COMMISSIONER OF INCOME TAX Vs. GOTAN LIME SYNDICATE

JUDGEMENT

(1.) THIS is a reference by the Income-tax Appellate Tribunal, Bombay bench B, under section 66 (1) of the Indian Income-tax Act 1922. The reference is a consolidated one, arising out of the Tribunals orders in Income-tax Appeals Nos. 7195 to 7197 of 1959-60, inasmuch as a common question of law admittedly arises therein. That question is as follows:

(2.) THE facts leading up to this reference may be stated as under. THE assessee is a registered firm bearing the name, Messrs. Gotan Lime Syndicate. Gotan, and carries on business in the manufacture of lime from limestone. THE assessee was assessed to income-tax for the assessment years 1954-55, 1955-56 and 1956-57, the corresponding accounting years being the respective financial years from 1953 to 1956. During each of these years, the assessee paid a sum of Rs. 96,000 to the Mines Department of the Rajasthan State as contract money and claimed it as a deductible expenditure under section 10 (2)(15) of the Income-tax Act of 1922. This was disallowed by the Income-tax Officer and the Appellate Assistant Commissioner as being capital expenditure. On appeal, the Income-tax Appellate. Tribunal, Bombay Bench B, however, allowed it as revenue expenditure. THEreupon the Commissioner of Income-tax asked for a case to be stated to this court on the question of law arising out of the orders of the Tribunal, and this is how the present consolidated reference has arisen.

(3.) ON the other hand, it was equally strenuously contended by learned counsel for the assessee that no lease deed having been executed between the parties as contemplated by the Rules of 1954, and having regard to the short extensions granted to it from time to time as already pointed out, the position of the assessee was a most precarious one, and it could not therefore be said that there was any lease in favour of his client of which it could take advantage, according to law, and that it would be more correct to say that its position was that of a mere licensee who had been granted the liberty or privilege to excavate limestone and to prepare lime in a certain area. Learned counsel further contended that the real nature of the payment in controversy was that if was not "a once and for all" payment but a "recurring" or a "periodical" one and that this payment was not of a fixed amount but was in fact the minimum royalty payable by the assessee liable to enhancement if the royalty amounted to more than what is called dead-rent in the Schedule to the Rules of 1954, depending upon the lime produced and, therefore, it was obvious that such payment was made to obtain raw material for the carrying on of the business of the manufacture of lime from limestone. Furthermore, learned counsel submitted that the main business of the assessee was to manufacture lime and not of a miner and that it was in connection with its manufacturing business that it had agreed to pay the amount of Rs. 96,000 annually to the State so as to be able to get raw material for that business, and as this payment was in the nature of annual royalty on the goods produced in the quarries, there was and would be no justification for holding that this amount was spent for the acquisition of any capital asset to the assessees business, and, therefore, there could be no question of this expenditure having been incurred for the acquisition of an asset of enduring benefit to the assessees business. In support of his submissions, learned counsel placed strong reliance on the decision of the Privy Council in Mohanlal Hargovind v. Commissioner of Income-tax.