COMMISSIONER OF INCOME -TAX, WEST BENGAL II versus RAJASTHAN MINES LTD., CALCUTTA

Citation: [1971] 1 S.C.R. 517 · Decided: 05-05-1970 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

517 
A 
COMMISSIONER OF INCOME· TAX, WEST BENGAL II 
B 
c 
D 
f 
G 
H 
v. 
RAJASTIIAN MINES LfD., CALCUTTA 
May 5, 1970 
[J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.J 
lndi1111 /11come-ra.r Act, ( 11 of 1922)-Assessee p11rchase.v propri<tory 
riRlrt.~ u·ith arrea1·s of rent and royalty-Wlrether receipt of tire arrears tax• 
11hh·-As.1·w·ee .<ells-Profit If taxabl<~findlng of Hlb11nal, if opr11 to re· 
riew h.v HiRlt Court. 
The assessee-company purchased the proprielury interests in lands rich 
in coal and fireclay. 
The deeds 
assigned to the assessee the vendors' 
right to receive arrears of rent. and royalty in pursuance of the agreement 
between the vendors and third parties. Later the assessee sold its right 
since it could not win the mines for want of finances. 
The Income-tax 
Officer assessed the entire arrears of rent, and royalty to tax in the 
assessee's hands as revenue receipts. He also assessed the profit df the 
•ale to tax as a business transactiC\n. 
The Appellate Assistant Commis· 
sioner, and the Tribunal agreed with the orders. The Tribunal found that 
the assessee was heavily indebted to the vendor but there was no evidence 
that the payment of the am'lunt was pressed for; the memorandum 
of 
association of the assc~ee empowered it to acquire, sell and--disposc 
of 
and deal with mines and mining properties; as a major part of the land 
purchased by the assessee was in possession of other mining companies, it 
was not possible for the assessee to undertake any large scale and pront· 
able mining operations; the assessee sold the lands purchased by it for a 
profit; and the properties purchased were sold very soon after they were 
purchased. 
But the High Court differed from these .conclusions. 
Dis· 
missing the appeals, this Court :-
HELD: (i) The purchase of the riaht to collect arrears of rent and 
royalty could not be considered as an income. It was true that the assessee 
purchased the lessors' right from the vendor in pursuance of the agree· 
ments entered into by the vendor with third parties whose ~ights had been 
acquiled by the assessee. 
The assessee company had been incorporated 
on Jan. 23, 1947. Th.erefore, it could not have got any right in the pro· 
perty prior to the conveyance in its favour on Dec. 22, 1947. As per the 
terms of the conveyance, the assessee becomes entitled to the arrears of 
rent and royalty as a purchaser of those rights. It had no right to collect 
ihese arrears of rent and royalty as the owner of the property. It may be 
that in determining the price payable under the conveyance, the arrears of 
rent and royalty were not taken into consideration. 
But that did not 
change the nature of the right acquired by the assessee. [520 DJ 
(ii) The findings of the Tribunal did not afford any basis to it to come 
to the conclusion that the purchases made by the assessee and the subse-
quent sale were in the nature of a trading adventure. The circumstances 
that the memorandum of association of the assessee permitted the assessee 
to acquire and sell and dispose of and deal with mining properties was an 
in~Qn~lu1iv-. one. It was not shown that the assessec had acquired 
or 
sold any other property. The fact that the assessee sold property pur· 
chased by it for profit was not decisive in finding out whether the sale 
was effected in the course of the business of the assessee. 
From the fact 
I 
518 
SUPREME COURT REPORTS 
(1971 J 1 S.C.R. 
that' the assessee could not undertake large scale an'<l profitable mining in 
the- area which was in its possession, no inference may be drawn that lands 
\\'ere acquired with a view to sell later on nor the circumstance that 
the 
properties were sold very soon after they were purcha5ed affords any basis 
for the conclusion that the sale.1 in ques~ion was effected in the course of 
the business. [,521 BJ 
(iii) If the finding of faci is based on an in°fcrence from the primary 
cvidentiary facts proved in the case, it_s correctness or validity is open to 
challenge in refe·rence proceedings within narrow limits. 
It is open to the 
parties to challenge a conclusion of fact ctr.awn by the trib11nal on the 
ground that it is not supported by an)i legal eyidence or that the in1pugn-
cd conclusion dra~u from 
the rele".ant facts is 
not rationally possible. 
If such a plea is established, the Court has to consider whether the con-
clusion in question is not perverse and should not, therefore, be set aside. 
On the facts of this case,

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