2006 (12) TMI 138 - SCH - Income Tax

Capital Or Revenue Expenditure - whether the proportionate lease rent paid by the mining lessee for acquiring leasehold right for extracting minerals from mineral bearing land would be a capital expenditure or a revenue expenditure - Held that - distinction lies between a case where royalty or rent is being paid on the one hand and where the entire amount of lease is paid either at a time or in instalments. Whereas in the former case it would be a revenue expenditure in the latter it would be a capital expenditure. In this view of the matter, we are of the opinion that this is not a case where the High Court could have interfered with the order of the Tribunal - Decided against assessee.

Summary

The Supreme Court considered whether lease rent paid by a mining lessee for acquiring leasehold right for extracting minerals is a capital or revenue expenditure. The court held that if royalty or rent is paid, it is a revenue expenditure, but if the entire lease amount is paid at once, it is a capital expenditure. The High Court was right to dismiss the appeal, and the appeal was accordingly dismissed.