TMI Blog1989 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... livered by KULDIP SINGH J . -The question in this appeal is whether the grant of a mining lease for a period of ten years by the assessee can give rise to capital gain taxable under section 45 of Income-tax Act, 1961. The assessee, a body of individuals, purchased two pieces of land in the year 1966 measuring 14.55 acres at a price of Rs. 27,260. By an instrument of lease-cum-licence dated September 10, 1970, they granted a mining lease in favour of Sri Krishna Tiles and Potteries (Madras) P. Ltd. (hereinafter called the "company"), an allied concern of the assessee. The lease was for a period of 10 years and the lessee had to pay a premium or salami of Rs. 5 lakhs in addition to the payment of a royalty of Rs. 12 per 100 cubic feet of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, he upheld the order of the Income-tax Officer. The assessee preferred an appeal to the Tribunal. The Tribunal observed that the entire ownership of the property means the ownership of a bundle of rights and a limited interest which can be severed and disposed of for a specified period in the form of lease or mortgage or the like is part of that bundle. According to the Tribunal, the purchase price paid by the assessee for the land includes therein a component of purchase price attributable to various kinds of interests embedded in the said land. The Tribunal confirmed the order of the Appellate Assistant Commissioner and dismissed the appeal. Arising from the said decision of the Tribunal, the following two questions were referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not include-. . . 45. (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections .... be chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place. " Mr. Harish Salve, learned counsel appearing for the appellant, without disputing that the grant of a lease would constitute a transfer of an asset, has raised the following two contentions : (i) That conceptually there is no "cost of acquisition" which is attributable to the right of limited enjoyment transferred by the grant of the lease. There is no nexus between the "cost of acquisition" of the free hold la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is correct. A lease of land is transfer of interest in the land and creates right in rem : and there is a transfer of title in favour of the lessee though the lessor has right of reversion after the period of the lease terminates." This decision has been referred to with approval by this court in R. K. Palshikar (HUF) v. CIT [1988] 172 ITR 311 If a transfer of a capital asset in section 45 of the Act includes grant of a mining lease for any period, then, obviously, the "cost of acquisition" of the land would include the "cost of acquisition" of the mining right under the lease. Undisputedly, the grant of a lease being a transfer of an asset, there is no escape from the conclusion that there is a live nexus between the "cost of acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in making apportionment. We, therefore, do not find any force in the first contention of Mr. Salve and reject the same. In view of our finding on the first contention, the second contention does not survive. The value of leasehold rights in the cost of acquisition of land being determinable, the computation provisions under the Act are applicable and section 45 would be attracted. In B. C. Srinivasa Setty's case [1981] 128 ITR 294 (SC), the question was whether the transfer of the goodwill of a newly commenced business can give rise to a capital gain taxable under section 45 of the Act. This court answered the question in the negative. Referring to the charging section and the computation provisions under the Act, this court held that no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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