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Issues Involved:
1. Whether the amounts of Rs. 22,805, Rs. 20,712, and Rs. 20,713 are allowable as revenue expenditure for the assessment years 1972-73, 1973-74, and 1974-75, respectively. Detailed Analysis: 1. Nature of Expenditure: Revenue vs. Capital The primary issue revolves around whether the payments made by the assessee for the lease of quarries are to be classified as revenue expenditure or capital expenditure. The assessee, a partnership firm engaged in the business of "napa" or cuddapah slabs, took on lease quarries from the State Government for five years. The Income-tax Officer initially allowed the deductions as revenue expenditure under section 37(1) of the Income-tax Act, 1961. However, the Commissioner of Income-tax, exercising suo motu revisional power under section 263, later classified it as capital expenditure. 2. Tribunal's Findings The Income-tax Appellate Tribunal found that the payments were revenue expenditure, arguing that the bids were for annual payments even though the lease was for five years. The Tribunal reasoned that the lease payments were akin to rent, which is a revenue expenditure, and not for acquiring a source of raw materials. 3. Legal Precedents and Arguments The Revenue's counsel argued that the payments were for acquiring a capital profit-yielding source, relying on precedents such as Pingle Industries Ltd. v. CIT, Abdul Kayoom v. CIT, and R. B. Seth Moolchand Suganchand v. CIT. Conversely, the assessee's counsel argued that the payments were akin to seigniorage fees or dead rent, thus constituting revenue expenditure, citing cases like Gotan Lime Syndicate v. CIT and Empire Jute Co. Ltd. v. CIT. 4. Statutory Provisions and Rules The court examined the relevant provisions of the Mines and Minerals (Regulation and Development) Act, 1957, and the Andhra Pradesh Minor Mineral Concession Rules, 1966. It noted that the lease was statutory for a fixed period, requiring investment, equipment, and skilled labor to win over the minor minerals. 5. Distinction Between Capital and Revenue Expenditure The court reiterated the principles laid down in various precedents to distinguish between capital and revenue expenditure. It emphasized that the expenditure for acquiring a right to extract minerals is capital expenditure, while expenditure for running the business is revenue expenditure. 6. Application of Principles to the Case The court held that the lease payments were for acquiring an enduring advantage or a source for a profit-earning asset, thus constituting capital expenditure. It rejected the argument that the minerals were available on the surface, requiring no further investment, as there was no finding to that effect by the Tribunal. Conclusion The court concluded that the amounts expended by the assessee during the relevant assessment years were capital outlays for an enduring advantage as a profit-earning source and not revenue expenditure. The question was answered in favor of the Revenue and against the assessee. The court also refused leave to appeal to the Supreme Court, stating that it had merely applied the ratio laid down by the Supreme Court. Summary: The court held that the amounts of Rs. 22,805, Rs. 20,712, and Rs. 20,713 paid by the assessee for the lease of quarries are capital expenditures, not revenue expenditures. This decision was based on the nature of the lease, requiring investment and skilled labor, and the enduring advantage it provided to the assessee's business. The court applied established legal principles and statutory provisions to reach this conclusion, ultimately ruling in favor of the Revenue.
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