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TMI Blog1985 (12) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... hat are not in dispute and found by the Tribunal. Prior to June 20, 1968, the assessee, a partnership firm of partners engaged in the business of mining, held six mining, leases issued by the Government of Karnataka under the Mines and Minerals (Regulation and Development) Act, 1957 (Central Act 57 of 1957) (" the Mines Act ") for extracting and selling manganese ore and iron ore in the District of Bellary as detailed hereunder : Details of leases held by the assessee -------------------------------------------------------------------------------------------------------------------------------------------- Sl. Lease Total area of Year of issue of No. No. the land lease --------------------------------------------------------------------------------------------------------------------------------------------- 1. ML 301 100 acres 1956-57 2. ML 428 34 ,, 1958 3. ML 456 48 ,, 1959 4. ML 372 640 ,, 1957 5. ML 123 434 ,, 1963 6. ML 130 1136 ,, 1963 --------------------------------------------------------------------------------------------------------------------------------------------- (Sl. Nos. 1 to 3 were manganese ore eases and Sl. Nos. 4 to 6 were iron o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment of Rs. 9,00,000 as a revenue receipt. Hence this reference : Sri K. Srinivasan, learned senior standing counsel for the Income-tax Department, was assisted by Sri H. Raghavendra Rao, for the Revenue. Sri G. Sarangan, learned advocate assisted by Sri J. N. S. Prasad appeared for the assessee. Both sides in their forceful, thorough and painstaking arguments spread over four days have taken us through every important ruling of the Supreme Court, two rulings of the High Court of Patna, several passages in the treatise " Kanga and Palkivala's the Law and Practice of Income Tax ", 7th edition, bearing on question No. 1 in particular which is crucial to both sides. We express our indebtedness to both the learned counsels for their thorough, neat and painstaking arguments addressed before us. We now proceed to examine the questions referred to us in their order. Sri Srinivasan has urged that the finding of the Tribunal that the receipt was premium and was a capital receipt was contrary to the pleas, the evidence placed by the assessee, the binding legal principles for their determination and that the receipt was a revenue receipt and not a capital receipt. Sri Sarangan has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52): 'The question whether a receipt is capital or income has frequently come up for determination before the courts. Various rules have been enunciated as furnishing a key to the solution of the question, but as often observed by the highest authorities, it is not possible to lay down any single test as infalliable or any single criterion as decisive in the determination of the question, which must ultimately depend on the facts of the particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account on reaching a decision: vide Van den Berghs Lid, v. Clark [1935] 3 ITR (Eng Cas) 17. That, however, is not to say that the question is one of fact, for, as observed in Davies v. Shell Company of China Limited [1952] 22 ITR (Suppl) 1, " these questions between capital and income, trading profit or no trading profit, are questions which, though they may depend no doubt to a very great extent on the particular facts of each case, do involve a conclusion of law to be drawn from those facts. " The inter-relation of facts which have a bearing on the question propounded must, therefore, first be determined ...... Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of revenue or that amounts paid to compensate for loss of agency must be regarded as capital loss. " In all the later cases and notably in CIT v. Chari and Chari Limited [1965] 57 ITR 400 (SC), CIT v. Best & Co. (P.) Ltd. [1966] 60 ITR 11 (SC) and Karam Chand Thapar and Bros. P. Ltd. v CIT [1971] 80 ITR 167, the Supreme Court, referring to the principles stated in these cases or elsewhere, had only reiterated them. The principles enunciated by the Supreme Court in the earlier leading cases like Karanpura Development Co. Limited v. CIT [1962] 44 ITR 362 (SC) are also to the same, effect. In CIT v. S. K. Sahana and Sons Limited [1976] 102 ITR 437 (Pat) and Nauranglal Chiranjilal v. CIT[1985] 154 ITR 851 (Pat) relied on by Sri Sarangan, the High Court of Patna has not enunciated any new principle. The ratio decidendi in each of the cases, many of them no doubt dealing with cases of multi-trading agencies, is of general application. The circumstance that they were not enunciated with reference to termination of leases does not detract from the weight of authority of the enunciation at all. We are of the view that the principles enunciated by the Supreme Court are general legal princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On all these aspects, Venkatarama Ayyar J., speaking for the court, has expressed thus (at p.39): "Considering the question on principle, when there is a question of fact to be determined, it would usually be necessary first to decide disputed facts of a subsidiary or evidentiary character, and the ultimate conclusion will depend on an appreciation of these facts. Can it be said that a conclusion of fact, pure and simple, ceases to be that when it is in turn deduction from other facts? What can be the principle on which a question of fact becomes transformed into a question of law when it involves an inference from basic facts ? To take an illustration, let us suppose that in a suit on a promissory note, the defence taken is one of denial of execution. The court finds that the disputed signature is unlike the admitted signatures of the defendant. It also finds that the attesting witnesses who speak to execution were not, in fact, present at the time of the alleged execution. On a consideration of these facts, the court comes to the conclusion that the promissory note is not genuine. Here, there are certain facts which are ascertained, and on these facts, a certain conclusion is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases that an inference from facts is a question of law. In this respect, mixed questions of law and fact differ from pure questions of fact in which the final determination equally with the finding or ascertainment of basic facts does not involve the application of any principle of law. The proposition that an inference from facts is one of law will be correct in its application to mixed questions of law and fact but not to pure questions of fact. The following observations of Lord Atkinson in Herbert v. Samuel Fox & Co. Limited [1916] 1 AC 405, 413, clearly bring out the principle above stated: ' ...... Your Lordships were pressed with the usual argument, that as the County Court judge, though a judge of law and fact, is the sole judge of fact, his findings cannot be disturbed if there be any evidence before him upon which he, as a reasonable man, could find as he has found. That argument is quite sound if it be applied to pure findings of fact. It is utterly unsound if it be applied either to findings on pure questions of law or on mixed questions of law and fact ...... It is wholly illegitimate, in my view, in cases such as the present, by finding in the words of the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merges on the authorities may thus be summed up: (1) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under section 66(1). (2) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final, its decision as to the legal effect of those findings is a question of law which can be reviewed by the court. (3) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (4) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact. " In the other two cases on which strong reliance was placed by Sri Sarangan, the Supreme Court was dealing with the conclusions reached by the Tribunal on pure questions of fact and not on mixed questions of law and fact. In cases of capital and revenue receipts, law and facts are so closely intertwined that it is almost impossible to separate one from the other. We are clearly of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exed to the said application (annexure-C), the assessee and Chougule stated that for the assignment of lease only a sum of Rs. 1,000 had passed to the former from the latter and that no premium had passed between them. In support of the application for transfer, the assessee and Chougule also filed affidavits reiterating the same. One D. N. Gopalakrishna, one of the partners of the assessee, in his affidavit (annexure-D), stated thus: " 2. That the deponent's company has agreed to transfer the Mining Lease No. 130, situate in Sandur Taluka of Bellary District, Mysore, acquired by it under Mining Lease No. 130 dated 28th September, 1963, from the Government of Mysore, in favour of Messrs. Chougule and Company Private Limited, Mormugao Harbour, Goa, India, by an agreement in accordance with the Mineral Concession Rules, 1960. 3. That in this transfer of lease no premium is involved excepting the investments already made by the deponent's company and the liabilities incurred by the deponent's company ever since the taking up of the said mineral concession." What emerges from this is that before the mining authorities the assessee maintained that no premium had passed from Chougu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a capital receipt but was a business receipt. On the foregoing discussion, we hold that our answer to question No. must be in the negative. We now pass on to examine question No. 2. On the view we have expressed on question No. 1, question No. 2 flowing as it does from the former, does not survive for consideration. We must accordingly decline to answer the same as having become unnecessary. But, we will assume that question No. 2 survives and examine the same on that basis also. While holding that the receipt was a capital receipt, the Tribunal declined to subject the same to capital gains tax on the view it held that such a course was not permissible in an appeal filed by the assessee. We are of the view that this question is concluded against the Revenue by Division Bench ruling of this court in CIT v. Maryam Mirza (I.T.R.C. No. 143 of 1978 dated on 21-9-1983) [1987] 165 ITR 339. For the very reasons stated in Maryam Mirza's case, we must necessarily answer question No. 2 against the Revenue even if it survives. In the light of our above discussion, we furnish our answers to the questions referred to us as hereunder : Questions Answers Question No. 1 : In the negative, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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