PINGLE INDUSTRIES LTD., SECUNDERABAD versus COMMISSIONER OF INCOME TAX, HYDERABAD

Citation: [1960] 3 S.C.R. 681 · Decided: 26-04-1960 · Supreme Court of India · Bench: S.K. DAS · Disposal: Dismissed

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

Judgment (excerpt)

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3 S.C.R. 
SUPREl\iE COURT.REPORTS 
681 
PING LE INDUSTRIES LTD., SECUNDERABAD 
1960 
v. 
COMMISSIONER OF INCOME TAX, HYDERABAD· 
(S. K. DAs, ]. L. KAPUR and M. HrnAYATULLAH, JJ.) 
Income Tax-Business Expenditure-Right to extract stou~s 
fmm quarries-Character of expenditure-Test, whether revenue or 
capital in nature-Hyderabad Income Tax Act (Hyderabad VIII oj 
1357 F), s. l2(2)(xv)-lndian Income Tax Act, s. 10(2)(xv). 
Under a quolnama the assessec company was granted exclu-
sive rights in the nature of a monopoly to extract Shahabad Flag 
Stones without limit to quantity or measurement from quarries 
situated in six villages for a period of 12 years on annual pay-
ment of Rs. 28,000 but not to manufacture cement. 
The stones 
had to be extracted methodically and skilfully before they could 
be dressed and sold. The assessee company paid an initial sum 
of Rs. 96,000 as security and the balance of Rs, 20,000 was payable 
each year in 
monthly instalments of 
Rs. 1,666-10-8 each. The 
payments were to be made even if no stones were extracted or 
could not be extracted. 
The question was whether the amount> 
paid were allowable as business expenditure under s. 12(2)(xv) 
of the Hvderabad Income Tax Act: 
Held 
(Per 
Kapur and Hidayatullah, 
JJ. 
S. K. Das, J., 
dissenting), that under the quolnama the assessee 
acquired by 
his long term lease a right to win stones and the lease conveyed 
to him a part of land. 
The stones in situ were not his stock-in-
trade in a business sense but a capital asset from which after 
extraction he converred the stones into his stock-in-trade. The 
payment though periodic in fact was neither rent nor royalty but 
a lump sum payment in instalments for acquiring· a capital asset 
of enduring benefit to his trade. 
The right 
acquired is to a 
source from which the raw material was to be extracted. The 
expenditure was 
outgoings 
on 
capital 
account and 
was not 
allowable as 
deductions under 
s. 12(2)(xv) of the 
Hyderabad 
Income Tax Act. 
Per S. K. Das, J .-That on its true construction the trans-
action was the sale of raw materials 
coupled with a 
licence to 
the assessee to 
come on the 
land and remove 
the materials 
sold, the purchase price being 
paid partly in a lump sum and 
partly in mon·hly instalments, that the object was the procuring 
of the stones for making flag stones and not the acquisition of 
an enduring asset or advantage, that the payments 
made were 
the price of raw materials and that the · assessee was therefore 
entitled to claim them as business expenditure under s. 12(2)(xv) 
of the Hyderabad Income Tax Act. 
Assam Bengal Cement Works Ltd. v. Commissioner of Income 
Tax. West Bengal, r1955] 1 S.C.R. 972, distinguished. 
C1v1L APPELLATE 
JuR1sri1cnoN: Civil 
Appeal 
No. I 90 of 1955. 
April 26. 
1960 
Pinglt 
Induslrits 
Ltd., 
Stc1mderabad 
v. 
Commissi~nu of 
lncomt·lax, 
H)'derabad 
S.K. Das]. 
682 
SUPREME COURT REPORTS 
[1960]. 
Appeal from the judgment and order dated July 31, 
1953, of the Hyderabad High Court in Reference Case 
No. 302/5 of 1951-52. 
N. A. Palhivala and R. 
Ganapathy Tyer,. for the 
appellants: 
H. N. Sanyal, Additional Solicitor-General of India, 
H.]. Uinrignr and D. Gupta, for the respondent .. 
1960. April 26. The Judgment of Kapur and 
Hidayatullah, .JJ., was delivered by HidayaLUllah, 
J. 
S. K. Das, ]., delivered a separate Judgment. 
S. K. DAS, ].-This is an appeal by the assessee 
with leave of the High Court of Hyderabad gr<imed 
under s. 66A(2) of the Indian Income-tax Act, 1922. 
The short facts arc these. The appellant is a private 
limited company carrying on the business, inter alia, 
of sale of Shahabad stones (flag stones) which had to 
be extracted from quarries, dressed and then sold. For 
the purpose of its business, 
the appellant took on 
contract the right 
to excavate stones 
from certain 
quarries in six villages in Tandur taluk for a period of 
twelve years under a Quolnama dated 9th Mehr, 1343F, 
from the then jagirdar of the taluk, named Nawab 
Mehdi Jung Bahadur. 
The contract provided 
that 
the jagirdar should be paid annually a sum of Rs. 28,000 
as consideration for extracting the stones till the end 
of the contract period, as per a plan prepared, within 
the six villages specified therein. 
Tht: appellant had 
no right or interest in the land; nor did he have am· 
other interest in the quarries apart 
from excavating 
stones therefrom. The contract specifically provided 
that the appellan

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