Simenon v. Commissioner

*821 The respondent determined a deficiency in income tax for the taxable year 1955 in the amount of $ 22,895.57. The main question is whether petitioner had a "permanent establishment" in the United States until March 19, 1955, within the meaning of the income tax convention between the United States and France and respondent's regulations adopted thereunder, with the consequence that author's royalties from U.S. sources received while he was in France are not tax exempt.

FINDINGS OF FACT

The stipulated facts are so found and are incorporated herein by reference.

Petitioner is now a resident of Switzerland. He was an alien resident of the United States from January 1 through March 19, 1955, and before 1955. He filed a return, Form 1040, which is an individual income tax return, sec. 6013(a)(1), 1954 Code. On the return, petitioner stated*36 that it was for a short period (other than the calendar year 1955) beginning January 1, 1955, and ending March 19, 1955. The return was filed with the director of international operations of the Internal Revenue Service in Paris, France (office of the Treasury representative for taxation), on April 30, 1957. Although the return was delinquent, reasonable cause was established and the respondent did not assert a delinquency penalty.

Beginning March 28, 1955, through November 29, 1955, concerns in the United States (U.S. sources) paid petitioner royalties, as consideration for the right to use copyrights and analogous rights with respect to literary works of the petitioner, in the total sum of $ 25,291.95, as follows, none of which was included in gross income in the return for 1955 filed by petitioner:

*822 The respondent determined that all of the above income from royalties is includable in petitioner's gross income for 1955 and taxable. In the statutory notice of deficiency, he gave the *37 following reason: "Royalty income received from sources within the United States for the period March 28, 1955 to December 31, 1955 is taxable since you engaged in trade or business through a permanent establishment in the United States during part of the year."

Petitioner's return for 1955 was prepared on a cash basis.

Petitioner, as an alien resident of the United States, filed income tax returns for the calendar years 1951, 1952, 1953, and 1954, at least.

Petitioner reports income on the basis of a calendar year. There is no evidence to the contrary.

Petitioner is, and at all times has been, a citizen of Belgium where he was born. His wife, Denyse (also known as Denise), is a citizen of Belgium. Petitioner's family consists of his wife and three children.

Petitioner is a professional writer of fiction, an eminent author. He writes in French. He is by experience and practice a European novelist. He writes psychological and mystery novels and stories. In his mystery stories, the principal character is Inspector Maigret. All of his literary works, except six, have a European background. His literary works have been published in various countries, including the United States, *38 Canada, and Great Britain, and many have been translated into the English language.

Prior to 1946, petitioner lived in several countries in Europe and in England for varying periods of time. In 1946, he lived in Canada until September, and in the United States during September through December, under a visitor's visa. He entered the United States from Cuba under a permanent visa in February 1947, and thereafter he continued living in the United States as an alien resident through March 19, 1955, except for occasional trips of short duration to European countries.

Beginning on July 27, 1950, petitioner rented residential property, called Shadow Rock Farm, in Lakeville, Conn., where he lived with his family until March 19, 1955. On November 1, 1950, he purchased this property. The purchase price plus improvements was $ 55,000.

While residing in the United States, petitioner wrote 46 books, novels, and short stories, all of which were written in French and have French titles. All have European backgrounds and are based on experiences and knowledge which petitioner had acquired in Europe, except six books of novels and stories in which petitioner made use of knowledge acquired in*39 the United States. Prior to 1955, petitioner's main publishers in the United States were Prentice-Hall, Inc., and Doubleday & Co. During 1955, Doubleday was his exclusive publisher.

*823 In about 1955, petitioner decided to go to Europe. He believed that he could carry on his creative writing better in a European background. He departed from the United States, with his family, on March 19, 1955, and went directly to France, where he remained until June 20, 1956. He then went to Switzerland where he and his family have lived continuously ever since. He has not returned to the United States at any time.

Prior to March 19, 1955, petitioner instructed his lawyer and real estate agent in Connecticut to offer the property called Shadow Rock Farm for sale. All of the furniture in the house was sold at an auction in the summer of 1955. The property apparently was unoccupied until December 1957, when it was rented, and thereafter it continued to be rented until it was sold on July 15, 1963.

Upon his arrival in France in March 1955, after a short stop in Paris, petitioner and his family went to the southern part of France where they lived in rented quarters from March 30, 1955, *40 until June 20, 1956, in or near Cannes. They lived at the Miramar Hotel in Cannes until April 8; in a furnished house (villa) in Mougins until October 5; and in a furnished house in Cannes until June 20, 1956. The house in Cannes was rented under a lease from October 1, 1955, to September 30, 1956, which provided that petitioner could vacate the premises before the end of the lease on the condition that he paid the full amount of the rent.

As of June 20, 1956, petitioner and his family moved to Lausanne, Switzerland, where he lived until June 1957. He lived in Echandens, Canton of Vaud, Switzerland, from June 1957 to December 18, 1963. In February 1962, petitioner purchased a piece of land in Epalinges, Canton of Vaud, Switzerland, on which he built a house, to which he and his family moved on December 18, 1963, where they have lived up to the present time.

Petitioner's first publisher in the United States was Prentice-Hall. Through Prentice-Hall (which had control for a time over rights to publish paperbound editions of the works of Simenon in the English language), the New American Library of World Literature, Inc., was granted the first option for 5 years, under an agreement*41 dated August 17, 1951, for the exclusive English language publication of paperbound books in the United States, Canada, and the Philippines of all the works of Simenon under royalty arrangements. It published some of petitioner's books.

In 1952, petitioner and Prentice-Hall terminated their agreement by mutual consent, and on November 25, 1952, petitioner and New American Library entered into a separate agreement under which petitioner granted New American Library a first option for the exclusive English language publication, in paperbound volume form, of all of petitioner's works, in the United States, Canada, and the *824 Philippines, in consideration for the payment of royalties to petitioner on such publications. The new agreement was for a period ending August 17, 1956.

The first agreement between petitioner and Doubleday was dated March 17, 1953. Under this agreement, petitioner granted Doubleday the exclusive right to print, publish, and vend in the United States, Canada, and the Philippines 20 novels written by petitioner, with a first option to negotiate for petitioner's next full-length book. Under this agreement, Doubleday was granted additional rights, to be exercised*42 after obtaining petitioner's "consent," relating to selling a book club edition of a work to the Literary Guild of America, the Book-of-the-Month Club, and others, and other rights relating to reprints, serial publication in magazines and newspapers, and other matters. Doubleday agreed to pay royalties at varying rates and to make an advance payment of royalties of several thousand dollars.

The above agreement was superseded by a new agreement with Doubleday dated March 14, 1955, which was executed by petitioner before he left the United States on March 19, 1955. Under the new agreement, petitioner granted Doubleday an exclusive right to print, publish, and vend four books, consisting of six individual novels, in addition to the works covered by the 1953 agreement, and other rights in the same territories. Doubleday agreed to pay petitioner royalties on all copies sold, and also agreed to pay petitioner, on demand, $ 5,000 as an advance payment of royalties. Petitioner requested that payment of $ 5,000 be made upon and right after the execution of the contract. Petitioner granted Doubleday several, various, additional exclusive rights, some of which could be exercised by Doubleday*43 only after "consultation" with petitioner. For these additional rights, Doubleday agreed to pay petitioner a substantial percentage of the proceeds of sales, such as 50 percent. The additional rights granted by petitioner included radio and television rights in connection with the literary works covered by the agreement, and the right to sell the literary works to book clubs, magazines, and newspapers.

During the period 1952 to 1955, other publishers in the United States were occasional publishers of petitioner's novels and stories (some of which were published for use in schools and were reprinted) as follows: Ellery Queen's Mystery Magazine, Jonathan Press, Mercury Publications, Harcourt Brace, and Appleton-Century-Crofts, Inc. The agreement with Appleton-Century is dated September 30, 1952.

Illustrative of the total amount of royalties in a year which petitioner received from publishers in the United States during the years 1952 through 1955, are the following: Petitioner received royalties from U.S. sources in each of the years in this period in annual total sums of around $ 6,000, $ 30,000, $ 21,000, and $ 14,000.

*825 Petitioner also received income from the sales of*44 motion-picture rights to some of his novels and stories from U.S. sources in each of the years 1952 through 1955, chiefly from Twentieth Century-Fox Film Corp. having offices in New York City. He received from $ 10,000 to $ 20,000 for motion-picture rights to a particular story.

Some of the royalties involved here, paid and received in 1955, were paid under petitioner's agreements with New American Library, Appleton-Century, and the new agreement with Doubleday dated March 14, 1955.

Petitioner entered into an agreement with Twentieth Century-Fox dated May 23, 1955, which he executed in Nice, France, on that date, under which he granted Twentieth Century-Fox the exclusive motion-picture rights in his literary property entitled "The Bottom of the Bottle," for which Twentieth Century-Fox paid him $ 20,000 on July 5, 1955, which he received about July 19, 1955. This story was originally published in France in 1949 in the French language under a French title. The English translation of this story was copyrighted in the name of petitioner in the United States in February 1954, and was published by Doubleday in 1954 in a book, with other stories by petitioner, entitled "Tidal Wave."

Under*45 both contracts with Doubleday, some of the novels to be published in the English language had already been written and others were to be written. The contracts did not specify any particular literary work; they referred only to the types of novels and stories to be published, a certain number of psychological novels and a certain number of mystery novels. It was agreed that the publisher could not make editorial changes in any literary work without petitioner's consent. Petitioner retained complete control over the writing of his literary works, the idea, the subject matter, plot, and entire writing of each one. The Doubleday contract of March 17, 1953, was for a period of 2 years; the contract of March 14, 1955, was for 1 year.

All of the literary works of petitioner published in the United States were and are copyrighted in the name of petitioner. All royalties paid to him were royalties under petitioner's grants of licenses under the copyrights.

During the period in which petitioner lived at Shadow Rock Farm, he set aside part of the house as his office. He carried on his work as an author and his related business affairs in this office, which he maintained until March 19, *46 1955.

The standard length of a book by petitioner was between 60,000 and 70,000 words, which amounted to between 150 and 200 pages. Petitioner's general practice in writing a novel or story was to make notes and an outline prior to writing, and then to write the novel or story on his typewriter in his office at Shadow Rock. He never discussed *826 preliminarily with a publisher the idea or outline of a story or novel that he was going to write. When the completed manuscript was offered to a publisher, that was the publisher's first encounter with the product. The publisher had the right to decide whether to accept and publish or reject the manuscript after it was submitted. Petitioner also created the titles to his works and maintained a list of possible titles. He discussed with his publisher which title would be the most likely one to be successful in the U.S. market or other market covered by the publishing contract. The publisher and its sales department determined in the first instance the number of copies to be printed of each work on the basis of distribution outlets and the market. Petitioner had little control over the publication arrangements which were the *47 province of the publisher.

After the contract of March 17, 1953, with Doubleday was executed, Doubleday was the exclusive U.S. publisher of petitioner's works, except for past contracts still in operation. The following list shows the dates of publication by Doubleday of books written by petitioner that were published under the contract of March 17, 1953:

Petitioner reserved to himself certain rights in his literary properties, including motion-picture, radio, and television rights to the dramatization and production of his literary works through such media. His activities and interests in negotiating the sales of such rights were continuous, and such activities were carried on by him while he was a resident in the United States. Petitioner's wife acted as a business*48 agent for petitioner. Her activities were carried on while they resided in the United States and thereafter. Under both agreements with Doubleday, it was necessary for petitioner to discuss various matters relating to his literary works frequently with the editor of Doubleday assigned to dealing with petitioner; and petitioner's wife, who worked on many details and the accounting of the royalties for him, had many discussions and much correspondence with the editor. This was true during the early part of 1955 while petitioner resided in the United States, and continued throughout 1955 after the Simenons left the United States. Under both agreements, *827 for example, the Doubleday editor was obliged to consult with petitioner about several types of productions of his books.

In his Form 1040 income tax return for the period January 1 to March 19, 1955, petitioner stated that his occupation is "author," and he included as part of the return Schedule C, "Profit (or Loss) From Business Or Profession." In Schedule C petitioner reported an amount as the net profit from his business after taking several business expense deductions. He included in his business deductions depreciation*49 on his house on the basis of devoting 50 percent of his use thereof to his business; and also on that basis he took a depreciation deduction on furniture and fixtures. The amount of the entire depreciation deduction was computed on the basis of his use of the property, furniture, and fixtures for business purposes during 78 days in 1955, i.e., 31 days in January, 28 days in February, and 19 days in March. Petitioner took business expenses deductions totaling $ 9,355.46 (of which respondent disallowed a claimed traveling expense of $ 3,814.48, and allowed the net amount of deductions of $ 5,540.98), as follows:

The total business deductions taken in the return was $ 12,717.57, which consisted of salaries and wages, $ 2,987.37; depreciation, $ 374.84; and other business expenses (supra), $ 9,355.46. In his computation of the amount of the income tax *50 reported on the return, petitioner entered $ 126 as his self-employment tax, computed in Schedule C on the basis of the amount of the net profit from his business reported in that schedule.

One of the items that respondent added to petitioner's taxable income for 1955 is $ 5,000 of advance royalties paid by Doubleday under the new contract dated March 14, 1955, which amount was payable on demand. Before the contract was executed, petitioner advised the Doubleday editor in charge of the contract that he elected to exercise his right to receive the above amount of advance royalties. Although petitioner executed the new contract before leaving the United States on March 19, and Doubleday agreed before that date to make immediate payment of the advance royalties, the office procedures *828 at Doubleday were such that the payment was not made until March 28, 1955.

ULTIMATE FINDINGS OF FACT

1. Petitioner failed to prove that he was a "resident" of France in 1955 within the meaning of that term as used in article 7 of the tax convention with France.

2. For several years prior to 1955, and during the period January 1 to March 19, 1955, petitioner was engaged in carrying on a business*51 in the United States which included writing literary works and promoting the sale of rights therein to others for profit and as a means of earning his living, dealing with publishers and others, and negotiating contracts under which he granted various rights in his literary works in return for the receipt of royalties and fixed amounts.

3. For several years prior to 1955 and during the period January 1 to March 19, 1955, petitioner maintained an office at his home, Shadow Rock Farm. This office was his business headquarters and fixed place of business at and from which he carried on his business activities, and it constituted a "permanent establishment" of petitioner in the United States within the meaning of that term as used in article 7 of the tax convention with France. Petitioner had a permanent establishment in the United States during part of 1955 until March 19, 1955.

OPINION

Royalties from sources within the United States, in the amount of $ 25,291.95, were paid to petitioner in 1955 after he left the United States on March 19, 1955. Petitioner did not include these royalties in his gross income on his return for 1955. He took the position that they are exempt from the*52 U.S. income tax under the provisions of article 7 of the income tax convention, or treaty, between the United States and France. The respondent made the following determinations: (1) That article 7 of the income tax treaty does not apply because petitioner had a "permanent establishment" in the United States at some time during 1955, i.e., during the period January 1 through March 19, 1955. (2) That since the treaty exemption does not apply, the royalties are subject to the U.S. income tax under section 871(c) of the 1954 Code. ¹

*53 The issue for decision is whether the royalties in question, from U.S. sources, are exempt from the U.S. income tax under article 7 of the income tax treaty with France. Section 894 of the Code exempts from *829 the Federal income tax income of any kind, "to the extent required by any treaty obligation of the United States." The tax treaty involved is the income tax convention with France which was signed on July 25, 1939, and in due course became effective on January 1, 1945. Article 7 of the convention, in title I, Double Taxation, provides as follows: ²

Royalties derived from within one of the contracting States by a resident or by a corporation or other entity of the other contracting State as consideration for the right to use copyrights, patents, secret processes and formulae, trade marks and other analogous rights shall be exempt from taxation in the former State, provided such resident, corporation or other entity does not have a permanent establishment there. [Italics added.]

*54 It is provided in the tax treaty in title II, Fiscal Assistance, art. 26, that each of the contracting States "may prescribe regulations necessary to interpret and carry out the provisions of this convention." Pursuant to this treaty provision and section 62 of the 1939 Code, the respondent promulgated regulations under the income tax treaty with France on February 27, 1946, in T.D. 5499, 1946-1 C.B. 134, 142-148. The provisions of these regulations originally were numbered as sections 7.411 through 7.426, but the provisions were renumbered on January 1, 1961, 26 C.F.R. part 514, as sections 514.102 through 514.117. See P.-H., Tax Treaties, par. 38,001 et seq., and C.C.H., Tax Treaties, pars. 2850-2865. The respondent's regulation under article 7 of the income tax treaty with France, section 514.109 (formerly sec. 7.418), provides as follows:

Sec. 514.109 Patent and Copyright Royalties. -- Royalties derived from sources within the United States by a nonresident alien individual who is a resident of France, or by a French corporation or other French entity, as consideration for the right to use copyrights, patents, secret processes*55 and formulae, trade-marks and other analogous rights, are exempt from Federal income tax under article 7 of the convention, provided that such individual, corporation, or other entity has no permanent establishment within the United States at any time during the taxable year in which such income is so derived. Thus a nonresident alien who is a resident of France, rendering personal services within the United States, is not subject to tax with respect to such royalties even though he is engaged in trade or business in the United States by reason of rendition of such services so long as he has no permanent establishment in the United States.

To obviate withholding of tax at the source, the nonresident alien individual resident of France or the corporation or other entity organized under the laws of France, as the case may be, shall notify by letter the person paying such income that the income is exempt from taxation under the provisions of the applicable convention and protocol. The letter of notification from an individual resident of France shall contain his address and a statement that he is a resident of France. The letter of notification from a corporation or other*56 entity organized under the laws of France shall contain the address of its office or place of business *830 and a statement that it is a corporation or other entity organized under the laws of France, shall be signed by an officer of such corporation or entity, and shall set forth his official title. In the case of royalties derived on or after January 1, 1945, the letter of notification shall also state that the individual resident of France, or corporation or other entity organized under the laws of France, as the case may be, does not have a permanent establishment in the United States and will not have such establishment in the United States at any time during the calendar year in which such royalties are paid. The recipient of the letter of notification shall immediately forward such letter or a copy thereof to the Commissioner of Internal Revenue, Withholding Returns Section, Washington 25, D.C.

[Italics added.]

The parties agree that the U.S. source royalties, paid under petitioner's rights as an author under his copyrights of his literary properties, are royalties within the provisions of article 7 of the income tax convention. Their dispute relates to whether*57 the other conditions in article 7 are satisfied, namely, (1) whether in 1955 petitioner was "a resident" of France within the meaning and for the purposes of article 7; and (2) whether in 1955 petitioner had a "permanent establishment" in the United States within the meaning of that term in article 7. Both questions are presented by the pleadings. Since all of the conditions prescribed in article 7 must be satisfied to obtain exemption from the U.S. income tax on the royalties, respondent's determination must be sustained if petitioner fails in establishing that either one of the above conditions was satisfied. The burden of proof was upon the petitioner under every question presented.

It is respondent's position that petitioner failed to prove that he was "a resident" of France under the meaning of that term in article 7 of the tax convention; and that the evidence establishes that petitioner did have a "permanent establishment" in the United States at some time during 1955. With respect to the latter, respondent makes two contentions. He contends that petitioner had at Shadow Rock Farm in Connecticut an "office" or "other fixed place of business" from January 1, 1955 (and before*58 that date), until his departure on March 19, 1955, within the meaning of article III of the protocol, which is an integral part of the tax convention, in which the term "permanent establishment" is defined as including offices and other fixed places of business. ³ He also contends that section 514.109 of his regulation, *831 supra, represents a valid interpretation of the term "permanent establishment" in article 7 of the convention, in the provision of the regulation which states that the individual or entity claiming the particular exemption from taxation must establish that he "has no permanent establishment within the United States at any time during the taxable year in which such income is so derived." This provision in the respondent's regulation is known as the "at any time" rule. Respondent relies upon the approval of the "at any time" rule, with respect to the treaty word of art, "permanent establishment," in Jules Samann, 36 T.C. 1011, aff. 313 F. 2d 461 (C.A. 4, 1963), which involved a provision (art. VIII) in the income tax convention between the United States and Switzerland of 1951, which is substantially*59 the same as article 7 in the convention with France.

Petitioner contends that he was "a resident" *60 of France in 1955 and satisfied the residence requirement of article 7; and that he did not have a "permanent establishment" in the United States. He argues that Samann was incorrectly decided and urges reconsideration by this Court of its holding in that case. ⁴

*61 1. Preliminary Matters

There are some minor questions which should be disposed of, whether petitioner became a nonresident in 1955, and whether he was entitled to report income on the basis of a short taxable period for 1955. Both questions involve petitioner's status in the calendar year 1955 with respect to the U.S. income tax.

(a) Petitioner was a resident alien in the United States for several years prior to 1955 and filed income tax returns. Whether or not his status changed in 1955 to that of a nonresident depends upon the facts in a particular case. Section 1.871-5 of the regulations provides that "An alien who has acquired residence in the United States retains his status as a resident until he abandons the same and actually departs from the United States." Departure plus intention to abandon U.S. residence are necessary to terminate an alien's status for tax purposes as a resident. John Ernest Goldring, 36 B.T.A. 779. Petitioner, with his family, left the United States on March 19, 1955. He went to France and was present in that country during the rest of 1955. *832 Whether or not he became a "resident" of France in 1955, as that*62 term is used in article 7 of the convention, is one of the issues in this case under which petitioner had the burden of proof, which is discussed hereinafter. It is sufficient to note here that the question of whether petitioner abandoned his status as a resident of the United States in connection with his departure on March 19, 1955, is a question of fact under which, also, petitioner had the burden of proof.

(b) Section 514.109 of the regulations of the respondent under article 7 of the tax convention (T.D. 5499, supra) provides that royalties are exempt from the Federal income tax provided the individual or entity "has no permanent establishment within the United State at any time during the taxable year in which such income is so derived." (Italics added.) Petitioner alleged in his petition that his taxable year for the purpose of the U.S. income tax ended on March 19, 1955, "insofar as treatment of subsequently received royalty income from United States sources under the aforesaid Tax Convention was concerned," which respondent denied. Petitioner made his return for 1955 on the basis of a short taxable period, January 1 through March 19; he used Form 1040, reporting*63 income as a resident alien during the short period; he took the position that under article 7 of the convention he did not have as a nonresident alien during the balance of 1955 any taxable income from sources within the United States. The pleadings present the question whether petitioner's taxable year was the calendar year 1955, or a short period of less than 12 months.

Section 441 of the Code provides that taxable income shall be computed on the basis of the taxpayer's "taxable year," which means his annual accounting period, either the calendar year or a fiscal year, and that the term "annual accounting period" means "the annual period on the basis of which the taxpayer regularly computes his income in keeping his books." Petitioner did not establish that prior to 1955 he had not regularly computed and reported his income on the basis of a calendar year. Lacking evidence to the contrary, it is found and concluded that his regular accounting period was the calendar year. Van Der Elst v. Commissioner, 223 F. 2d 771, 773.

Section 443 of the Code provides that a return shall be made for a "short period" of less than 12 months under certain circumstances, *64 but petitioner, on whom the burden of proof rests, has not established that he was entitled to make a 1955 return for a period that was different from and less than a period of 12 months, which evidently was the annual period on the basis of which he had regularly computed and reported his income prior to 1955.

For tax purposes an alien may be a resident for part of a taxable year and a nonresident for the balance of the same year, Marsman v.*833 , 205 F. 2d 335 (C.A. 4, 1953), affirming in part 18 T.C. 1, and under such circumstances he has a dual status as a taxpayer and his taxable year is known and treated as a dual-status taxable year. If petitioner had a dual status for income tax purposes in 1955, a question which we do not and need not decide, that taxable year was a dual-status taxable year. Respondent has promulgated a pamphlet which deals with the reporting of income for the purpose of the Federal income tax by alien taxpayers having a dual-status tax year, "Dual-Status Tax Years of Alien Taxpayers," Information Guide No. 3, Office of International Operations. In general, such dual-status*65 taxpayer must file his return on Form 1040, on which he must report separately the respective amounts of taxable income derived during the periods of residence and nonresidence, and the tax is computed separately for each period, giving effect to applicable tax treaty provisions, if any. Petitioner's annual accounting period and taxable year for each taxable period prior to 1955, as a resident alien, was the calendar year of 12 months, and his 1955 taxable year continued to be the 12-month calendar year. The only difference might be that 1955 was a dual-status tax year. If the U.S. source royalty income is held to be exempt from U.S. tax under the tax convention, it was not includable in gross income for 1955 on Form 1040. If the royalties are not exempt from the U.S. tax, it follows that they should have been reported separately on the return which petitioner filed for 1955, since only one return, Form 1040, is to be filed by an alien taxpayer for a dual-status year. For the purposes of considering the application of article 7 of the tax convention to the royalty income in issue, petitioner's taxable year was the 12-month calendar year of 1955. Van Der Elst v. Commissioner, supra.*66

2. Treaty Article 7, Resident of France

The U.S. income tax law comprises two independent concept