LexM/S. GOTAN LIME SYNDICATE versus COMMISSIONER OF INCOME-TAX, DELHI AND RAJASTHAN.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
5 96 M/S. GOTAN LIME SYNDICATE v. COMMISSIONER OF INCOME-TAX, DELHI AND RAJASTHAN. November 15, 1965 [K. SUBBA R.Ao, J. C. SHAH AND S. M. S!KR!, JJ.] Income-tax-Royalty paid for nzining lease-Capital or Revenue penditure-Tests. • A • • • ll ... ex- The appellant was a registered firn1 carrying on the. business of manu- • facturing lime from lime-stone. By an indenture dated March 4, 1949, it was granted by the Government of Rajasthan the right to excavate lime- C stone in a certain area, subject to certain conditions. The lease expired on July 14, 1952. The lease was extended from time to time by the Government for short periods. While working out a new scheme for leasing out lime-stone quarrie.s the Government sanctioned the leasing out of 15 sq. miles of lime deposits to the appellant. Till the new lease was given effect to the appellant agreed to pay Rs. 96,000 per year to the Government as royalty. For each of the assessn1cnt years 1954-55, 1955-56 and 1956-57 the assessee' paid a sum of Rs. 96.000 to the D Government and claimed it as a deduction against its profits for those years. The Income-tax Officer disallowed this expenditure as being of a capital nature. On reference the High Court also upheld that view. • In appeal to the Supreme Court it was conlendcd on behalf of the appellant that under the Rajasthan Mineral Concession Rules and the arrangement with the Government the appellant did not get exclusive possession of the mines as such; what he got was a right to get lime for E manufacturing and the payment had direct relation to the amount of lime removed by the appellant. HELD : Under the arrangement read with the Rajasthan Mineral Concession Rules, 1955. the assessee was certainly entitled to go upon the land and had some rights to build premises for the purpo'5e of mining the lime. But it ~'as also clear that the assessee could not carry a\vay any other mineral which might be found on the mine and further he F was obliged to allow other lessees of other minerals to go on the land and win their minerals. [603 B-D] Thei royalty payment by the assessee in the present case was not a direct payment for securing an enduring advantage; it had relation to the raw material to be obtained. No material had been placed on the record to show that any part of the royalty must, in view of the circu1n- stances .of the case be treated as permium and be referable to the acquisi- G tion of 'the mining lease. (605 E-G] The yearly payment of Rs. 96.000 must therefore be treated as re- venue expenditure. [605 HJ lf. R. Rorke Ltd. v. Co1nn1is:rioner of Inland Rerenue, 39 T.C. 194. Ogden v. Medway Cine111as Ltd., 18 T.C. 691 and Allenza Con1pany v. Bell. [1904] LR. 2 K.B. 666. relied on. H Abdul Kayoom v. Conunissioner of !nco1ne-tax, 44 I.T.R. 689 and PinRI.'.! Industries Ltd. v. Con11nissio11er of Inco,11e-tax, 40 I.T.R. 67, distinguished. • • • • • ' GOTAN LIME V. C.J.T. (Sikri, J.) 597 A As.~ani Bengc1l Ce111ent Co. Ltd. v. Co111111issioner of lncon1e-tax, 27 I.T.k. .l4 and Bri1isf1 Insulated and He/shy Cables Ltd. v. Atherton, 10 T.C. 155, referred to . CIVIL APPELLATE JuRISDICT!ON : Civil Appeals Nos. 692 to 694 of 1964. B Appeal from the judgment and order dated October 9, 1963 of the Rajasthan High Court in D. B. Civjl Income-tax Reference No. 73 of 1961. N. A. Palkhivala, T. A. Ramachandran and J. B. Dadachan- ji for the appellant. C C. K. Daphtary, Attorney-General, S. T. Desai, R. Gana- D pathy Iyer, R. N. Sachthey and B. R. G. K. Achar, for the res- pondent. A. V. Viswanatha Sastri, J. B. Dadachanji, for interveners Nos. 1 and 2. M. M. Tiwari, S. S. Khanduja and Ganpat Rai,. for Intervener No. 3. The Juugment of the Court was delivered by Sikri, J. These three appeals are directed against the judg- E ment of the Ra jasthan High Court in a consolidated reference made to it by the Income Tax Appellate Tribunal, Bombay . Branch, under s. 66 (1) of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act). The question referred to by the Appeilate Tribunal :s as follows : F "whether on the facts and in the circumotances of the case the sum of Rs. 96,000 paid by the assessee during each of the relevant acc~unting years was rightly allowed as a revenue deduction in computing the business profits of the assessee company." G The reference arose out of the following facts : Tlie appel- lant, M/s
Excerpt shown. Read the full judgment & AI analysis in Lexace.