Before SCHNACKENBERG, KILEY and SWYGERT, Circuit Judges.
This is an appeal from a decision of the District Court denying a refund of income taxes paid under protest pursuant to deficiency assessments of the Director of Internal Revenue for the years 1951 and 1952 against taxpayer, Vulcan Materials Company,*fn1 a New Jersey corporation doing business in Illinois. During these years taxpayer owned and operated stone quarries at three locations, one near Racine, Wisconsin, one at McCook, Illinois, and the third at Bellwood, Illinois.
The question presented concerns the proper depletion rates to be allowed taxpayer for the stone quarried at these locations. The applicable statute is Section 114(b)(4)(A) of the Internal Revenue Code for 1939, 26 U.S.C. § 114(b)(4)(A), as amended by the Revenue Acts of 1942 and 1951.*fn2
In the proceeding in the District Court the parties stipulated that the chemical analysis of the stone from each of the quarries for the years in question reveals the following mineral content:
Magnesium carbonate 43% 43% 40%
Calcium carbonate 55% 55% 53%
It was also stipulated that the stone from all the quarries was dolomite and that the McCook and Racine stone was commonly known as such; further, that the stone from these two quarries was suitable for use in the chemical and metallurgical industries, but that the stone from the Bellwood quarry was not.
In its income tax returns for the years 1951 and 1952 taxpayer claimed a depletion deduction of 15% of all sales from the three quarries. The District Director upon an audit of the returns allowed depletion rates of 15%, 10%, and 5% depending upon the actual use to which the quarried stone was put.
The amount of the refund requested by taxpayer was $383,341.67. The District Court determined (1) that the District Director improperly employed the "end use" test in computing the assessments,*fn3 and (2) that instead of a 15% depletion allowance claimed by taxpayer, it was entitled to a 10% allowance on the sales from the McCook and Racine quarries based on its finding that the stone from these quarries was dolomite and not chemical or metallurgical limestone, and a 5% allowance on the sales from the Bellwood quarry based on its finding that the stone from this quarry was stone and not dolomite. As a result of these determinations the court allowed a partial refund in the amount of $100,210.11. Taxpayer appeals from the denial of a larger refund, claiming that in addition to the amount allowed by the District Court it is entitled to an amount to be computed on the basis of a 10% depletion allowance on the Bellwood sales and a 15% allowance on the McCook and Racine sales.
Both in its tax returns and in the proceeding in the District Court, taxpayer claimed that the stone from all three quarries met the requirements of metallurgical grade limestone, thereby entitling it to a 15% depletion allowance. It now concedes, however, that the stone from the Bellwood quarry does not meet the requirements of metallurgical grade ...