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TMI Blog1985 (3) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... hich accumulates in the colliery has to be pumped out and discharged at the surface to prevent inundation of the colliery and for proper working of the mine. The percolated water in the mine of the respondent company was pumped out and sold by the company to a neighbouring glass factory, the Hindustan Pilkington Glass Works Limited, which required such water for cooling and other purposes. The respondent company by sale of such water received in the year 1958-59 a sum of Rs. 42,073, which amount was entered in their profit and loss account as miscellaneous income, besides the sum of Rs. 5,82,000 shown as the sale price of coal of the said colliery. The respondent company had been selling such percolated water in the earlier years also and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent took up the matter before the High Court under article 226 of the Constitution which was eventually allowed by the High Court. It took great pains to come to a conclusion that the water discharged from the mine was not a mineral. It was also not land within the meaning of section 6 of the Bengal Cess Act. On these findings the High Court observed: "The tenant of a mine, particularly of a coal mine, is normally under the vanishing expenses of sinking new pits, diving galleries, pumping out water and the like and some of the expenses representing capital might be disallowed as working expenses of the colliery but that does not justify the authorities, as in this case, to impose cess on the sale price of water ...... and the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of such property, calculated on the average of the annual net profits thereof for the last three years for which accounts have been made up. Such Collector may in his discretion extend the time allowed for lodging such return." The key words in these two sections on which the fate of this case hinges, are "on the annual net profits from the mines". The precise question for consideration is whether the sale price of water pumped out and discharged from the mine could be included in the annual net profits from the mine. If so, the cess levied on the respondent company was fully justified by section 6. The contention on behalf of the respondent company is that the sale price of the water discharged from the mine cannot be taken to be a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, be treated as having made "any profit" from the mines within the meaning of section 6 of the Act. The question for consideration was whether a person could in law be said to have derived profit from a mine when the ore extracted is not sold by him as such but is utilised by him for the purpose of manufacturing a finished product which he sells. The contention of the appellant company that the ore extracted was not sold as such but was used by the owner in the production of other finished products and, there was no question of the owner of the ore realising profit from the mine, was repelled by this Court and it observed : (at page 140) "In our opinion therefore the principle of apportionment resting on the disintegration of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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