9911796707
TMI Blog1965 (3) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... renewable at the option for another term of one year. Under the said lease deed the assessee was required to pay a fixed sum of Rs. 82,500. The assessee paid the amount of Rs. 56,100 for the assessment year 1955-56, the accounting year for the period ending on 30th September, 1954, and the balance of the amount of Rs. 26,400 was paid subsequently for the assessment year 1956-57, the accounting year ending on 30th September, 1955. He, however, claimed these payments as revenue expenditure in the concerned assessment, This was disallowed by the Income-tax Officer as in his view the assessee had secured the right to recover sand from the river bed which was in the nature of a capital asset. The matter was carried in appeal to the Appellate As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the terms of the lease. The learned counsel for the assessee, on the other hand, with reference to the statement of facts made by the department, which, according to him, were not controverted, argued that the assessee had bargained for sand which had accumulated in the beds of Musi river and various nullahs as the result of floods. There was no question of equating it with any mining operation. The fact beyond controversy is that the lease dated 1st February, 1954, was entered into between the assessee and the Director of Mines and Geology on behalf of the then Government of Hyderabad subject to the rules in force in the State regarding the quarry leases. The relevant portions of the lease deed are as under : " (2) Whereas the lessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries under the lease situated at Musi river and various nullahs. They cover extensive areas under the river Musi and also nullahs situate in Taluqas Hyderabad East, West, Taluqa Medchal and Shahabad. Admittedly, this agreement was entered into in accordance with the rules and regulations in force at the relevant period. The rules define " minor minerals " to mean building stone, boulder, shingle, gravel, brick-earth, ordinary clay, ordinary sand and road metal. " Quarrying " has been defined to mean mining, excavating, digging and searching for, winning, working and carrying away, removing, converting, rendering marketable, selling or disposing of any minor mineral. If we go by the terms of the lease deed, there is no difficulty in holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmit of allowable deductions, and in determining the character of the expenditure the aim and object of the expenditure would be the decisive factor. In the instant case, the assessee has the business of supplying lime and sand. For the purpose of obtaining sand he acquired the sand areas under the Musi bed and various other nullhas. In the circumstances, on the principle enunciated above, the sand in the sand areas could not be held to be stock-in-trade. It is only on quarrying the sand, i.e., on removal thereof either by shovelling or by process of digging that he could render it as a marketable commodity. The process does not seem to be in any way different from that of quarrying Shahabad stones in the case of Pingle Industries Ltd. v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in-trade and the only process involved was to remove it from bed and sell it as a marketable commodity. The case of the assessee is that, during the floods, sand would be deposited in the river bed and the various nullahs and would lie loose on the surface---the bed underneath consisting of hard rocks. The assessee had to employ labour at a negligible expense to remove the sand so accumulated, stock it on the bank of the river and dispose it of to the customers. There was no process of quarrying as in the case of Shahabad stones or of diving and collecting chanks as in the second case. This argument is sought to be substantiated by the observation of the Appellate Assistant Commissioner made as the result of his personal investigation and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se deed could be varied, altered or clarified so as to confer any benefit on the lessee. The deed has 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. On the other hand, it refers to the acquisition of sand areas comprising the quarries situated at Musi river and various nullahs. Paragraph 3 of the lease deed authorises the lessee to carry away, sell and dispose of the sand within or under or upon the lands specified in the lease. The argument that the lease deed was drawn up on a pro forma drafted so as to cover all types of quarrying and did not disclose the exact nature of the oper ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
