LexKARANPURA DEVELOPMENT CO., LTD. versus THE COMMISSIONER OF INCOME TAX, WEST BENGAL
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368
SUPREME OOURT REPORTS
[1962]
KAH.ANPURA DEVELOPMENT CO~, LTD.
v.
THE 00l\ll1ISSWNER OF INCOME-TAX,
WEST BENGAL
(P. B. GAJENDRAGAD:KA.R; K. SUBBA RAo and
.
M. HIDAYATULLAH, JJ.)
.
Income Ta:1:-.Appreciation of Capital or projil3 of busine/111-
0ompanyformedfor acquiring and WQrking coal minin(! lea11u-
Oompany developing coal field8 and 11Ub·lea.9ing t!Mm-Income
reali11ed by u:ay of increa11ed salami-If amounl11 to projit11 of
bu8inu11-Lia.bility to tax-Indian lncome-ta:1:
.Act,
1922
(11 of 1922) 1111. 2(4). 10.
· The asseS!'ee company was incorporated in 1920 with the
objects, inter alia, of acquiring underground coal-mining and
relative rights and to do business of coal raising etc. Power
was given under the memorandum of association to lease,
devel11p or otherwise deal with the property and rights ·of
the · company. The assessee acquired from time to time
diverse coal·mining leases and after developing the coal-fields
by providing mearu of cummunication etc., sub-leased them
to collieries · and other companieJ. As a condition of the
acquisition of the head lea~s the as5('5see had paid 11alami at
the rate of Rs. 40/- per standard Li~ha and had agreed to
pay royalty at certain rate.•, while from the sub-leas('s it
charged 11alami at the rate of Rs. 400/· and royalties at higher
rates. For the assessment years 1949-50 and 1950..51 the
a!Seal>ee admitted the liability to LIX in respect of the income
arising from the enhanced royalties, but claimed that the
exce'\S amount realised by way of increased 1alami was an
appreciation of capital and could not be taxed on the ground~
tl' .. t apart from obtaining head leases, developing the coal
field• and tub-leasing its rights, the assessee did not do any
business, either by working the coal-fields with a view to
railing coal or by acquiring or se!Jing coal ra~ed by the sub-
lessea.
Held, that the asseuee company lu acc1uirir~g the head
I~
and in granting the sub-le~~ was carry111g on a bwsiness
wuhm Its memorandum of a.ssocratwu and that the increa.:red
.alami received from the sub-lessees n-presented profits or that
business, liable to be included in the assessable Income for
purp11.se1 Income-tax and business profits tax.
Kama~/iya }.'arain Singh v. Oommiuiontr of lnc(n/HJ•Ia11
(1943) L.R, 70 I.A. 180, di:ltinguuhed.
.
,Oalifornian Copptr B!J11dKatt (Umiled and Rtduc~d) v.
lla-rn•, (190-t) .5 T,G. 159, rdied on,
Case-law d~~d.
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3 S.C.R.
. SUPREMECOURT REPORTS
369
CrvrL APPELLATE JumsDICTION: Civil Appeal
Nos. 376 to 379 of 1960.
Appeal from the judgment ancl order dat~d
September 18, 1958, of th•; Calcutta High Court m
Income-tax Reference No. IOI of 1954.
S. JJJUra, S. N .. Mukhe1jee and B. N. Ghosh, for
the appellants.
111. 0. Setalvad,
Attorney-General
R. Ganapathy Iyer
and P. D. ,Menon,
respondents.
of lnd·ir.i,
for
the
1961. August 31. The Judgment of the Court
was delivered by
HrnAYATULLAH, J. ··-These arc four appeals
filed by the assessee Company 1Karanpura Develop-
ment Co., Ltd.) in respect of two assessment years,
1949-50 and 1950-51 and two chargeable accounting
periods under the Business Profits Tax Act, January 1,
1948, to December 31, 1949. By these appeals,
the assessee Company impugns the judgment of the
High Court of Calcutta dated September 18, 1958,
answering a common question "whether on the facts
and in the circumstances of the case, the sums recei-
ved as salami by the assessee for granting sub-leases
were trading receipts in its hands and the amount
of profit therein is assessable under the Indian
Income-tax Act" in the affirmative and against tho
assessee Company. The case was certified to this
Court by the High Court under s. 66A (2) of the
Income-tax Act presumably also read with s. 19 of
the Business Profits Tax Act.
The facts of the case are as follows : In 1915,
the Court of Wards represpnting the proprietor of the
Ramgarh Estate granted a prospecting licence to
Messrs.
Bird & Co., of an area of coal-bearing
lands described as the Karanpura Coal Fields. The
licence was for 12 years but was renewable for
another term of 12 years. The licence reserved to
the licensee the ·right to take coal mining leases of
the Karanpura Coal Fields or any part thereof. The
1961
J..Granpura
Du·eloftment Co.,
Ltd.
v.
Tht Commissioner
of lncome·tax,
f'Vest Bengal
f!idayatultah ].
1961
A·aranpura
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