Greensboro Gas Co. v. Commissioner of Internal Revenue, 5750.
| Decision Date | 18 September 1935 |
| Docket Number | No. 5750.,5750. |
| Parties | GREENSBORO GAS CO. v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Third Circuit |
Cravath, de Gersdorff, Swaine & Wood, of New York City (Douglas M. Moffat, William D. Whitney, Joseph C. White, and George G. Tyler, all of New York City, of counsel), for petitioner.
Frank J. Wideman, Asst. Atty. Gen., and Sewall Key and Ellis N. Slack, Sp. Assts. to the Atty. Gen., for respondent.
Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.
Section 204 (c) (2) of the Revenue Act of 1926, 44 Stat. 16, provides: 26 USCA § 935 see 26 USCA § 114 note.
The taxpayer, the Greensboro Gas Company, which both produces and distributes natural gas to the public, contends that under that statute it is entitled to an allowance for depletion based upon the gross value of its natural gas as and when it is distributed to consumers and not based upon the gross value of the gas at the mouth of its wells. But both the Commissioner of Internal Revenue and the Board of Tax Appeals determined to the contrary, that the taxpayer should have an allowance for depletion based on the field price of the gas as it came from the wells.
We see no merit in the contention that the taxpayer should be granted an allowance under section 204 (c) (2) based on the gross value of the gas after it has passed from its wells through its system of gas mains, service pipes, and meters and has reached the consumer. The investment of the taxpayer, outside of its wells, in its distributing system represents $1,305,000, and this equipment is subject to the usual allowance for depreciation.
The express language of the statute that "in the case of oil and gas wells the allowance for depletion shall be 27½ per centum of the gross income from the property" is perfectly clear. Its purpose is to return the original cost of a wasting gas or oil deposit to its owner. Obviously, the problem of calculating the annual depletion of an oil or gas well cannot be accurately solved; so Congress, after trying other...
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