[Inclosure.]

75 MURRAY STREET, New York, February 20, 1865.

Brigadier General H. E. PAINE, U. S. Volunteers, Present:

GENERAL: I have the honor to inclose copy of correspondence between my agents, Duncan, Sherman & Co., and the Commissioner of Internal Revenue, in reference to the tax claimed on the 830 bales of cotton transported from Mobile by the United States under the date agreement between General Grant and Colonel Ould, and to respectfully request that, the cotton being received in a Southern port and transported by the United States to this port, I be not required to pay the usual tax of 2 cents per pound. This, I think, the Government of the United States will agree to, and respectfully request that you lay the matter before the proper authorities.

I am, respectfully, your obedient servant,

WM. N. R. BEALL,

Brigadier-General, Provisional Army, C. S.,

Paroled Prisoner of War and Agent to Supply Prisoners of War.

[Sub-inclosure Numbers 1.]

NEW YORK, February 1, 1865.

Honorable JOSEPH J. LEWIS,

Commissioner Internal Revenue, Washington, D. C.:

SIR: There has been delivered to our care, for realization, 830 bales of cotton, brought from Mobile by the U. S. steamship Atlanta, under charge of Captain Noyes, of General Granger's staff, consigned to Brigadier-General Beall, agent for the relief of the prisoners of war at present held by the United States, by whom the same was handed over to us. The assessor of internal revenue has notified us to pay a tax of 2 cents per pound thereupon. This cotton has been sent by permission of and through the U. S. authorities, and the officers of custom have made no claim upon the same. We therefore submit whether General Beall shall be called on to pay the said tax of 2 cents per pound. Favor us with an early reply to the present, and oblige,

Your most obedient servants,

DUNCAN, SHERMAN & CO.

[Sub-inclosure Numbers 2.]

TREASURY DEPT., OFFICE INTERNAL REVENUE,

Washington, February 3, 1865.

Messrs. DUNCAN, SHERMAN & CO.,

Bankers, New York, N. Y.:

GENTLEMEN: I reply to your letter of February 1, in relation to 830 bales of cotton brought from Mobile, the section 177 of the act of June 30, 1864, provides that-

Whenever any cotton, the product of the United States, shall arrive at any port of the United States from any State in insurrection against the Government, the assessor or assistant assessor shall immediately assess the taxes due thereon, and without delay return the same to the collector or deputy collector of the district, who shall demand of the owner, or other person having charge of such cotton, the tax, unless evidence of previous payment shall be produced.

I do not see that under this provision the assessor or collector, or this office, have any discretion in the matter except to assess and collect the tax. No cotton comes into our military lines unless by permission