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1957 (8) TMI 38

..... e assessee is an incorporated company, called Bharat Collieries Limited, which owns coal mines and carries on the business of winning coal therefrom. For the accounting year ending on the 30th of June, 1949, which corresponds to the assessment year 1950-51, the company incurred an expenditure amounting to ₹ 10,266, which was the amount paid by the company to the owners of the surface land just above the coal mines at the time when de-pillaring operations started. In a coal mine it is the usual practice that coal is extracted through gallery working when the roof of the mine remains supported on the pillars of coal. After the gallery working, coal is extracted from these pillars which have to be demolished in that very process. This op .....

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..... Tribunal was erroneous. In support of this argument learned counsel referred to O'Grady (H.M. Inspector of Taxes) v. Bullcroft Main Collieries, Ltd. [1932] 17 Tax Cas. 93. in which the assessee had taken certain leases of coal seams, under which, in consideration of covenants by the lessors indemnifying the assessee against liability for surface damage, the assessee undertook to make payments to the lessors on specified dates in respect of each acre or part of an acre beneath which coal seams had first been worked since the previous accounting date. It was contended on behalf of the assessee in that case that payments to the lessors under the surface damage provisions of these leases were admissible deductions in computing profits. The .....

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..... proper test to be applied is this-have you provided by capital payment for purchasing the surface right of the land outright from the surface owners, or are you really conducting the mine upon the principle of having to make incidental payments as you go along so as to enable you to work the mine? For instance, it was held in Robert Addie and Sons' Collieries Ltd. v. Commissioners of Inland Revenue [1924] 8 Tax Cas. 671 that the sum paid by the colliery company for restoring to an arable state all ground occupied by it or damaged by its workings was in the nature of capital expenditure and was not, therefore, a proper deduction in computing the company's liability to income-tax. The question is, on which side of the line the present .....

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..... orary dislocation of drainage, which can be prevented from recurring by a readjustment of the drains. Occupational damage of that sort is often met by a payment to the tenant for the damage done to his crop for the year, or year by year, until the drains are relaid. I express no opinion on the character of expenditure required to meet such payments or repairs as these. The whole terms of the lease are not before the Court, but, as far as they have been put before us in the case, it is clear that it was within the contractual contemplation of parties that the lessees working under the lease and in accordance with its provisions would, or might, cause damage to land by subsidence of a character so serious and permanent as to destroy its value .....

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