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TMI Blog1965 (11) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... limestone. By an indenture dated March 4, 1949, the assessee was granted the right to excavate limestone in certain areas at Gotan and Tunkaliyan, subject to certain conditions. It is not necessary to detail the conditions contained in this indenture except that the lease expired on July 14, 1952. The lease was extended from time to time by the Government for short periods. The last letter dated December 17, 1952, extending the lease was in the following terms : " In continuation to this office letter cited above, Government have been pleased to convey extension up to the 31st March, 1953, or till the finalisation of the proposals for leasing out the area, whichever may be shorter, with the clear understanding that you will have to vacate the area, when you may be asked to do so, and will have no claim whatsoever over the area after it. " By letter dated December 1, 1953, the Government intimated to the Director of Mines and Geology, Rajasthan, Udaipur, that the Government had adopted a new policy for leasing out lime-stone quarries. The proposal was to divide the lime-stone quarries in Jodhpur Division in blocks of 5 sq. miles each and the dead rent was to be charged at Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 0 ------------------------------------------------------------------------------------------------------------------------------------------------- At the end of each financial year the accrued royalty amount is far less actually and as such as per the agreement the royalty payable is Rs. 96,000 in all the years above-written. The royalty for each of these years was settled after the end of each year, i.e., in the subsequent year. At this stage it would be convenient to mention the terms on which the assessee remained in possession. It is common ground that these terms are contained in the Jodhpur Division Vindhyan Lime-stone Mining Leases Rules, 1954, and the Rajasthan Minor Mineral Concession Rules, 1955. These rules were made in exercise of the powers conferred by rule 4 of the Central Mineral Concession Rules, 1949. In the Jodhpur Division Vindhyan Lime-stone Mining Leases Rules, 1954, "mining lease" was defined to mean "a lease to mine, quarry, bore, dig, search for, win, work and carry away lime-stone". Under these rules the assessee had to make an application for a mining lease in response to a notification issued by the Director of Mines and Geology, Rajasthan, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly dead-rent within the limits specified in the Second Schedule to these rules as may be fixed by the Director in each case, and if the lease permits the working of more than one mineral in the same area, the Government may charge separate dead-rent in respect of each mineral. (iv) The lessee shall keep correct accounts showing the quantity and particulars of all minerals obtained from the mines, etc. (v) The lessee shall allow existing and future licensees or leaseholders of any land which is comprised in or adjoins or is reached by the land held by the lessee, reasonable facilities for access thereto. (vi) The lessee may erect on the area granted to him any building required for bona fide purposes and such buildings shall be the property of the Government after the expiry of the lease. (vii) The lessee if he discovers any new mineral was entitled to apply for a mining lease in respect of the newly discovered mineral. (viii) The Government shall have the right of pre-emption at current market rates over all minerals demised by the lease and shall be indemnified by the lessee against claims of any third party in respect of such minerals. (ix) In case of any breach on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and the judgment of the High Court, we have to concentrate on the following test laid down by Viscount Cave in British Insulated and Helsby Cables Ltd. v. Atherton : " But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. " The learned Attorney-General, relying on this test, urges that what the assessee got by entering into the mining lease was an asset or advantage of an enduring nature, that this asset or advantage was an interest in land for not only has the assessee the right to go upon the land and excavate but also has the right to use part of the area as premises, and it was by virtue of this that the assessee eventually got raw material for his manufacturing business. Mr. Palkhivala, the learned counsel for the assessee, on the other hand, contends that under the Rajasthan Minor Mineral Concession Rules and the arrangement between the assessee and the Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows : " The case then proceeds to set out the leases in question, which were substantially in the same form. The first was an agreement made on 16th December, 1957, between a Mr. Parker, the lessor, and the company. Clause 1 provided that the lessor, being the owner of the land in question (four acres and five perches of agricultural land in Yorkshire) should let the land to the lessee--that is, the appellant company-from 5th November, 1957, for one year, paying therefor a royalty of 1s. 3d. per ton for all coal recovered from the demised land and accepted by the coal sales department of the National Coal Board, or the sum of pound 312 10s. whichever was the greater, such payment to be made by calendar monthly instalments. There is, of course, no doubt that those rents or royalty payments would be allowable as deductions on revenue account. " He had no doubt in his mind that rent and royalty payments would be deductible as revenue expenditure. In Pingle Industries Ltd. v. Commissioner of Income-tax the assessee had already been allowed payments of royalty as revenue expenditure and the only dispute was regarding lump sum payment. In Ogden v. Medway Cinemas Ltd. an annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature is capital expenditure. The reason underlying the illustration is that the payments made to enter into a forward contract have relation to the raw material eventually to be obtained. Viscount Cave acknowledged that in certain cases an expenditure for obtaining an enduring advantage need not be capital expenditure for he inserted the words in the absence of special circumstances leading to an opposite conclusion within brackets. We are of the opinion that in the present case the royalty payment is not a direct payment for securing an enduring advantage ; it has relation to the raw material to be obtained. Ordinarily, a mining lease provides for a capital sum payment ; but the fact that there is no lump sum payment here cannot by itself lead to the conclusion that yearly payments to be made under the mining lease have relation to the acquisition of the advantage. No material has been placed on the record to show that any part of the royalty must, in view of the circumstances of the case, be treated as premium and be referable to the acquisition of the mining lease. Therefore, on the facts of this case, we must hold that the royalty payment, including the dead-rent, have re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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