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TMI Blog1978 (4) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... e former. The assessee being aggrieved by the order filed an appeal before the AAC. The AAC found that the assessee-company was appointed a raising and selling contractor by M/s. New Beerbhum Coal Co. Ltd. by an agreement dated December 1, 1960, for an area of 1,547.87 bighas. The contract was to remain in force in the first instance for a period of 15 years and it could be terminated thereafter subject to 12 months' notice from either side. Under cl. 3 of the said agreement, the right, title and interest in the properties covered by the contract were to continue to vest entirely in the New Beerbhum Coal Co. Ltd. Under cl. 8 of the agreement, the said M/s. New Beerbhum Coal Ltd. continued to remain responsible for the payment of all rent and royalties, cesses, taxes and any other imposition but all these payments were to be reimbursed by the assessee-company. Clause 16 of the agreement provided that a sum of Rs. 1,54,787 by way of advance profits on coal to be raised from the area covered by the contract was to be paid by the assessee-company by monthly instalments of Rs. 7,500 each. In addition, the company also had to pay what was described as a net profit of 0-8-0 (eight annas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oming the raising and selling contractor of the collieries within the specified areas for a period of 15 years and that the payment was calculated on the basis of the area and in any case it had no relationship with the raw material which was contemplated to be raised under the contract. It was also observed by the Tribunal that on the date of contract or at the time of payment of these amounts the quantity of the raw material to be extracted was not known and on reading cl. 16 of the agreement it would be apparent that the payments in respect of the actual raising were separate from the lump sum payment which was to be paid before the commencement of the actual mining operation and was by way of a premium and in consideration of the new source of income which had been acquired by the assessee-company. Thus, it was concluded by the Tribunal that the amounts of Rs. 90,000 and Rs. 33,987 could not be deducted as revenue expenditure in computing the business income of the assessee. On the aforesaid facts, the following question of law has been referred to this court : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sums of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was paid in advance as security of which Rs. 8,000 was to be adjusted annually against the annual payment and the balance of Rs. 20,000 was payable in monthly instalments of Rs. 1,666-10-8. Under the contract, the assessee had only the right to excavate stones from the area. There was another similar lease obtained from the Government of Hyderabad for a period of 6 years under which the assessee had to pay Rs. 9,000 per year in monthly instalments of Rs. 760 per month. The question which arose for determination was whether the amounts paid by the assessee to the jagirdar and the Government each year were revenue expenditure allowable under the section 12(2)(xv) of the Hyderabad Income-tax Act, corresponding to s. 10(2)(xv) of the Indian I.T. Act, 1922. It was held by the Supreme Court that the assessee had acquired an asset of an enduring character and of a capital nature. The amount paid every month was not in any sense a payment for acquisition of any right from month to month. It was really the entire sum chopped into small payments for his convenience. Nor can the amount be described as a business expense, because the outgoings every month were not to be taken as spent over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the revenue also refers to the decision of this Court in Hirji Co. Ltd. v. CIT, being I.T. Reference No. 31 of 1976 (since reported in [1978] 113 ITR 694 (Cal). In this case, the assessee was not a dealer in shares. The shares were purchased and held by the assessee as not its stock-in-trade but as investment in the nature of capital. Thus, the loss incurred in selling these shares was found to be capital loss. It was also held that the assessee by the acquisition of controlling interest in the company, acquired a source of supply and this source was held to be a benefit of an enduring nature and hence a capital asset. It has already been pointed out that cl. 16 of the agreement in this case provided that a sum of Rs, 1,54,767 by way of advance profits on coal to be raised from the area covered by the contract was to be paid by the assessee. The assessee-company acquired a source of income by becoming raising and selling contractors of the collieries within specified areas for a period of 15 years. The payment was calculated on the basis of the area and in any case it had no relationship with the raw material which was contemplated to be raised under the contract. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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