TMI Blog1967 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,100 in respect of the account year ended 30th September, 1954, for the assessment year 1955-56, and another sum of Rs. 26,400 for the account year ended 30th September, 1955, relevant to the assessment year 1956-57. Both these payments were claimed by the assessee, in the proceedings for assessment to income-tax, as revenue expenditure. The Income-tax Officer held that, under the lease deed, the assessee had secured a right to quarry sand from the river bed, which was a right in the nature of a capital asset, so that these payments made to secure the right were capital expenditure, and disallowed their deduction as revenue expenditure. The assessee appealed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, in addition to the material provided by the terms of the lease deed and other material before him, made a personal investigation also. Thereafter, in his appellate order, he recorded findings that the lease was a short-term contract for one year, that the contract was for removal of sand lying on the surface of the river beds, within a specified period, and no excavation or skilful extraction was involved in the process, and that no interest in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lease was discovered in this land, the lessee was to report such discovery to the Director of Mines and Geology and could obtain either a prospecting licence or a mining lease in respect of it, but, if he intimated his intention of not working the newly discovered mineral, or failed to give any intimation to work it within the period of three months, it would be open to the Government to sublet the working of such newly discovered mineral. This use of the word " sublet " in the deed indicates that, though the Government reserved to it the right to allow some other person to work the newly discovered mineral, that person could only be admitted as a sub-lessee and, obviously, he would be the sub-lessee under the assessee. These terms do indicate that an interest in land was also conveyed by the lease ; but that is, in our opinion, not decisive of the question whether the money payable under the lease was a capital expenditure or a revenue expenditure. As an example, if a shop is taken on rent by a person to run his business and he pays monthly or annual rent, he certainly acquires an interest in the building and the land on which it stands as a lessee, but no one will contend th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was made, as held by the High Court, about six years after the lease con tract had been entered into. The High Court was of the view that it was difficult to see how, after a lapse of six years, the terms of the lease deed could be varied, altered or clarified so as to confer any benefit on the lessee, and that the lease-deed contained absolutely no reference to the accumulation of sand as the result of floods, its lying loose on the surface and the lessee being allowed to remove the sand merely from the surface without digging underneath. In examining this question of fact, it is clear that the High Court exceeded its jurisdiction. The finding of fact recorded by the Appellate Assistant Commissioner had been affirmed by the Tribunal and no question was referred to the High Court that it was a finding which was based on no evidence. Whether the evidence on which the finding was accepted by the Tribunal was good or bad did not fall for consideration by the High Court. The finding being binding on the High Court, that court should have proceeded on the basis that these facts did exist and should have examined the legal position on that premise. This circumstance that the sand was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it were to be exercised, came to the finding that no capital expenditure was involved and that the only right acquired was the right to obtain raw material from the leased land. The payment was not for securing an enduring advantage. In the case before us, the facts are much stronger in favour of the assessee. The period of lease is shorter and the only object of the lease is to remove sand lying loose on the surface, without exercising any other right on the land included in the lease. In Bombay Steam Navigation Co. (1953) Private Ltd. v. Commissioner of Income-tax, this court explained the principle of determining the nature of an expenditure. The court held : " Whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit-earning process and not for acquisition of an asset or a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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