companies, instead of Form 1120H for taxing holding company corporations. The Commissioner, upheld by the Board, drew the legal conclusion that such a return was “no return” whatsoever, and hence he "was entitled to determine deficiencies thereon at any time, — here in 1939, over four years after the 1934 return and over three years after the 1935 return were filed. It is not questioned that the 1936 return was assessed within the statutory time limit. The Commissioner also determined penalties of 25 per cent for each year on the theory that Technicraft had failed to file any returns, and the penalties were upheld by the Board.

We do not agree that the returns are to be deemed not made. They started the running of the time for assessment.

Construing analogous, statutes of limitation, the Supreme Court holds that where one kind of income taxpayer in good faith files a return on a form provided for another kind of income taxpayer, which return discloses the facts upon which the Commissioner may compute the income tax actually due from the taxpayer, the return filed is a return which starts the running of the time within which the Commissioner may assess the tax. Germantown Trust Company, Trustee, v. Commissioner, 309 U.S. 304, 307, 310 , 60 S.Ct. 566 , 84 L.Ed. 770 . The pertinent language of the Supreme Court and the cases cited showing the principle to be long recognized are ( 309 U.S. at page 310 , 60 S.Ct. at page 569 , 84 L.Ed. 770 ): “It cannot be said that the petitioner, whether treated as a corporation or not, made no return of the tax imposed by the statute. Its return may have been incomplete in that it failed to compute a tax, but this defect falls short of rendering it no return whatever. Zellerbach Paper Co. v. Helvering, 293 U.S. 172, 180 , 55 S.Ct. 127, 130 , 79 L.Ed. 264 ; Commissioner v. Stetson & Ellison Co., 3 Cir., 43 F.2d 553 ; United States v. Tillinghast, 1 Cir., 69 F.2d 718 ; Appeal of Mabel Elevator Co., 2 B.T.A. 517 ; Abraham Werbelovsky v. Commissioner, 8 B.T.A. 442, 446 ; Estate of F. M. Stearns v. Commissioner, 16 B.T.A. 889 ; J. R. Brewer v. Commissioner, 17 B. T. A. 704.” See, also, Denman v. Motter, D.C.Kan.1930, 44 F.2d 648 , where no form available and return made on plain paper.

We are unable to see any difference in principle between the Germantown decision and the instant case, where one of the class of income taxpayers called “holding companies” files, in good faith, a return on a form provided for companies not holding companies which discloses the facts neces sary to compute the tax due from the holding company.

The Board attempts to distinguish the Germantown case on the ground that though both forms 1120 and 1120H are for income taxpayers under the income tax provisions of the Act of 1931, taxpayer used Form 1120 under a tax imposed on it under Title I of the Act, 26 U.S.C.A. Int.Rev.Acts, page 659 et seq. while taxpayer should have used Form 1120H under a tax imposed by Title IA, 26 U.S.C.A. Int.Rev.Acts, page 757 et seq. The attempted distinction is that the tax under Title I is a “separate and distinct tax” from the tax under Title IA. The distinguishing is not sound. In the Germantown case the fiduciary return on Form 1041 returns income which is for computing a separate and distinct tax either on the trustee or the beneficiary. The tax on either is as much a “separate and distinct tax” from that on “associations taxable as corporations” as are separate and distinct the taxes on holding companies and companies not holding companies. Both are income taxes imposed by the same Act. The Act makes the statute of limitations applicable alike to all classes of returns.

The Treasury Department in 1934 attempted to forestall the rule of the Germantown case, established in 1940, by incorporating in the Regulations providing Form 1120H for holding companies a similar erroneous conclusion of law. This conclusion of law is stated in the Regulations as, “However, since the surtax imposed under Title IA is a distinct and separate tax from those imposed under Title I, the making of a return under Title I will not start the period of limitation for assessment of the surtax imposed under Title IA.” Art. 351-8, Treasury Regulations 86, promulgated under the Revenue Act of 1934.

The respondent’s contention is that, despite the holding of the Germantown case, the contrary construction of the law placed in a regulation makes the construction of law a regulation within the regulatory power of the Secretary of the Treasury. The statement of the proposition answers it. It is the function of the courts and not the Secretary to determine the legal effect of his Regulations requiring the use of forms for different classes of taxpayers.

The limitation and penalty provisions of the Revenue Act of 1934 here in question are, §§ 275, 276, 291, 311, 26 U.S.C.A. Int.Rev.Acts, pages 748-750, 753:

The 1934 taxes were not assessed within the four years of § 311, and Lane-Wells, transferee, is not liable for the tax for that year. Nor is Technicraft liable for the 1934 and 1935 taxes, assessed more than the three years of § 275 after its returns for those years.

Concerning the 1935 taxes, Lane-Wells claims that the Board could not hold it liable because of a stipulation that “Lane-Wells is liable as transferee for any taxes which may be found due from Technicraft.” It contends that such a stipulation prevented the Board from holding it liable for a tax as transferee, after the statutory three year limit for assessing Technicraft. We do not agree. We are not required to determine whether the Commissioner has the power to waive any tax by stipulating that the time limited in the statute for assessment has passed, when it is apparent that it has not. Here the stipulation, while stating that the transferee is liable for the tax due from the transferor, does not state that it is not liable for a tax which was due from the transferor but no longer collectible from the transferor because of the three year statute of limitation. We hold that the Commissioner properly assessed against Lane-Wells, as transferee, a tax in the amount of that owed by Technicraft for the year 1935, though not assessable against the latter.

Since under the Germantown decision the good faith return of all the facts necessary to compute a tax is a “return,” though on a form for a different taxpayer, the Board erred in upholding the penalties determined by the Commissioner under §§ 276 and 291 for the tax years 1934, 1935 and 1936.

B. Technicraft is a personal, holding •company and it and Lane-Wells, transferee, are liable for deficiencies assessed against Technicraft for the years 1935 and 1936.

Technicraft, a California corporation, with its principal office in Los Angeles, was organized in December 1932. Throughout the periods in controversy its entire stock was owned by W. G. Lane, W. T. Wells, and their wives. These four individuals also owned the entire stock of Lane-Wells Company of California, Lane-Wells Company of Oklahoma, Lane-Wells Company of Texas, and Lane-Wells International, Inc. Lane and Wells were directors and officers of the various affiliated companies. Petitioners concede that Technicraft is liable for the tax as a holding company unless they have maintained their burden of proof before the Board that the Commissioner erred in deciding that 80 per cent of Technicraft’s income in 1935 and 1936 was from “royalties” as defined in Treasury Regulations 94 promulgated for the Revenue Act of 1936, of which Art. 351-2(1) provides,

The Board held that the income taxed by the Commissioner was made up in large part from royalties as so defined. There was no segregation in the evidence of the amounts other than royalties, or proof that such other amounts exceeded 20 per cent of the income. Since the evidence shows a very substantial portion of the income to be royalties and there is no segregation, the finding of the Board that the petitioners have not proved their negative, i. e., that the royalties did not equal 80 per cent of the income, must be sustained.

Petitioners further contend that none of the income consisted of royalties, because — although it was so denominated in agreements with the held companies — there was a prior agreement between Technicraft and the companies that all that was to be paid by them to Technicraft was for engineering services. We assume there was testimony from which such an agreement might be inferred. Our review, however, is confined to the determination whether “there is substantial evidence to support the conclusion” of the Board to the contrary. Helvering v. Kehoe, 309 U.S. 277, 279 , 60 S.Ct. 549, 550 , 84 L.Ed. 751 . There is abundant such evidence.

Technicraft had patent rights in a perforator device known as the Mims patent, for shooting into oil bearing stratification or through oil well piping to free the flow of mineral oil or gas. The held companies were in the business of furnishing such perforator services. Technicraft made contracts with each of the held companies for the use of the Mims patent, for which each agreed to pay a “royalty” of 15 per cent of its gross receipts. It was the moneys so denominated “royalties” which Technicraft received which it returned to the Treasury for 1935 and 1936, also stating them to be “royalties”. In the royalty agreements with the Oklahoma and Texas companies it was provided,

Technicraft conducted experiments, purchased test instruments, and built models of devices, some of which were sold to the Lane-Wells Company of California. Lane and Wells and employees of Technicraft assigned more than 50 patents to Technicraft. Technicraft owned at least 19 abandoned and unfiled inventions. In 1935 it had from 85 to 100 patents or patent applications which it was furnishing to the Lane-Wells companies by June 1, 1937, and of which seven or eight related to the basic principle of the Mims patent.

Obviously, the Board could reject the testimony of the prior agreements that the furnishing of these patents and models and mechanical devices or processes were mere professional engineering services paid for by the 15 per cent of gross income. It could infer that the transactions were just what they were called, “licenses” to use the patents’ models and devices upon which 15 per cent of the gross income from their use constituted “royalties.” As stated, if, in addition to the licensed matter, non-royalty devices were given for the same 15 per cent consideration, there was no segregation to show that they amounted to over 20 per cent of the taxed income. The Board properly decided that there were deficiencies in petitioners’ income taxes for the years 1935 and 1936 in the amounts found in its decision.

Reversed and remanded for a recomputation of petitioners’ income taxes for 1934, 1935 and 1936 in accord with this opinion.

Reversed and remanded.

The petition for rehearing is denied.

The finding is: “4. * * * Taxpayer’s income and excess profits tax returns filed on Form 1120 made a full disclosure of its gross income and deductions and its resulting net income. * * Revenue Act 1936, c. 690, 49 Stat. 1648 : “§ 351. Surtax on Personal Holding Companies * * * * * “(b) Definitions. As used in this title— “(1) The term ‘personal holding company’ means any corporation (other than a corporation exempt from taxation under section 101, and other than a bank, as defined in section 104, and other than a life-insurance company or surety company) if — (A) at least 80 per centum of its gross income for the taxable year is derived from royalties, dividends, interest, annuities, and (except in the case of regular dealers in stock or securities) gains from the sale of stock or securities, and (B) at any time during the last half of the taxable year more than 50 per centum in value of its outstanding stock is owned, directly or indirectly, by or for not more than five individuals. * * * ” 26 U.S.C.A. Int.Rev.Acts, page 936. The Revenue Act of 1934, c. 277, 48 Stat. 751 , § 351, 26 U.S.C.A. Int.Rev.Acts, page 757, is identical in its applicable provisions.