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Lehigh Portland Cement Co. v. United States

decided: June 17, 1964.

LEHIGH PORTLAND CEMENT COMPANY
v.
UNITED STATES OF AMERICA, APPELLANT.



Author: Hastie

Before BIGGS, Chief Judge, and HASTIE and SMITH, Circuit Judges

HASTIE, Circuit Judge.

In the district court the taxpayer, Lehigh Portland Cement Co., obtained a judgment for the refund of income and excess profits taxes which it had paid pursuant to allegedly erroneous assessments for the taxable years 1951, 1952 and 1953. The United States has appealed.

The taxpayer manufactures cement, using as a principal ingredient limestone from its own quarries. Under section 23(m) of the 1939 Internal Revenue Code, as applicable to the taxable years, it was entitled to a percentage deduction from gross income for depletion of these limestone deposits. The sole question here is whether the taxpayer's limestone qualifies as "chemical grade limestone", for which section 114(b)(4)(A)(iii) of the Internal Revenue Code authorizes a 15 per cent depletion allowance, or only as "calcium carbonates" for which the immediately preceding subsection allows a 10 per cent deduction. The district court, disagreeing with the Commissioner's decision upon this issue, held that the mineral in suit is "chemical grade limestone" within the meaning of the statute.

Calcium carbonate in varying amount is the principal ingredient of limestone, which also contains smaller amounts of magnesium carbonate, silica and other substances. The percentage by weight of various ingredients constituting the limestone extracted from each of the taxpayer's ten quarries involved in this appeal appears in the following table:

TYPICAL CHEMICAL ANALYSIS*fn1

Percentages

Quarry Calculated Calculated Total SiO2 Al2O3 Fe2O3

CaCO3 MgCO3 Carbonate

Alsen, N. Y. ... 78 2.0 80.0 14.7 1.9 1.7

Birmingham, Ala. ... 85 4.0 89.0 7.4 2.6 1.0

Fogelsville, Pa. ... 76 5.6 81.6 13.7 3.2 1.2

Fordwick, Va. ... 87 2.3 89.3 7.9 .69 .74

Iola, Kansas ... 84 6.3 90.3 ...


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