TMI Blog2005 (7) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... stated in short as under: The assessee is a toddy contractor. His case for assessment year 1996-97 was taken up for scrutiny. The Assessing Officer noticed that the assessee had credited a sum of Rs. 3 lakhs as cost of earth and the said amount was not included by the assessee in his taxable income. The assessee explained to the Assessing Officer that the said amount represented sale proceeds of earth sold to M/s. Techni Bharathi Ltd. who were engaged in the work of four laning and strengthening of NH 47. It was the case of the assessee before Assessing Officer that the said amount was not taxable since it constituted a capital receipt. The contention of the assessee did not find favour with the Assessing Officer who made addition of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. For example, it can be used for agriculture producing agricultural income, can be leased out for storage purposes earning lease income or it can be subjected to mining operations depending upon the availability of various minerals and income can be earned by sale of the products of mining. Such exploitation could be on a long term basis yielding income in a recurring manner or once for all. Still the character of the resulting receipt remains the same viz., that of income. Here, when the appellant permitted to remove the top soil in lieu of some consideration, no land or any part of it got transferred. What was taken away is the top soil which is a portion of the filling of the land in the sense that the removal of soil is akin to mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, due to which the value of the land has gone up and the land is capable of easier and better utilization for industrial and commercial purposes. Hence, the CIT(A) concluded that the amount of Rs. 3,18,266 received by the assessee represented the receipt that the assessee could obtain by allowing the exploitation of the land owned by him for non-agricultural purposes without affecting the capital nature of the land which is still owned by him and it is possible for the assessee to further exploit the land in similar manner or otherwise for generating income. The CIT(A), therefore, dismissed the assessee's appeal by upholding the action of the Assessing Officer in bringing to tax the amount of Rs. 3,18,266 as revenue receipts liable to inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Departmental representative vehemently submitted that there is no diminution in the value of the land nor the land is exhausted. In fact, M/s. Techni Bharathi Ltd. who were engaged in the work of NH 47 had a commercial deal with the assessee. He further submitted that the land was not useful to the assessee for rubber plantation as due to infertility in the top soil only, the rubber trees were not giving good yield. He further submitted that as per own story of the assessee, if the top layer of the soil is a removed, then, in fact, the assessee would get fertile land and hence, the value of the asset has increased and there is no exhaustion of land. The ld. DR thus strongly supported the order of the CIT(A). 7. We have heard the riva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed covenants granting several benefits to the lessee which included inter alia liberties to do various things upon the land. As the lessee was granted lot of liberties for the use of the land, it was held by the Privy Council that whatever royalty was paid, in substance it was a rent which was like a compensation which the occupier paid to the landlord for that species of occupation which the contract between them allows. 8. While dealing with the issue before us, it is necessary to decide merely because the earth would be consumed and exhausted in the process of digging and removal, can that by itself would be a ground for holding that the consideration received for it is a capital receipt and not a revenue receipt. It is well settled le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajah's which were as under: "Where the trunks are cut so that the stumps remain intact and capable of regeneration, receipts from sale of the trunks would be in the nature of income. It is true that the tree is a part of the land. But by selling a part of the trunk, the assessee does not necessarily realize a part of his capital. We need not consider whether in case there is a sale of the trees with the roots so that there is no possibility of regeneration, it may be said that the realization is in the nature of capital." On the facts of the said case, the Apex Court held that an accretion to capital does not become taxable income merely because an asset is acquired in the hope that it may be sold at a profit. It must also be remember ..... X X X X Extracts X X X X X X X X Extracts X X X X
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