1960 (4) TMI 5 - SUPREME COURT

Whether the lease money paid by the assessee company to Nawab Mehdi Jung Bahadur and to Government is capital expenditure or revenue expenditure?

Held that:- We are satisfied that in this case the assessee acquired by his long term lease a right to win stones, and the leases conveyed to him a part of land. The stones in situ were not his stock-in-trade in a business sense but a capital asset from which after extraction he converted the stones into his stock-in-trade. The payment, though periodic in fact, was neither rent nor royalty but a lump payment in instalments for acquiring a capital asset of enduring benefit to his trade. In this view of the matter, the High Court was right in treating the outgoings as on capital account.

In the result, the appeal fails, and will be dismissed with costs.