M.A. JABBAR versus COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH, HYDERABAD

Citation: [1968] 2 S.C.R. 413 · Decided: 23-11-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
M.A. JABBAR 
V. 
COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH, 
. 
HYDERABAD 
November 23, 1967 
[J. C. SHAH, V. RAMASWAM! AND V. BHARGAVA, JJ.] 
lnconie-tax-Lease of land for renioving · sand-Provision for pay-
n1ent of lease money-Tests for de!ermining whether capital or rcre11pe 
t'XP£'nditure. 
The assessee was carrying: on the business of supplying 
lime 
anJ 
s~nd, and for the purpose of procuring sand, obtained a )ease of a river 
bed from the State Government. for a period of 11 months. 
The lcasc-
dccd provided, (a) for the payment of a large amount of lease moncY. 
( h) that the lessee ( assessee) was to have an exclusive right to enter 
upon and occupy the. land and -to carry 
away 
sand 
lvithin or under or 
upon the ]and, and (c) that if any mineral was 
discovered 
and 
the 
assessce intimated his intention not to work or failed to give any inti-
mation to work it, it would be open to the Government to 
suhle! 
the 
working of such newly discovered mineral. 
· 
The assessee paid the lease money and in proceedings for assessment 
of income tax claimed it as a deduction on the basis that it was a, revenue 
expenditure. 
The Income-tax Officer disaUowed the claim holding that 
it was capital expenditure. On appeal, the Appellate Assistant c():n1mis-
sioner, after a pen;onal investigation, found that the contract· was for 
removal of_ sand lying on the surface of the land and that no excavation 
or skHful extraction was involved in the process, and 1beld, that no inte-
rest in the land was conveyed to the J~ssee and that therefore the an1ount 
v.iaS dcductihle as revenue cxpl.!nditure. 
The Appellate Tribunal confirrn-
·~d the order observing that the finding of fact given by the. Appellate 
Assistant .Commissioner was not challenged before the Tribunal. 
On 
reference, the High Court, relying .on the terms of the ]ease. reversed the 
finding of fact that the contract was for removal of sand lying on the 
.\"11rface of the ]and and that no excavation or skilful extraction was in .. 
valved, and held that the assessee had acquired a right in the land and 
that the amount was not deductible. 
Jn appeal to this Court, 
HELD: (I) The clauses in the lease dee.d .. g1v1ng an exclusive 'right 
to-- the assessee to enter upon an,d occupy the land, and re'ferring to the 
right of the Government to sublet the working of any newly discovered 
miheral. indicate that the assessee was the lessee and that an interest in 
Jand wa·s conveyed to him by the lease. 
But that is not decisive of the 
question whether the money paid under the lease was a capital or a ·reve-
nue expenditure. 
That question has to be decided on the facts of each 
case and the <lecisiv.z factors are the. object with which the lease was taken 
and the nature of: the payment wl:ich was made 
when 
obtaining 
thi:: 
leas~. {416 C-E; 418 A] 
'(2) Jn spite of the rigcht given to the assessce to dig and. cxcavat~. 
the Appellate Assistant· Commissioner found as a fact that the sand was 
lying loose on the surfa(:e and that the contract \vas only for removal of 
LJSup.Cf168-I 2 
·l l ~ 
SUPREME COURT REPORTS 
[1968] 2 S.C.R. 
thJt ;and. The finding was affirmed by the Appellate Tribunal and as 
no question was referred to the High Court that it was a findin~ based 
on n0 evidence, the High Court Y•as in error in not accepting it. 
There-
fore. (a) as the lease was for a short period, and consequently, the ex-
penditure incurred by the as~csscc was -not related to the acquisilion of 
an 
a~.;;ct or of a right of an enduring nature or permanent ch;.iraclcr but 
merl!ly to ohtain his stock-in-trade in the form of sand;.an<l (h) as th~ 
expcnlliturc \\.'as incurred not for the reservation of a sol!rce "-hich had 
!<) ho excavated or skilfully workcc but for the specific object or enablin~ 
the ~bscsscc to remove sand lying loose on the surface of the laud. the 
C'.':.Pl!nJiture v:as dcductihlc as revenue expcndilurc. [417 D-E. G-H. 419 
A-BJ 
G-•1an Linu• Syndirntr v. CoJ11111iJsio11er of /11co111e-tax, Raiasthan and 
Dellri, 59 l.T.R. 718 and Bombar Steam Navigation Co. (1953) (P.) Ltd. 
v. CC1111111i~sioner of Jnco111e-tax, 56 l.T.R. 52. 59 foJlgwed. 
l\..T.M.T.M. Abu! Km·oou1 & Anr. v. Con1111is.(ioner of 
lnco111e.fa:c. 
44 l.T.R. 689, distinguished. 
CivtL APPELLATE JuRISDICTIO'.': Civil Appeals Nos. 2514 
and 2515 of 1966. 
Appeals from the judgment and order dated March 4. 1965 
c>f the Andina Pradesh High Co.urt in R. C. No. 15 of

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