TMI Blog1961 (1) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2(4A) and section 12B of the Indian Income-tax Act? 2. If the answer to the first question is in the affirmative, whether the sale of the said leasehold rights took place only on May 5, 1947, when the sale deed was executed? These questions arise under the following circumstances. The assessee, Messrs. Rajendra Mining Syndicate, Guntur, is a registered firm having three mining leases and one prospecting licence for varying terms for certain plots in the Kondapalli Reserve Forest area. On January 29, 1946, the assessee entered into an agreement to transfer to one B.D.V Ramaswami Naidu, the mining rights, concessions, licences and leases in those mines possessed by the assessee together with stocks, equipments etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : The tax shall be payable by an assessee under the head 'Capital gains' in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after the 31st day of March, 1946, and before the 1st day of April, 1948, and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place. The first point that falls to be considered is whether the leasehold rights of the assessee were a capital asset within the terms of section 12B. It is urged on behalf of the assessee that a leasehold right in a mine is only movable property and as such does not attract section 12B. This argument lacks substance. That a leaseh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urface rights together with the mine located in that area was a capital asset within the mischief of section 12B. Provident Investment Co. Ltd. v. Commissioner of Income-tax [1953] 24 ITR 33 (Bom.) contains the principle that the managing agency of a concern was a capital asset within the meaning of section 12B. There can be little doubt that the leasehold rights which the assessee had and which he transferred constituted a capital asset for the purpose of section 12B. The first question has, therefore, to be answered in favour of the department and against the assessee. The only question that survives is whether the capital gains tax could come into play in regard to the transaction in question. This depends upon whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The party of the first part shall not claim the deposits made by him to the Government towards licences and leases and the same shall enure to the benefit of the party of the second part. 5. After the date of transfer the party of the second part shall pay all the royalties, surface and deed rents, survey fees, the tree values and all such other incidental charges payable to the revenue, forest and other departments of the Government. 6 Title: To be approved of or otherwise by Messrs. King and Partridge by the twenty first day of February, 1946. 7. Completion to be seven days after Government's sanction for transfer of all leases and licences where such sanction is necessary. 8. Transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of sale give a clear indication that the agreement proprio vigore could not create interest in the property in question. Condition No. 3 definitely states that the agreement itself was subject to the approval of the legal advisers of the vendee regarding the title to the property of the vendor. The obligations of the vendee under condition No. 5 to pay the relevant rents, charges, etc., would arise only after the transfer. Further, clause 8 of the agreement specifically states that the transfer has to be made in favour of the vendee or his nominee or assigns. A reference to clause 10 also reinforces the conclusion that the agreement cannot operate as a transfer. The vendor has to assign or transfer the rights in favour of the vendee. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the property. The very sale deed relied on by Sri Venkataramaiah, counsel for the assessee, clearly says that all the right, title and interest of the vendor was assigned to the vendee only under that document. It is, therefore, difficult to uphold the plea of the assessee that the moment the agreement of sale was executed or possession was given to the vendee the sale was affected. Provident Investment Co. Ltd. v. Commissioner of Income-tax [1953] 24 ITR 33 (Bom.), called in aid by Sri Venkataramaiah, does not lend any countenance to the theory propounded by him. That decision did not deal with the question as to the date on which the sale could be said to have been effected. The controversy there was whether there was a trans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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