LexCHINTAMANI SARAN NATHSAHDEO versus C.I.T. BIHAR & ORISSA
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
CfllNTAMANl SARAN
NATH SAH DEO
l '.
C.I.T. BIHAR & ORISSA
August 5, 1971
[K.S. HEGDE AND A.N. GROVER, JJ.]
}ik.'OIIle-tax- Prelllit/111 for mining Jease- fl' r £'1'£'111/e vr capital receipt-
:Priw:iples for determining.
The assessee had granted a prospecting, lease of his land to a com.
pany in 1941 for a period of one y_ear. In 1944 he granted ~~ h.:asc or
mining rights to the same company m respect of a part of the land for a c
period of 30 years.
T~e assessee took a large amount by way of pre.
mium bul charg;ed a sl1ghtly lesser amouru than what he had charged
·in the prospect1ng lease, by way of royalty. The assessee had also
HTantcd other leases and the premium per acre in the case of those leases
~as very much less than the premium per acre in the 1944-lease.
On the question whether the premium or· a pJrt of it was in the nature D
of a revenue receipt. the High Court on reference, held against the
. assessee.
In appectl to this Coun,
·IIELD: (I) When the interest of the
l~ssor is parted for a price,
the price paid is premium or salami but the periodical payments made
ror the continuous enjoyment of the benefits under the lease are in the
£
nature or rent. The former is capitC:Jl receipt and the Iauer a revenue
receipt. ln finding the real natLtre of the transaction it is not the nomcn-
dature or fonn but the circumstances of the transaction that
matter.
The onus. however. is upon the Income-tax ;tuthorities to show that
there exist racts an LI circumstances which would make payment or what
has been called salami. income. l 39E-Hl
Commissioner o/" lncome-nrx. Assam v. The Pcmbari Tl!a Co. Ltd.
F
f 19651 3S.C. R. 811 ~ fo ll owed .
(2) The terms of 1941-lease wl1ich was only for one year and which
was for the entirely diffei·ent purpose of prospecting would not afford
any reasonable basis for hold·i,,g that the ·terms of J 944-lease. which
·was a mining lease for 30 years, were fixed in such a manner that part
pf the proceeds of the royalty were included in the figure of the sala1~1 i .
G
When the lessor creates a lease for a lonu IJeriod it is leo-itimate for h 1111
~
e
to charge more amount by way of premium as he is transferring posscs-
., ion or the demised land and he may cl1arge -royalty at a slightly l c~sc-r
rate. The mere !'act that the amount taken on account or prcnuulll
was substamial and on the face of it looked considerably large would
not .iu~ til·y the view that the amount represented capitalised royalty.
_
J.40H . .t I.L\-E] J1
. _t}) The fact that the prem.ium was approximately equal
to _,~~~~
-~IJikrcnce betWC'Cll the total ~ll1 0 Uilt S or royalty (a)cu!Htel~ ~ ( the J,li~ -
Jll the 194 1-lcasc and the "1 944-.lea ~c, would not justify :tn Jnfc rt.: J lC~ tll.lt
f
CHlNTAMANI V. C.l.T. (Grover, J.)
37
A
the amount was taken in exchange of. royalty because, the assessee could
·not have known how much mineral could be extracted from the areas
:11 the time of granting the 1944-lease. [ 43A-C]. ·
.
(4) It was open to the Departmental authorities to have examined
the assessee or his representative and discovered all the reasons for the
terms in the various ·leases being different. The Department could
B
l'!)so have ascertained the details of the quantity of mineral which could
be extracted from the areas covered by the l1ther leases and discharged
the onus which lay on the Revenue to show that the payment of pre-
mium was in fact of royalty.
But the same was not done.[ 42E-G] .
CIVIL APPELLATE JURISDICTION : Civill Appeal No.
c 1732 of 1967.
D
Appeal from the judgment and order dated December
22, 1965 of the Patna High Court in Misc. Judicial Case
No. 101 of 1962.
M. C. Chagla and B. P. Singh. for the appeii~nt.
Jagadish Swarup' Solicitor-General J. R{lmamurthi.
R.N. Sachthey and B. D.
Sharma for the respondent.
The Judgment of the Court was delivered by
£
•
Grover, J. This is an appeal from a judgment of
the Patna High Court in a reference made to it under
s. 66(1) of the Income-tax Act, 1922, by the AppelJate Tri-
bunal by which the following question of law was referred
for\ietetmination by the High Court:-
F ·
"Whether on the facts artd' circumstances
G
of this case, the T~ibunal was right' in ho1d'itlg
that the sum of Rs. 2,20,000/- was the incotne·
of the assessee assessa~le to tax underthe pro-
visions of the lncome-tax A:ct ?"
The otiginal assessee was Maharaja· Partap. U gainath
. Sah D .
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