TMI Blog1965 (12) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... grant a new lease for a period of four or five years " that an offer to pay those amounts in addition to the stipulated royalty was made. There was no legal obligation to pay those amounts under the terms of the original agreements, and the company offered " as a special case to pay " those additional amounts " on the understanding that the Government will give approval " for renewal of the agreement. The amounts agreed to be paid did not form part of the price of the company's stock-in-trade, right to collect which was conferred by the agreement dated June 13, 1952. There is no doubt that payment of premium in consideration of the owner of property agreeing to grant a right to take and remove the stock-in-trade of the taxpayer is in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with effect from July 1, 1951, under which the company was granted the right to cut sal trees marked by the Estate's forest department in the areas agreed upon and to convert the same into " sleepers and scantlings " and to remove them. The agreement provided that the company would pay to the Estate, subject to a minimum of Rs. 40,000 annually (which would not be altered during the term of the agreement), at the rates specified in clause 6 for different types of " sleepers and scantlings " mentioned therein. During the course of the negotiations for extension of the agreement from July 1, 1951, the company agreed to pay royalty at enhanced rates for the period July 1, 1948, to June 30, 1950, on condition that the agreement was extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal confirmed the order of the Appellate Assistant Commissioner. The Tribunal then drew up a statement and submitted the following question for the opinion of the High Court of Judicature at Calcutta : " Whether, on the facts and in the circumstances of the case, and on the correct interpretation of the three enclosures to the letter of the assessee dated the 8th day of July, 1954, to the Income-tax Officer concerned, the sum of Rs. 83,157 was allowable as an expenditure of a revenue nature ? " The High Court recorded its answer on the question in the negative. In the view of the High Court, the expenditure incurred by the company was of the nature of capital expenditure and not revenue. In reaching their conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of a contract whereby it could continue its business activities for a sufficiently long period to come, it was a benefit of an enduring nature and, therefore, the payments were of a capital nature. Under section 10(2) of the Act in the computation of the profits of a business carried on by an assessee certain allowances are permitted to be deducted and one such allowance is " expenditure not being an allowance of the nature described in clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. " The expenditure in question was, it is common ground, laid out wholly and exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e., from June 1, 1948, to June 30, 1950, and were offered to be paid in consideration of the Estate agreeing to grant renewal of those agreements. Under the original agreements of the year 1944, certain payments were stipulated to be made for acquiring the " sleepers and scantlings " and payments were made accordingly by the company. Before the period of the agreements came to an end, the company offered to pay for the last two years royalty at an enhanced rate. The offer was conditional : it was binding only if renewal of the agreement was granted as proposed. The offer apparently fell through, when the Collector of Koraput sanctioned renewal only for one year. Before the expiry of the year for which renewal was granted, the company ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
