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TMI Blog1944 (9) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... lied were excessive, and (3) whether the sum spent in taking leases of lands for brick kiln was admissible as a deduction under Section 10 (2) (ix) of the Act in computing profits from the brick-kiln. (N.B.) According to the Amended Act (Act VII of 1939) the sub-section should be 10 (2) (xii). On the first two points the application was rejected, but it was allowed so far as the third point is concerned. There were three applications relating to the years 1936-37, 1937-38 and 1938-39. The amount paid on account of the lease and the compensation for or price of earth in the first year is Rb. 1436-8-0. In the second year, Rs, 3268.12-0 and ₹ 500- were paid for 6 bighas and odd and 1 bigha of land for making earth; total ₹ 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Secretary of State for India for excavation of lime shell. The assessee sought to have the money paid to the Secretary of State during the year deducted from his profits, but the High Court held that this was in the nature of capital expenditure. (3) Commissioner of Income-tax, U.P. v. Tika Bam and Sons, Ltd* (I.L.R. 1937 All. 908): (1937) 5 I.T.R. 544.' The assessee was a limited company carrying on the business of manufacturing bricks. It owned a plot of land from which earth was taken for the manufacture of bricks and it also held a lease for the other portion of the land. It claimed that a sum of ₹ 2500 representing the value of the earth used up in the manufacture of the bricks during the year of accounts should be deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, a well known principle that what is capital in the hands of one man may be income when paid to another, and there is no need to cite authority for it. There is, however, one point which is the same for both the lessor and the lessee, which has been raised in the present case and has been decided by their Lordships of the Privy Council. (See page 184 of LXX Indian Appeals in the arguments of Sir Walter Monckton, K.C.): This was in substance a sale of coal at a price which the parties have chosen to call royalty ; it is a payment for the coal as and when it is obtained, and not a rent for enjoyment of the lease. (1943) 70 I.A. 180 ; 11 I.T.R. 513' Again, at page 188 he reiterates this argument in his rejoinder. It is in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is true that he was dealing with occupation from the point of view of rating, but occupation has the same meaning in its application to matters of taxation such as are involved in this case. Their Lordships were also influenced by the fact that there was a minimum royalty which does not correspond to any coal in fact extracted and taken away. It is clear that if the lessor does not receive royalties as the price of coal extracted, the lessee does not pay them as the price of coal extracted. It is also clear that this principle has been applied to clay pits. This is the mainstay of the argument of the assessee's learned counsel in the present caBe. He alleges that he has been buying clay as raw material and making it into b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty of the estate on the termination of the lease. No building has to be constructed on the land without the owner's permission. The lessee can relinquish the land in June in any year if there is a dearth of earth. The whole material of the brick-kiln is to be removed from the land within six months of the termination of the contract and rent will be payable up to the end of that period. We think that the price or compensation for earth mentioned in Exhibits G and H are akin to royalties on coal extracted from coal mines. The assessee's learned counsel has tried to distinguish the two cases on account of the limitation of depth to which extraction can take place. We do not think that this is a valid ground of distinction. Coal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Qaneshilal Bhattawala(1938) 6 I.T.R. 489. Other decisions have been cited before us, but bear more remotely on the subject. We do not think it worthwhile citing them in view of the conclusion at which we have arrived from an examination of the Privy Council ruling cited above in conjunction with Income-tax Commissioner v. Tika Bam and Sons.1 This case does not so much involve a question of income derived from wasting assets, a point long ago decided by the Courts, as the question whether under the leases Exhibits G and H the price of earth is provided for or the carrying on of business including all the various operations necessary for the making of bricks of which the digging of earth is only one. We think that the latter is the corr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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