TMI Blog1955 (1) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,290 as premium, On the 26th May, 1945, he granted another prospecting licence to the same company and received ₹ 1,24,789 as premium. On the 7th June, 1945, he granted a prospecting licence to Dayanand Modi for six months and received a premium of ₹ 1,500. On the 14th August, 1945, he granted a prospecting licences to Indian Aluminium Company Limited for one hear and received a premium of ₹ 70,146. The assessee's case is that these amounts were capital receipts and were not taxable. The Income-tax Officer held that these receipts were income and were taxable. On an appeal being taken to the Appellate Assistant Commissioner of Income-tax, he held that the amounts were capital receipts. The Income-tax Department appealed to the Income-tax Appellate Tribunal who held that the amounts were income and were taxable as such. At the instance of the assessee, the Tribunal has made this reference to this Court. Mr. Mazumdar has contended that the amounts which assessee received in the accounting years in question were lump sum payments and were, therefore, in the nature of the capital receipts. In support of his argument, he has relied upon the case of Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding and Manohar Lall, Acting Chief Justice, observed as follows: The question raised, therefore, is a question of fact in the main except in so far as it may be urged that on the facts found the inference in law follows that this particular salami was income. The next case upon which Mr. Mazumdar has relied is the decision of their Lordships of the Judicial Committee in the case of Kamakshya Narain Singh v. Commissioner of Income-tax [1943] 11 I.T.R. 513. In that case the assessee received in respect of some coal mining leases some payments which could be classed under three categories; (i) the salami or premium; (ii) the minimum royalty; (iii) the royalties per ton . The question before their Lordships was whether the minimum royalty received by the assessee was income an they held that it was income although the lessee was entitled to remove coal from the mines. Lord Wright who delivered the judgment of the Judicial Committee observed in respect of the premium received by the assessee that that had been rightly held to be a capital receipt because it was a single payment made for the acquisition of the right of the lessee to enjoy the benefits granted to them by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 313. In that case, Harries, C.J., observed that, prima facie, salami was not income but it was open to the Income-tax authorities to show that salami constituted income and not capital receipt. In the present case, the two members of the Tribunal have written separate order s but they have both come to the conclusion that the amounts in question were income and not capital receipts. Both the members have given plenty of good reasons for coming to their conclusion. I consider it unnecessary to mention all those reasons but some of the important ones are the no possession over any land or property of the assessee was given to the licensees nor was any interest in any property created in the licensees's favour; that the licensees were to do as little damage as possible; that no rent was separately payable; that the assessee frequently granted such short term licences; and that in some cases the licensees were to report on the progress of work each month. In each of the four licences granted by the assessee, the period for which the licence was granted was rather short. In two cases, the period was six months and in the other two cases, the period was one year. The sums paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts on capital account. In my opinion, there is no doubt at all in this case that the Appellate Tribunal's finding that the amounts in question were income is a finding of fact and there is plenty of material in support of that finding No ground has at all been made out of holding that the amounts were capital receipts. The question must therefore be answered in favour of the Income-tax Departments and against the assessee. The assessee must pay the cost of this reference which is assessed at ₹ 250. RAMASWAMI, J.--I agree. Counsel on behalf of the assessee pointed out that the parties have described the amounts paid to the assessee as premium in the various prospecting licences. Counsel made the submission that the amount paid to the assessee in respect of these prospecting licences should, therefore, be treated prima facie as capital receipts, and in support of the submission counsel referred to the decision of this Court in Province of Bihar v. Maharaja Pratap Udai Nath [1941] 9 I.T.R. 313. In my opinion, the argument of the assessee on this point has no substance. In the law of income-tax it is well settled that the name given to transaction by the parties does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and no estate or interest in land was converged to the licensee in consideration of the so called premium. It should also be noticed that the periods of licence are short. In two documents, the period was for six months each and in the other two documents the period was for one year each. It is also stipulated in the agreement that the licensee should do as little damage as possible and he should also pay compensation to tenants and remove excavations and plug them. The licensee also agreed in each case to restore all the lands to the original condition as far as practicable after the licence was terminated. There was no waste contemplated and no damage to capital was suffered. The inference must, therefore, be drawn that the amount described as premium is really a fee paid by the licensee for the privilege of prospecting for bauxite in the lands owned by the assessee. To put it differently, the amount of so called premium is in substance an advance payment of fee by the licensee. The amounts is in reality the profits derived by the assessee from the use and exploitation of his property. In my opinion, the amounts received by the assessee in respect of prospecting licences are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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