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TMI Blog1965 (11) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGMENT The judgment of the court was delivered by SIKRI J.--These three appeals are directed against the judgment of the Rajasthan High Court in a consolidated reference made to it by the Income-tax Appellate Tribunal, Bombay Bench, under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act). The question referred to by the Appellate Tribunal is as follows : " Whether, on the facts and in the circumstances of the case, the sum of Rs. 96,000 paid by the assessee during each of the relevant accounting years was rightly allowed as a revenue deduction in computing the business profits of the assessee-company. " The reference arose out of the following facts : The appellant, M/s. Gotan Lime Syndicate, hereinafter referred to as the assessee, is a registered firm and carries on the business of manufacturing lime from limestone. By an indenture dated March 4, 1949, the assessee was granted the right to excavate limestone in certain areas at Gotan and Tunkaliyan, subject to certain conditions. It is not necessary to detail the conditions contained in this indenture except that the lease expired on July 14, 1952. The lease was extended fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 30, 1959, from the Mining Engineer, Jodhpur, to the assessee. The Mining Engineer stated in this letter as follows : " On checking the figures of export of lime-stone, lime-kali and lime-kachra for the settlement of royalty, the figures of royalty amount payable in the following years is as under : ------------------------------------------------------------------------------------------------------------------------------------------------- From 1st April Year Export figures Amount paid to 31st March ------------------------------------------------------------------------------------------------------------------------------------------------- Rs. as. p. 1953-54 13,511 tons 30,553 10 6 1954-55 13,308 tons 27,965 11 6 1955-56 18,033 tons 37,332 9 0 1956-57 18,383 tons 37,740 0 6 1957-58 6,14,946 mds. 49,862 14 6 1958-59 6,04,498 mds. 43,673 15 0 ------------------------------------------------------------------------------------------------------------------------------------------------- At the end of each financial year the accrued royalty amount is far less actually and as such as per the agreement the royalty payable is Rs. 96,000 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty within six months from the date of expiry of the lease and shall pay the royalty on the stock within this period. There was a proviso to this condition to the effect that the Rajasthan Government would be free to lease out the deposits afresh to any person on expiry of the tenure of the lease, and the lessee shall hand over the quarry to the new lessee in a workable condition. Rule 31 of the Rajasthan Minor Mineral Concession Rules, 1955, prescribed, inter alia, the following conditions : " (i) the lessee shall pay the royalty on minerals despatched from the leased area at the rate specified in the First Schedule to these rules. (ii) The lessee shall pay for the surface area used by him for the purpose of mining, surface rent at such rate not exceeding the land revenue as may be specified by the Government in such case. (iii) The lessee shall also pay, for every year, such yearly dead-rent within the limits specified in the Second Schedule to these rules as may be fixed by the Director in each case, and if the lease permits the working of more than one mineral in the same area, the Government may charge separate dead-rent in respect of each mineral. (iv) The lesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Hidayatullah J.'s observations in Abdul Kayoom v. Commissioner of Income-tax that " none of the tests (laid down in various authorities) is either exhaustive or universal. Each case must depend on its own facts, and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases... by matching the colour of one case against the colour of another. " Therefore, we do not propose to review all the cases, cited before us, especially as this court has, after reviewing the relevant cases, formulated certain tests in Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax. The cases were reviewed again in Pingle Industries Ltd. v. Commissioner of Income-tax and Abdul Kayoom v. Commissioner of Income-tax. In this case, in view of the arguments of the respondent and the judgment of the High Court, we have to concentrate on the following test laid down by Viscount Cave in British Insulated and Helsby Cables Ltd. v. Atherton : " But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of this case fall within the test laid down by Viscount Cave and relied on strongly by the learned Attorney-General. In our opinion, the test does not apply fully to this case because there is no payment once for all ; it is a yearly payment of dead-rent and royalty. It is true that if a capital sum is arrived at and payment is made every year by chalking out the capital amount in various instalments, the payment does not lose its character as a capital payment if the sum determined was capital in nature. But it is an important fact in this case that it is a case of an annual payment of royalty or dead-rent. No lump sum payment was ever settled or paid. We have not been referred to any case in which payments of royalty under a mining lease have been treated as capital expenditure. In H. R. Rorke Ltd. v. Commissioners of Inland Revenue Cross J., while dealing with a similar question, observed as follows : " The case then proceeds to set out the leases in question, which were substantially in the same form. The first was an agreement made on 16th December, 1957, between a Mr. Parker, the lessor, and the company. Clause 1 provided that the lessor, being the owner of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gle Industries Ltd. v. Commissioner of Income-tax is distinguishable because on the facts it was a lump sum payment in instalments for acquiring a capital asset of enduring benefit to his trade. It is not the law that, in every case, if an enduring advantage is obtained, the expenditure for securing it must be treated as capital expenditure, for, as pointed out by Channell J., in Allianza Company v. Bell "...in the ordinary case, the cost of the material worked up in a manufactory is not a capital expenditure ; it is a current expenditure, and does not become a capital expenditure merely because the material is provided by something like a forward contract, under which a person for the payment of a lump sum down secures a supply of the raw material for a period extending over several years. " This illustration shows that it is not in every case that an expenditure in respect of an advantage of an enduring nature is capital expenditure. The reason underlying the illustration is that the payments made to enter into a forward contract have relation to the raw material eventually to be obtained. Viscount Cave acknowledged that in certain cases an expenditure for obtaining an endurin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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