dissenting: It seems to me that the construction given to section 731 in the majority opinion is entirely too narrow and serves to defeat the very purpose of its enactment.
In 1940, there was a crying need for the production of certain strategic war materials, of which chromite was one. We had depended on foreign sources for our supply and the war activities of the enemy made likely the stoppage of our importations. To give encouragement to the discovery and development of our domestic sources of supply, Congress enacted section 731 of the Internal Revenue Code which provided that:
In the case of any domestic corporation engaged in the mining of * * * chromite * * *, the portion of the adjusted excess profits net income attributable to such mining in the United States shall be exempt from the tax imposed by this subchapter.
There can be no question b.ut that the income with which we are concerned was attributable to the mining of chromite. But it is said that the petitioner was not engaged in mining and therefore may not have the benefit of the statute.
The petitioner was organized in 1941 for the sole purpose of taking title to a group of mining claims believed to contain chromite and with the view to their exploration and development. By April 1942, it had opened tunnels and had performed various other work in order to locate the deposits of chromite and to prepare for the actual removal of the ore. Apparently the petitioner was financially unable to carry out the operation itself and a lease arrangement was made with Robertson under which the petitioner was to receive a gross royalty of 20 per cent of the amounts realized from the sales of ore.
To deny petitioner the benefits of section 731 because it did not engage in the actual extraction of ore from the claims is to say that Congress intended only to accelerate the production of chromite from mines already existing and operating within the United States or to benefit only those firms possessed of sufficient financial resources to undertake and complete the exploitation of mining properties without outside assistance. In my opinion, this result is in direct conflict with the intent evidenced by Congress in its Committee Reports*, which indicate that the statute was designed to encourage the discovery, exploration and development of mines containing these strategic metals as well as to encourage the day-to-day removal of the ore. Therefore, it seems to me that recognition of the underlying necessity for the extension of this exemption and the specific purposes of Congress in granting this benefit require that the petitioner be regarded as having been engaged in the mining of chromite within the meaning of section 731 during 1944.
Van Fossan, Johnson, and Tietjens, JJ., agree with this dissent.See H. Rep. No. 3002, 76th Cong., 3d sess., 1940-2 C. B. 548, 559: 86 Cong. Rec., pp. 12347, 12348, 12920: H. Rep. No. 1040, 77th Cong., 1st sess., 1941-2 C. B. 413, 434; 87 Cong. Rec., pp. 6710-11, 6725-26, 7440-41; S. Rep. No. 1631, 77th Cong., 2d sess., 1940 2 C. B. 504, 536-538.