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TMI Blog1965 (3) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... aining sand, the assessee entered into a lease agreement with the Government of Hyderabad under a deed dated first February, 1954. The lease was for the period from 1st February, 1954, to 31st December, 1954. It was renewable at the option for another term of one year. Under the said lease deed the assessee was required to pay a fixed sum of Rs. 82,500. The assessee paid the amount of Rs. 56,100 for the assessment year 1955-56, the accounting year for the period ending on 30th September, 1954, and the balance of the amount of Rs. 26,400 was paid subsequently for the assessment year 1956-57, the accounting year ending on 30th September, 1955. He, however, claimed these payments as revenue expenditure in the concerned assessment, This was dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner and of the Tribunal based on the personal investigation carried on by the Appellate Assistant Commissioner some time in 1960 could not be taken into consideration for reaching the conclusion not consistent with the terms of the lease. The learned counsel for the assessee, on the other hand, with reference to the statement of facts made by the department, which, according to him, were not controverted, argued that the assessee had bargained for sand which had accumulated in the beds of Musi river and various nullahs as the result of floods. There was no question of equating it with any mining operation. The fact beyond controversy is that the lease dated 1st February, 1954, was entered into between the assessee and the Director of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both as regards prevention of waste by removal of sufficient overburden, careful storage of waste, drainage and removal of all valuable minerals within the quarry." Schedule " A " gives the sand areas comprising the quarries under the lease situated at Musi river and various nullahs. They cover extensive areas under the river Musi and also nullahs situate in Taluqas Hyderabad East, West, Taluqa Medchal and Shahabad. Admittedly, this agreement was entered into in accordance with the rules and regulations in force at the relevant period. The rules define " minor minerals " to mean building stone, boulder, shingle, gravel, brick-earth, ordinary clay, ordinary sand and road metal. " Quarrying " has been defined to mean mining, excavating, di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, to some of which we will presently advert, the principle laid down is that the expenditure which is incurred for acquiring capital asset of enduring benefit to the trade of the assessee is capital expenditure and does not admit of allowable deductions, and in determining the character of the expenditure the aim and object of the expenditure would be the decisive factor. In the instant case, the assessee has the business of supplying lime and sand. For the purpose of obtaining sand he acquired the sand areas under the Musi bed and various other nullhas. In the circumstances, on the principle enunciated above, the sand in the sand areas could not be held to be stock-in-trade. It is only on quarrying the sand, i.e., on removal thereof ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are sought to be distinguished mainly on the ground that the sand acquired under the lease deed was lying loose on the beds and what the assessee had purchased was not the source but the sand itself. It was, therefore, his stock-in-trade and the only process involved was to remove it from bed and sell it as a marketable commodity. The case of the assessee is that, during the floods, sand would be deposited in the river bed and the various nullahs and would lie loose on the surface---the bed underneath consisting of hard rocks. The assessee had to employ labour at a negligible expense to remove the sand so accumulated, stock it on the bank of the river and dispose it of to the customers. There was no process of quarrying as in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that the lease contract was made in February, 1954. The investigation was conducted by the Appellate Assistant Commissioner in 1960 and so was the memo. It is difficult to see how, after a lapse of six years, the terms of the lease deed could be varied, altered or clarified so as to confer any benefit on the lessee. The deed has absolutely no reference to the accumulation of sand as the result of floods, its lying loose on the surface and the lessee being allowed to remove the sand merely from the surface without digging underneath. On the other hand, it refers to the acquisition of sand areas comprising the quarries situated at Musi river and various nullahs. Paragraph 3 of the lease deed authorises the lessee to carry away, sell and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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