TMI Blog1954 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure, is it a capital expenditure or a revenue expenditure ? Is it a payment incurred wholly for the purpose of the business as contemplated in clause (xv), of section 13 of the Income-tax Act ? 3. Whether payment is of the nature of an additional royalty ? And if it is so, whether it is an allowable deduction ? 4. Whether on the facts and circumstances of the case the pay ment can be allowed as a deduction in computing the company's assessable income from businesses ? 5. Whether in the circumstances of this case the assessee is estopped from claiming allowance for the 10 per cent, payable to the Government. Travancore Minerals Company, Ltd., a company incorporated in England, is the assessee at whose instance t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tromagnetic separators. These separate the other minerals from monazite and to some extent from each other by means of the differences in magnetic permeability. As usually carried out the partially refined monazite is dried and carefully sized and subjected to electromagnets of increasing intensity. These remove in order (a) magnetite ; (b ) hematite and ilmenite, (c) garnet, platinum, epidote, apatite, olivine, and tourmaline; (d) coarse monazite with small amounts of zircon, rutile, epidote, etc.; (e) fine monazite. The non-magnetic residues, containing gold, zircon, rutile, quartz, feldspar, etc., etc., may be separated by means of an ozcillating table (Ibid pp. 15-16). The assessee had taken a mining lease for this purpose from the ers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seven and a half per ton of zircone exported from Travancore or sold within Travancore provided however that if the market selling price at any time exceeds . (10) ten per ton, the lessee shall pay to the Government in addition to the minimum royalty of Bh. Rs. (7 ) seven and a half per ton a surplus royalty of 10 per cent, on such excess. (c) A minimum of Bh. Re. (1) per ton of ilmenite exported from Travancore or sold within Travancore provided however that if the mar ket selling price exceeds . (3 ) three and a half per ton the lessee shall pay to the Government in addition to the minimum royalty of Bh. Re. (1) one per ton of a surplus royalty of five per cent on such excess. (d) In addition to the royalty fixed as above the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But profits on their coming into existence attract tax at that point and the revenue is not concerned with the subsequent application of the profits in Pondicherry Railway Company, Ltd. v. Commissioner of Income-tax [1931] 5 ITC 363, which led to considerable controversy need not detain us, as the learned Law Lord himself explained subsequently, in Union Cold Storage Co. Ltd. v. Adamson [1931] 16 TC 293, that the first sentence therein must be read with reference to the facts of the Pondicherry's case (supra), where the obligation was, first of all to ascertain the profits in the prescribed manner, after providing for all outlays incurred in earning them, and then to divide them. To quote Lord Maugham in Indian Radio Cable Communic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rupees and that the reference to the percentage of net profits is merely meant as a mode of calculation to arrive at the amount payable in order that the interests of both the parties may be subserved. The net profits of the company should be calculated by applying the principles of business. Expenditure by way of royalty is surely one to be deducted to find out the profits of the business. 3. Question No. 1.-The answer to this question is that the payment of ten per cent, of the company's net profits to Government is an expenditure and not a share in the profits of the business. 4. Questions Nos. 3 and 4 .-The answers are in the affiirmative. 5. Question No. 2.-The expenditure had to be incurred for getting the sand which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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