The Internal Revenue Code of 1939 permitted taxpayers to deduct
as a depletion allowance a percentage of "gross income from
mining," and defined "mining" as including the
"ordinary treatment processes normally applied by mine owners .
. . to obtain the commercially marketable mineral product or
products."
Respondent mines fire clay and shale for which there is a
market, but which it utilizes to manufacture sewer pipe and other
vitrified articles. It claims that it could not profitably market
its raw fire clay and shale without processing them into finished
products.
Held: Respondent's depletion allowance must be based,
not upon the value of the sewer pipe and other vitrified products
which it manufactures, but upon the value of its raw fire clay and
shale after application of ordinary treatment processes normally
applied in the recovery of those materials by miners not engaged in
the manufacture of finished products. Pp.
364 U. S.
77-90.
(a) Congress intended to grant miners a depletion allowance
based on the constructive income from the raw mineral product, if
marketable in that form, and not on the value of finished articles.
Pp.
364 U. S.
81-86.
(b) A depletion allowance is an allowance for the exhaustion of
capital assets -- not a subsidy to manufacturers or to high-cost
mine operators. P.
364 U. S.
86.
(c) That respondent is both a miner and a manufacturer does not
entitle it to treatment different from that accorded miners of the
same raw materials who are not manufacturers. Pp.
364 U. S.
86-88.
(d) That respondent's underground method of mining prevents it
from selling its raw fire clay and shale does not entitle it to
treatment different from that accorded to the other miners of the
same raw materials. Pp.
364 U. S.
88-89.
268 F.2d 334 reversed.
Page 364 U. S. 77
MR. JUSTICE CLARK delivered the opinion of the Court.
This income tax refund suit involves the statutory percentage
depletion allowance to which respondent, an integrated
miner-manufacturer of burnt clay products from fire clay and shale,
is entitled under the Internal Revenue Code of 1939. [
Footnote 1]
The percentage granted by the statute is on respondent's "gross
income from mining." It defines "mining" to include the "ordinary
treatment processes normally applied by mine owners . . . to obtain
the commercially marketable mineral product or products."
Respondent claimed that its first "commercially marketable mineral
product" is sewer pipe and other vitrified articles. Alternatively,
it contended that depletion should be based on the price of 80 tons
of ground fire clay and shale actually sold during the tax year in
question. The District Court agreed with respondent's first claim.
The Court of Appeals affirmed, holding that respondent could not
profitably sell its raw fire clay and shale without processing it
into finished products, and that its statutory percentage depletion
was therefore properly based on its gross sales
Page 364 U. S. 78
of the latter. 268 F.2d 334. The Government contends that the
product from which "gross income from mining" is computed is an
industry-wide test, and cannot be reduced to a particular operation
that a taxpayer might find profitable. The Government further
argues that, while the statute permits ordinary treatment processes
normally applied by miners to the raw product of their mines to
produce a commercially marketable mineral product, it does not
embrace the fabrication of the mineral product into finished
articles. In view of the importance of the question to taxpayers as
well as to the Government, we granted certiorari. 361 U.S. 923. We
disagree with respondent's contention that the issue is not
presented by this record, and we therefore reach the merits. We
have concluded that, under the mandate of the statute, respondent's
"gross income from mining" under the findings here is the value of
its raw fire clay and shale, after the application of the ordinary
treatment processes normally applied by nonintegrated miners
engaged in the recovery of those minerals. [
Footnote 2]
I
During the tax year ending November 30, 1951, the respondent
owned and operated an underground mine from which it produced fire
clay and shale in proportions of 60% fire clay and 40% shale. It
transported the raw mineral product by truck to its plant at
Cannelton, Indiana, about one and one-half miles distant. There it
processed and fabricated the fire clay and shale into vitrified
sewer pipe, flue lining and related products. In this process, the
clay and shale is first ground into a pulverized form about as fine
at talcum powder. The
Page 364 U. S. 79
powder is then mixed with water in a pug mill and becomes a
plastic mass, which is formed by machines into the shape of the
finished ware desired. The ware is then placed in dryers, where
heat of less than 212� is applied to remove all of the water. This
process takes from 12 hours to 3 weeks, depending on the size of
the ware. Thereafter, the ware is vitrified in kilns at 2,200�
Fahrenheit, requiring from 60 to 210 hours. It is then cooled,
graded, and either shipped or stored.
Not all clays and shales are suitable for respondent's
operations. They must have plasticity, special drying qualities,
and be able to withstand high temperatures. Respondent's clay,
known as Cannelton clay, is the deepest clay mined in Indiana and,
respondent says, yields, the best sewer pipe. Its cost of removing
and delivering the same to its plant was $2.418 per ton in 1951.
Respondent used some 38,473 tons of clay and shale in its
operations that year, and sold approximately 80 tons of ground fire
clay and shale in bags at a price of $22.88 per ton. Net sales of
its finished wares amounted to approximately one and a half million
dollars.
In connection with its tax assessment for the year in question,
respondent filed a document in which it stated that
"we used as a basis for calculating the gross income from our
mining operations of shale and fire clay the point in our
manufacturing operations at which we first arrive with a
commercially marketable product, which is ground fire clay. This
product arrives after the raw mineral is crushed and granulated to
such extent that, by the addition of water, it can be made into a
mortar for use in laying or setting fire or refractory brick. This
ground fire clay has a definite market and an ascertainable market
value at any particular time, and is the same product from which
our end product, sewer tile, is made simply by the addition of
water and the necessary baking process."
In this return, it based the value of the ground
Page 364 U. S. 80
fire clay at $22.81 per ton, the price for which it sold some 80
tons of that material in bags during 1951. At this figure, the
depletion allowance would have been slightly above $2 per ton.
Thereafter, respondent claimed error and asserted that its mineral
product, rather than being commercially marketable when it reached
the stage of ground fire clay, only became commercially marketable
when it became a finished product,
e.g., sewer pipe. On
this basis, the depletion allowance on petitioner's gross income
would be approximately $4 per ton, since the mineral would have a
value of about $40 per ton. On the other hand, if the mineral it
used in 1951 was valued at $1.60 to $1.90 per ton, the going price
elsewhere in Indiana, the depletion allowance would be
approximately 20� per ton.
The record shows and the District Court found that, in 1951,
there were substantial sales of raw fire clay and shale in Indiana,
mostly in the vicinity of Brazil, about 140 miles from Cannelton.
The average price there was $1.60 to $1.90 per ton for fire clay
and $1 per ton for shale. Transportation costs from Brazil to
Cannelton ran from $4.58 to $5.50 per ton. In Kentucky, across the
river from respondent's plant, it appears that fire clay and shale
of the same grade were mined and sold [
Footnote 3] before, during
Page 364 U. S. 81
and subsequent to 1951. In fact, since 1957, respondent has
secured all of its mineral requirements from this source on a lease
basis under which the lessor mines and delivers the raw material to
its plant. The exact cost is not shown, but the haul in 1957 from
pit to plant, including the ferry crossing, was some seven
miles.
II
We have carefully studied the legislative history of the
depletion allowance, including the voluminous materials furnished
by the parties not only in their briefs but in the exhaustive
appendices and the record. [
Footnote 4] We shall not burden this opinion with its
repetition.
In summary, mineral depletion for tax purposes is an allowance
from income for the exhaustion of capital assets.
Anderson v.
Helvering, 310 U. S. 404
(1940). In addition, it is based on the belief that its allowance
encourages extensive exploration and increasing discoveries of
additional minerals to the benefit of the economy and strength of
the Nation. We are not concerned with the validity of this theory
or with the statutory policy. Our sole function is application of
the congressional mandate. A study of the materials indicates that
percentage depletion first came into the tax structure in 1926,
when the Congress granted it to oil and gas producers. The
percentage allowed was based on "gross income from the property,"
which was described as "the gross receipts from the sale of oil and
gas as it is delivered from the property." Preliminary Report,
Joint Committee on Internal Revenue Taxation, Vol. I, Part 2
(1927). The report continued that, as to the integrated
Page 364 U. S. 82
operator,
"the gross income from the property must be computed from the
production and posted price of oil, as the gross receipts from a
refined and transported product cannot be used in determining the
income as relating to an individual tract or lease."
The Treasury Regulations confirmed this understanding.
Treas.Reg. 74 (1929 ed.), Arts. 221(i), 241.
Thereafter, in 1932, percentage depletion was extended to metal
mines, coal, and sulphur. The mining engineer of the Joint
Committee, Alex. R. Shepherd, urged in a report to the Congress
[
Footnote 5] that depletion for
metal mines be computed, as in the oil and gas industry, on a
percentage of income basis, and the Revenue Act of 1932 was so
drawn. The Shepherd Report pointed out that the percentage basis
for oil and gas depletion had been in force for over a year, and
had "functioned satisfactorily both from economical and
administrative viewpoints and without loss of revenue." It added
that
"careful study of this method as applied to metal mines
indicates that the same results will be attained in practice as in
the case of oil and gas,"
but that, because of varied practices in the mining industry, it
would be necessary to determine "the point in accounting at which"
gross income from the property mined could be calculated. It
recommended that "it is logical to peg
gross income from the
property' f.o.b. cars at mine," i.e., net smelter returns,
recognizing that processing beyond this point should not be
included in calculating "gross income from the property." While as
to certain metals, viz., gold, silver, or copper, the
report suggested that gross income should be based on receipts from
"the sale of the crude, partially beneficiated or refined" product,
this was but to make
Page 364 U. S. 83
provision for the specific operations of miners in those metals.
In this regard, the report also proposed that the depreciation
base,
"in the case of all other metals, coal and oil and gas, [should
be] the competitive market receipts, or its equivalent, received
from the sale of the crude products, or concentrates on an f.o.b.
mine, mill, or well basis."
The Congress, in fashioning the 1932 Act, took into account
these recommendations. It incorporated a provision in the Act
allowing percentage depletion for coal and metal mines and sulphur,
based on the "gross income from the property." § 114(b)(4), Revenue
Act of 1932, 47 Stat. 169. On the following February 10, 1933, the
Treasury issued its Regulations 77, which defined "gross income
from the property" as
"the amount for which the taxpayer sells (a) the crude mineral
product of the property or (b) the product derived therefrom, not
to exceed in the case of (a) the representative market or field
price . . . or in the case of (b) the representative market or
field price . . . of a product of the kind and grade from which the
product sold was derived, before the application of any processes .
. . with the exception of those listed. . . ."
Treas.Reg. 77, Art. 221(g). These exceptions listed processes
normally in use in the mining industry for preparing the mineral as
a marketable shipping product. The regulation was of unquestioned
validity, and, in 1943, at the instance of the industry, the
Congress substantially embodied it into the statute itself, 58
Stat. 21, 44, including the basic definition of the term "gross
income from the property." [
Footnote 6] Since that time, the
Page 364 U. S. 84
section on percentage depletion -- § 114(b)(4)(B) of the 1939
Code -- has remained basically the same. [
Footnote 7] Additional minerals have been added from
time to time -- shale and fire clay in 1951 -- until practically
all minerals are included.
As now enacted, the section provides that "mining" includes
"not merely the extraction of the ores or minerals from the
ground, but also the ordinary treatment processes normally applied
by mine owners or operators in order to obtain the commercially
marketable mineral product or products,"
plus transportation from the place of extraction to the "plants
or mills in which the ordinary treatment processes are applied
thereto," not exceeding 50 miles. [
Footnote 8] It then defines "ordinary treatment
processes"
Page 364 U. S. 85
by setting out specifically in four categories those covering
some 17 named minerals. Fire clay and shale are not within these
specific enumerations. The Government, however, contends that they
should come within clause (iii) of the section, which provides
that,
"in the case of iron ore, bauxite, ball and sagger clay, rock
asphalt,
and minerals which are customarily sold in the form of
a crude mineral product -- sorting, concentrating, and
sintering to bring to shipping grade and form, and loading for
shipment . . ."
are included in "ordinary treatment processes." (Italics added.)
Clause (iv) lists specific metals such as lead, zinc, copper, etc.,
"and ores which are not customarily sold in the form of the crude
mineral product," and specifically excludes from the permissible
processes certain ones used in connection with these metals. To
recapitulate, the section contains four categories of "ordinary
treatment processes": the first enumerating those permissible as to
the mining of coal; the second, as to sulphur; the third, as to
minerals customarily sold in the form of the crude mineral product;
and the fourth, as to those ores not customarily so sold. We note
that the Congress even states the steps in each permissible
process, and in addition specifically declares some processes not
to be "ordinary treatment" ones,
viz., "electrolytic
deposition, roasting, thermal or electric smelting, or refining."
Furthermore, none of the permissible processes
Page 364 U. S. 86
destroys the physical or chemical identity of the minerals or
permits them to be transformed into new products.
From this legislative history, we conclude that Congress
intended to grant miners a depletion allowance based on the
constructive income from the raw mineral product, if marketable in
that form, and not on the value of the finished articles.
III
The findings are that three-fifths of the fire clay produced in
Indiana in 1951 was sold in its raw state. This indicates a
substantial market for the raw mineral. In addition, large sales of
raw fire clay and shale were made across the river in Kentucky.
This indicates that fire clay and shale were "commercially
marketable" in their raw state unless that phrase also implies
marketability at a profit. We believe it does not. Proof of these
sales is significant not because it reveals an ability to sell
profitably -- which the respondent could not do -- but because the
substantial tonnage being sold in a raw state provides conclusive
proof that, when extracted from the mine, the fire clay and shale
are in such a state that they are ready for industrial use or
consumption -- in short, they have passed the "mining" state on
which the depletion principle operates. It would be strange indeed
to ascribe to the Congress an intent to permit each miner to adopt
processes peculiar to his individual operation. Depletion, as we
have said, is an allowance for the exhaustion of capital assets. It
is not a subsidy to manufacturers or the high-cost mine operator.
The value of respondent's vitrified clay products, obtained by
expensive manufacturing processes, bears little relation to the
value of its minerals. The question in depletion is what allowance
is necessary to permit tax-free recovery of the capital value of
the minerals.
Respondent insists that its miner-manufacturer status makes some
difference. We think not. It is true that the
Page 364 U. S. 87
integrated miners in Indiana outnumbered the nonintegrated ones.
But in each of the three basic percentage depletion Acts, the
Congress indicated that integrated operators should not receive
preferred treatment. Furthermore, in Regulations 77, discussed
above, the Treasury specifically provided that depletion was
allowable only on the crude mineral product. And, as we have said,
this regulation was substantially enacted into the 1943 Act. We
need not tarry to deal with any differences which are said to have
existed in administrative interpretation, for here we have
authoritative congressional action itself. Ever since the first
percentage depletion statute, the cut-off point where "gross income
from mining" stopped has been the same,
i.e., where the
ordinary miner shipped the product of his mine. Respondent's
formula would not only give it a preference over the ordinary
nonintegrated miner, but also would grant it a decided competitive
advantage over its nonintegrated manufacturer competitor. Congress
never intended that depletion create such a discriminatory
situation. As we see it, the miner-manufacturer is but selling to
himself the crude mineral that he mines, insofar as the depletion
allowance is concerned.
IV
We now reach what "ordinary treatment processes" are available
to respondent under the statute. As the principal industry witness
put it at hearings before the Congress:
"Obviously it was not the intent of Congress that those
processes which would take your products and make them into
different products having very different uses should be considered,
as the basis of depletion. [
Footnote 9]"
But respondent says that the processes it uses
Page 364 U. S. 88
are the ordinary ones applied in the industry. As to the
miner-manufacturer, that is true. But they are not the "ordinary"
normal ones applied by the nonintegrated miner. It was he whom the
Congress made the object of the allowance. The fabrication
processes used by respondent in manufacturing sewer pipe would not
be employed by the "run of the mill" miner -- only an integrated
miner-manufacturer would have occasion to use them.
Respondent further contends, however, that it must utilize these
processes in order to obtain a "commercially marketable mineral
product or products." It points out that its underground method of
mining prevents it from selling its raw fire clay and shale. This
position leads to the conclusion that respondent's mineral product
has no value to it in the ground. If this be true, then there could
be no depletion. One cannot deplete nothing. On the other hand,
respondent alleges that its minerals yield "the best sewer pipe
which is made in Indiana." If this be true, then respondent's
problem is one purely of cost of recovery, an item which, as we
have said, has nothing to do with value in the depletion formulae.
Depletion, as we read the legislative history, was designed not to
recompense for costs of recovery, but for exhaustion of mineral
assets alone. If it were extended as respondent asks, the
miner-manufacturer would enjoy, in addition to a depletion
allowance on his minerals, a similar allowance on his manufacturing
costs, including depreciation on his manufacturing plant, machinery
and facilities. Nor do we read the use by the Congress of the
plural word "products" in the "commercially marketable" phrase as
indicating that normal processing techniques might include the
fabrication of different products from the same mineral. We believe
that the Congress was only recognizing that, in mining operations,
often more than one mineral product was recovered in its raw
state.
Page 364 U. S. 89
In view of the finding that substantial quantities -- in fact,
the majority -- of the tonnage production of fire clay and shale
were sold in their raw state, we believe that respondent's mining
activity during the year in question would come under clause (iii)
of the section here involved. That clause includes "minerals which
are customarily sold in the form of a crude mineral product." We
believe that the Congress intended integrated mining-manufacturing
operations to be treated as if the operator were selling the
mineral mined to himself for fabrication. It would, of course, be
permissible for such an operator to calculate his "gross income
from mining" at the point where "ordinary" miners -- not integrated
-- disposed of their product. All processes used by the
nonintegrated miner before shipping the raw fire clay and shale
would, under such a formula, be available to the integrated
miner-manufacturer to the same extent, but no more.
Nor do we believe that the District Court and Court of Appeals
cases involving percentage depletion and cited by respondent are
apposite here. [
Footnote 10]
We do not, however, indicate any approval of their holdings. It is
sufficient to say that, on their facts, they are all
distinguishable.
Page 364 U. S. 90
In view of these considerations, neither of respondent's
alternate claims for depletion allowance is appropriate. The
judgment of the Court of Appeals is therefore reversed, and the
cause remanded for further proceedings in conformity with this
opinion.
It is so ordered.
[
Footnote 1]
The applicable provisions of the Code are § 23(m) and §
114(d)(4). In general, they provide for a depletion allowance based
on a percentage of "gross income from mining," which is
specifically defined.
See note 8 infra. The percentage permitted on shale
is 5%, and on fire clay, 15%.
[
Footnote 2]
The quantity of ground and bagged fire clay and shale actually
sold is too negligible to furnish an appropriate basis for
computing depletion.
[
Footnote 3]
The evidence indicates that, for $50, Owensboro Sewer Pipe
Company bought from L.R. Chapman five acres of ground under which
the shale and clay deposits lay. Contemporaneously it made a
contract with L.R. Chapman, Inc., to mine and deliver shale and
fire clay from this tract to the Owensboro plant for $1.40 per ton.
Chapman also testified that, in addition, he furnished shale and
fire clay to other manufacturers in the same area in Kentucky. The
arrangements varied. Some were similar to the Owensboro agreement,
while others were leases on a royalty basis with a contemporaneous
agreement to mine and deliver the clay at a set price. The exact
year or years are not clear, but appear to have been between 1949
and 1956. Respondent began using shale and fire clay from the same
source by lease arrangement in 1957. The reason for lease
arrangements and paper transfer of title is not shown. However,
Chapman testified that the manufacturers "didn't seem to want to do
the prospecting or the sampling until they were sure they could get
either a lease or a deed."
[
Footnote 4]
The briefs cover 294 pages and the appendices an additional 685,
not including 10 charts. The record is 276 pages.
[
Footnote 5]
Preliminary Report on Depletion, Staff Reports to the Joint
Committee on Internal Revenue Taxation (1930), Appendix XXXI
(Shepherd Report).
[
Footnote 6]
See, e.g., Hearings before Senate Committee on Finance
on H.R. 3687, 78th Cong., 1st Sess. 528; S.Rep. No. 627, 78th
Cong., 1st Sess. 23-24; Hearings before House Committee on Ways and
Means on Revenue Revisions, 80th Cong., 1st Sess., part 3 at 1857;
Hearings before Senate Committee on Finance on H.R. 8920, 81st
Cong., 2d Sess. 771; S.Rep. No. 2375, 81st Cong., 2d Sess.
53-54.
[
Footnote 7]
The present statute, § 613 of the Internal Revenue Code of 1954,
is essentially unchanged.
[
Footnote 8]
Internal Revenue Code of 1939, § 114(b)(4)(B):
"
Definition of gross income from property. As used in
this paragraph, the term 'gross income from the property' means the
gross income from mining. The term 'mining' as used herein shall be
considered to include not merely the extraction of the ores or
minerals from the ground, but also the ordinary treatment processes
normally applied by mine owners or operators in order to obtain the
commercially marketable mineral product or products, and so much of
the transportation of ores or minerals (whether or not by common
carrier) from the point of extraction from the ground to the plants
or mills in which the ordinary treatment processes are applied
thereto as is not in excess of 50 miles unless the Secretary finds
that the physical and other requirements are such that the ore or
mineral must be transported a greater distance to such plants or
mills. The term 'ordinary treatment processes,' as used herein,
shall include the following: (i) In the case of coal -- cleaning,
breaking, sizing, and loading for shipment; (ii) in the case of
sulphur -- pumping to vats, cooling, breaking, and loading for
shipment; (iii) in the case of iron ore, bauxite, ball and sagger
clay, rock asphalt, and minerals which are customarily sold in the
form of a crude mineral product -- sorting, concentrating, and
sintering to bring to shipping grade and form, and loading for
shipment; and (iv) in the case of lead, zinc, copper, gold, silver,
or fluorspar ores, potash, and ores which are not customarily sold
in the form of crude mineral product -- crushing, grinding, and
beneficiation by concentration (gravity, Flotation, amalgamation,
electrostatic, or magnetic), cyanidation, leaching,
crystallization, precipitation (but not including as an ordinary
treatment process electrolytic deposition, roasting, thermal or
electric smelting, or refining), or by substantially equivalent
processes or combination of processes used in the separation or
extraction of the product or products from the ore, including the
furnacing of quicksilver ores. The principles of this subparagraph
shall also be applicable in determining gross income attributable
to mining for the purposes of sections 450 and 453."
26 U.S.C. (1952 ed.) § 114.
[
Footnote 9]
Robert M. Searls, Attorney, San Francisco, Hearings before the
Senate Special Committee on the Investigation of Silver, 77th
Cong., 2d Sess., p. 764.
[
Footnote 10]
Respondent's cases are based on
United States v. Cherokee
Brick & Tile Co., 218 F.2d 424 (adhered to in
United
States v. Merry Bros. Brick & Tile Co., 242 F.2d 708),
which went off on factual concessions not present here. They have
been pyramided into a statistically imposing number of cases,
predicated upon one another. Close analysis indicates that they
either go off on concessions or findings not present here or deal
with controversies over particular treatment processes claimed as
"ordinary" in the industry involved. For our purposes, we need not
reach the question of whether, in those cases, the minerals in
place had any "value" to be depleted. Other than the decision here
under review, only two of the Court of Appeals cases cited by
respondent, both from the same Circuit (
Commissioner v. Iowa
Limestone Co., 269 F.2d 398;
Bookwalter v. Centropolis
Crusher Co., 272 F.2d 391), adopt the profitability test,
which we find unacceptable.
MR. JUSTICE HARLAN, concurring in the result.
In joining the judgment in this case, I shall refer only to one
matter which, among the voluminous data presented by the parties,
is for me by far the most telling in favor of the Government's
position.
Treasury Regulation 77, promulgated in 1933 under the Revenue
Act of 1932 (47 Stat. 169), defined the basic term "gross income
from the property" contained in § 114(b)(4) of the 1932 Act and
carried forward in its successors. Art. 221(g). It concededly
supports, by its express terms (
see ante, p.
364 U. S. 83),
the position of the Government in the present case. In my opinion
the regulation was undoubtedly a valid exercise of the
Commissioner's power to construe a generally worded statute.
See Preliminary Report on Depletion, Staff Reports to the
Joint Committee on Internal Revenue Taxation (1930), p. 68
(Shepherd Report);
Helvering v. Wilshire Oil Co.,
308 U. S. 90,
308 U. S.
102-103. The Revenue Act of 1943 (58 Stat. 21, 45),
which added to the 1939 Code the provisions governing this case,
represented only a limited departure from the 1933 Regulation, or
from the administrative action taken under it, principally in the
area of extractive processes applied to minerals not customarily
sold in the form of a crude product, and did not basically affect
the meaning of the term "gross income from the property."
See,
e.g., Revenue Act of 1943, Hearings before the Senate
Committee on Finance, 78th Cong., 1st Sess., on H.R. 3687, pp.
527-529; S.Rep. No. 627, 78th
Page 364 U. S. 91
Cong., 1st Sess., pp. 23-24; Revenue Revision of 1942, Hearings
before the House Committee on Ways and Means, 77th Cong., 2d Sess.,
p. 1202;
compare id. at 1199; Silver, Hearings before the
Senate Special Committee on the Investigation of Silver, 77th
Cong., 2d Sess., pursuant to S.Res. 187 (74th Cong.), pp. 761-764.
Respondent's efforts to impugn the force of that Regulation,
see Shepherd Report,
supra, at 70, 71; Revenue
Revisions, 1947-1948, Hearings before the House Committee on Ways
and Means, 80th Cong., 1st Sess., p. 3283; Mineral Treatment
Processes for Percentage Depletion Purposes, Hearings before the
House Committee on Ways and Means, 86th Cong., 1st Sess., pp. 258,
264, seem to me quite unpersuasive.
This history, in my view, provides an authoritative and
controlling gloss upon the term "commercially marketable mineral
product or products" in the statutory definition of "mining,"
which, in turn, constitutes the "property" with which the statute
deals.
See Helvering v. Wilshire Oil Co., supra. It
results, on this record, in limiting respondent's basis for
depletion to its constructive income from raw fire clay and
shale.