TMI Blog1946 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... o the High Court is 1,76,306 and is agreed to be the correct figure) in the assessable income on the view that this amount was received from the lessees Anderson Wright Co., and the destination thereof after it was earned was immaterial, namely that it went to reimburse the assessee. In appeal, the Appellate Assistant Commissioner, Mr. P.K. Son Gupta, in a careful order came to the conclusion that the amount of salami was capital receipt and not taxable. He also came to the same conclusion regarding the amount of cess. The Income-tax Officer went up in appeal to the Appellate Tribunal contending that the amount received as salami and the mount recovered as cess should not have been deducted out of the assessable income. The Appellate Tribunal agreed with the Appellate Assistant Commissioner. It is now necessary to give the facts shortly in order to trace the origin and nature of the two sums in question which were admittedly received by the assessee in the previous year. On the 26th of November, 1907, the then Raja Bahadur of Ramgarh gave a prospecting licence to Bokaro Coal Syndicate on receiving a salami of ₹ 1,00,000. The period of licence was three years but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce dated the 18th of July, 1932, the period of which was still unexpired, was not binding upon the assessee. It was also asserted that the leases which had been taken in the meanwhile based on the licence were ultra vires, and although he was legally justified in repudiating these leases but as royalty or minimum royalty was being paid on those leases, he was not repudiating them. Accordingly the assessee informed Anderson Wright Co., that he was entitled to make under-ground settlement of any portion of the Bokaro and Ramgarh coal fields other than the portion which was in their possession under the leases which were not being repudiated. A further claim was made on behalf of the assessee that he should be reimbursed in respect of the cess and income-tax which were paid on his behalf to the Government during the relevant period and he laid a claim at about ₹ 5,00,000 on account of cess and about ₹ 28,00,000 on account of income-tax and super-tax. The assessee and the coal company entered into a settlement on the 10th of June, 1940, by which the assessee agreed to accept the various prospecting licences and their extensions and the leases which had been granted un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds is payment of rent in advance and therefore assessable as income. In some cases it may be payment of rent in advance; in other cases it might well be a lump sum payment for transfer of the leasehold interest, in which cash it will be a capital receipt. Consequently, whether salami is a capital receipt or income can only be determined after a full investigation of all the facts relating to the settlement for which the salami or nazrana was paid . A Special Bench of this Court consisting of Harries, C.J., Fazal Ali, J. (as he then was), and myself in the case of Maharaja Pratap Udai Nath Sahi Deo [1941] 9 I.T.R. 313 came to the same conclusion, namely, salami could not be regarded as income as a matter of law. It may in certain cases be regarded as payment of rent in advance and in such cases it could rightly be regarded as income. Where, however, salami could not be regarded as a payment of rent in advance, it could not be regarded as income and would, therefore, not be taxable. Prima facie, salami is not income, and it is for the Income-tax authorities to show that there do exist facts which would make the salami income . The question raised, therefore, is a question of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stice. As to the salami of ₹ 5,25,000, it was no doubt contended before us that this had nothing to do with the settlement of the claim regarding the previous leases and licences for which a capital lump sum of ₹ 40,000 was paid. It was contended that the salami of ₹ 5,25,000 was in respect of the extension of the prospecting licence and that it was really payment of rent in advance. As has been observed by my Lord the Chief Justice, the question if salami in a particular case is in reality payment of rent in advance, or is a lump sum payment for transfer of some interest in the property, is a question of fact which can only be determined after a full investigation of all facts relating to the settlement by which the salami or nazrana was paid. Even if it is conceded that the salami in this case was not paid for validating the previous leases and licences, it does not affect the reasoning by which the Appellate Tribunal has come to the conclusion that the salami in this case was not payment of rent in advance. The Appellate Tribunal has rightly drawn attention to clause 8 of the main indenture of the 26th of November, 1907, where there is a provision for the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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