COMMISSIONER OF INCOME TAX Vs. CHENGALVAROYA MUDALIAR

JUDGEMENT

(1.) The question referred to us is: Whether the decision of the Assistant Commissioner that Rs. 11,775 is not deductible in arriving at the profits of the petitioner's business is correct in law.

(2.) The facts out of which the question referred arises are that the assessee entered into an agreement with the Secretary of State for India in Council represented by the Revenue Divisional Officer, Gudur, on the 29 June, 1930, for the excavation of lime shells from certain Government lands in the Nellore District. Under this agreement he was to have the exclusive privilege of excavating chunam shells within the area specified in the agreement from the 1 July, 1930, to the 30 June, 1933, that is to say, for three years. He also agreed to pay the sum of Rs. 27,750 for this privilege in 12 equal quarterly instalments payable in advance.

(3.) The Income Tax Officer held that these payments were of a capital nature and were not therefore deductible in computing the income derived from the excavation and sale of lime shells and with that opinion the Commissioner of Income Tax agrees.