TMI Blog1964 (1) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... difications mentioned therein. Prospective applicants were advised that the mines, quarries and prospecting pits had acquired a value which can be determined by the principles of mine valuation and that the intending applicants should visit the area and assign their own value and tender for the same under a sealed cover . It was also mentioned therein that the amount so offered will be one of the factors on which selection of the lessees will be made, the other factors specified being: experience in mining, proved competence and sound financial position, though these qualifications were not insisted on in the case of displaced persons with which class of case we are not concerned. The whole area having been divided into certain blocks in three separate parts which were called A , B and C , it was notified that for these areas falling in Part A , a dead rent of ₹ 8 per acre will be charged, while for areas in Part B and C like rent of ₹ 3 and ₹ 5 per acre will be charged respectively. It was also made clear that the annual dead rent would be payable from the second year of the lease in four quarterly instalments, except where the Government should direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther appeal to the Income-tax Appellate Tribunal, Bombay Bench C . The contentions which we have set out above and which were raised before the Appellate Assistant Commissioner were not pressed before the Tribunal but an altogether new contention was raised before it, and that contention was that as no dead rent was payable by the assessee for the first year, a certain element of rent was necessarily included in the payment of ₹ 1,55,000 which was to be made by the assessee under the terms of the lease. This plea was resisted on behalf of the department and it was submitted that the payment in question was of a capital nature and could not be dissected in the manner sought for by the assessee. This objection was, however, ruled out, and the Tribunal held that as three payments were to be made under the agreement, and one of them was in connection with the rent and no provision therefore had been made for the first year, it would be reasonable to hold that a reasonable portion of it was rent, and having regard to the rent which was paid by the assessee for the next following year, the Tribunal further came to the conclusion that the portion ascribable to rent in the sum of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persuades us to come to that conclusion is that there is a provision both in the notice and in the letter of acceptance referred to above that the assessee was required to pay even for the first year of the lease a certain amount of royalty. After providing in paragraph 12(d) of the notice that annual dead rent will be payable from the second year of the lease, the payment to be made at certain specified points of time mentioned in the paragraph itself, it was laid down in paragraph 13 that a certain amount of royalty will be payable at 10 per cent. on a certain formula which has been mentioned in that paragraph. In the letter of acceptance the royalty was also required to be paid, though there was a variation in the rate. It may also be pointed out at this place that generally speaking the assessee was required to start mining operations within one month of the grant of the lease. During the course of the arguments before us, we called upon learned counsel for the assessee to tell us precisely whether the assessee was required to pay both dead rent as well as royalty for the years next following the first year, but he was unable to give us any satisfactory answer on that point. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent whichever was higher in amount, except that, for the first year, no dead rent was to be charged. It is in this background that the question whether there is an element of rent in the payment of ₹ 1,55,000 made by the assessee as tender money falls to be determined. On a most careful and anxious consideration of the matter, our answer to this question is in the negative. As we have already pointed out, we are unable to accept the view of the Tribunal that no rent whatsoever was payable by the assessee to the State Government for the first year of the lease, for such rent was paid by it in the shape of royalty. The mere fact that the condition as to the payment of dead rent did not enure for the first year cannot alter that fundamental position. As we look at the real nature of the payment of ₹ 1,55,000, it clearly seems to us that it has hardly anything to do with any payment by way of rent or royalty, as such, and this was a payment which was required to be made by the assessee over and above this, and as the notice puts it, it was merely a bid price based on certain principles of mine valuation for the acquisition of mining rights in certain areas which having be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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