Appeal from the District Court of the United States for the Western District of Oklahoma; Bower Broaddus, Judge.
Before PHILLIPS, BRATTON, and HUXMAN, Circuit Judges.
The question presented for determination is whether appellant is entitled to take discovery value depletion under Sec. 114(b)(2) of the Revenue Act of 1934, 48 Stat. 680, 710, 26 U.S.C.A. Int Rev. Code, § 114(b)(2) on account of the discovery of a deposit of sodium sulphate in solution.
Appellant was engaged in the manufacture and sale of chemicals. In 1930 it investigated Soda Lake, near Monahans, Texas, to determine whether sodium sulphate existed there in paying quantities. It found sodium sulphate crystals in the bed of the lake, but not in commercial quantities. It continued its investigation by drilling a large number of wells, and discovered a subterranean lake of sodium sublphate in solution. The discovery was completed some time in 1931. Sodium sulphate in solution or brine form has no commercial value. Appellant constructed a processing plant to reduce the sodium sulphate to crystalline form. This plant was completed in 1933. Thereafter, appellant processed the solution and marketed the refined and finished product. In its 1935 income tax return it claimed a depletion deduction as the discoverer of a mine. This was disallowed, an additional tax was assessed and paid under protest, and suit was instituted to recover the same. Appellant has appealed from a decision adverse to its contention.
Appellant contends that it discovered a mine and that sodium sulphate in solution is a mineral deposit. Great emphasis is placed on the definition of a mine or mineral. Many authorities, including decisions by federal and state courts, Webster's international Dictionary, and general reference works, defining mines and minerals, are cited to sustain its contention that it did discover a mineral deposit in a mine.
We are not concerned here with a technical, scientific definition of a mine or mineral. Our problem is to determine what Congress meant by the use of these terms in the applicable revenue act. Did it have in mind the ordinary accepted and understood meaning of the words "mines" and "minerals" or a highly scientific one established through laboratory research and investigation?
We ordinarily do not think of a liquid as a mineral, nor pumping brine into receptacles and removing minereal substances therefrom by condensation or evaporation as mining. The ordinary, accepted meaning of a "mine" is an excavation in the earth from which metallic ores are removed by digging. Drilling a well and removing a liquid brine solution by pumping is far from the ordinary concept of a mine or a mining operation. In Marvel v. Merritt, 116 U.S. 11, 6 S. Ct. 207, 208, 29 L. Ed. 550, the court said: "The words used are not technical, either as having a special sense by commercial usage, nor as having a scientific meaning different from their popular meaning. They are the words of common speech, and, as such, their interpretation is within the judicial knowledge, and therefore, matter of law. Webster, in his Dictionary, defines the noun 'mineral' as 'any inorganic species having a definite chemical composition,' and 'ore' as 'the compound of a metal and some other substance, as oxygen, sulphur, or arsenic, called its "mineralizer," by which its properties are disguised or lost.' The word 'mineral' is evidently derived from 'mine', as being that which is ussually obtained from a mine, and, accordingly, Webster defines the latter as 'a pit or excavation in the earth from which metallic ores or other mineral substances are taken by digging, distinguished from the pits from which stones only are taken and which are called quarries.'" In Atlas Milling Co. v. Jones, 10 Cir., 115 F.2d 61, 63, we said: "A 'mine' is an excavation in the earth from which ores, coal, or other mineral substances are removed by digging or other mining methods. In its broader sense it denotes the vein, lode, or deposit of minerals. Mining connotes the removal of minerals from a natural deposit." These definitions express the generally accepted and understood meaning of the words "mine" and "mineral."
When Congress used these terms in the 1934 Act, it was dealing with revenue and taxation. Taxation is eminently practical. Tyler v. United States, 281 U.S. 497, 50 S. Ct. 356, 74 L. Ed. 991, 69 A.L.R. 758; Commissioner v. Affiliated Enterprises, Inc., 10 Cir., 123 F.2d 665, decided November 11, 1941. In Lutz v. Magone, 153 U.S. 105 ,107, 14 S. Ct. 777, 778, 38 L. Ed. 651, the Supreme Court said: "It was held, however, to be unnecessary to enter upon this inquiry, 'because congress must be understood to use the word in tis known commercial sense.' 'The object of the duty laws,' said Mr. Justice Story, 'is to raise revenue, and for this purpose to class substances according to the general usage and known denominations of trade. Whether a particular article were designated by one name or another in the country of its origin, or whether it were a simple or mixed substance, was of no importance in the view of the legislature. It did not suppose our merchants to be naturalists or geologists or botanists. It applied its attention to the description of articles as they derived their appellations in our own markets, in our domestic as well as our foreign traffic.'"
It is our conclusion that in framing the 1934 Revenue Act, Congress used the terms "mines" and "minerals" in their usual and ordinarily accepted meaning. While the deposit found by appellant may be measurably akin to a mineral, it is not a mineral, and what appellant has is not a mine, as these terms were used by Congress in that portion of the Act providing for the allowance of discovery value deductions for depletion on account of the discovery of mines or minerals.
We think this construction finds support in the Act itself.Sec. 23 deals with deductions from gross income. subsection (m), 26 U.S.C.A. Int. Rev. code § 23(m), states that "in the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance * * * ." The position of the phrase "other natural deposits" in the sentence indicates that Congress considered such deposits a classification separate and apart from mines and gas wells. By "natural deposits" Congress no doubt meant natural deposits other than mines or oil and gas wells.
Sec. 114 deals with depletion. Subsection (b)(2) deals with discovery value as the basis for depletion allowance. It grants discovery value depletion to only one of the classes of property enumerated in Sec. 23(m), and even limits that classification to mines other than metal, coal or sulphur.
A taxpayer is not entitled as a matter of right to any deductions from his income in determining the amount of income taxes due the government. All such deductions are matters of legislative grace and the taxpayer must clearly bring himself within the act before he can claim them. New Colonial Ice Co. v. Helvering, 292 U.S. 435, 54 S. Ct. 788, 78 L. Ed. 1348; Deputy v. DuPont, 308 U.S. 488, 493, 60 S. Ct. 363, 84 L. Ed. 416; Scripps v. Commissioner, 6 Cir., 96 F.2d 492; Commodore Mining Co. v. Commissioner, 10 Cir., 111 F.2d 131; United States v. Donaldson Realty Co., 8 Cir., 106 F.2d 509.
It may be conceded, as petitioner contends, that sodium sulphate in solution is a natural deposit within the meaning of the Revenue Act. Natural deposits are mentioned, however, only in Sec. 23(m), which deals with depletion generally, and not in Sec. 114(b)(2), which deals with allowances for depletion based on discovery value.This section restricts such allowances to only a limited classification of mines and minerals. Had it been the intention of Congress to make discovery value the basis of depletion allowances in case of ...