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TMI Blog1961 (1) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ah Deo of the surface rights necessary to exercise the powers and privileges in respect of the first lease and the third from Maharaj Kumar. Raj Kishore Nath Shah Deo of surface rights in respect of Hoyer village. The period in each of the three leases was thirty years. On March 17, 1922, the Karanpura Company conveyed the rights and options under the three leases to the appellants. On September 30, 1934, the appellants acquired the limestone and surface rights in respect of limestone beds in village Umedanda for 95 years from Maharaja Pratap Narain Udai Nath Shah Deo and Maharaj Kumar Raj Kishore Nath Shah Deo. On the same date, the appellants entered into two agreements, one with Maharaja Pratap Narain Udai Nath Shah Deo which is called the " bauxite option agreement " thereby acquiring the first option to take a lease or leases of any area or areas of bauxite deposits in certain villages, and another from the said Maharaja for the first option to take a lease or leases of limestone beds in the Tori District. By a fourth agreement also dated September 30, 1934, between the Karanpura Company, Maharaja Pratap Narain Udai Nath Shah Deo acting with the consent of Maharaj Kumars Raj K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty and rights and in pursuance of these objects the rights and concessions of the Karanpura Company were acquired and extension of leases and concessions were obtained and were transferred to the Associated Cement Ltd. The appellants were, therefore, carrying on in the year of account 1944-45, the business for which they were incorporated. After reciting the prefatory clauses, it was stated in the deed : " WHEREAS it was agreed inter alia that the Purchaser should pay to the Vendor the sum of Rupees twenty five thousand for trouble and expenses in obtaining the leases and agreements dated the thirtieth day of September one thousand nine hundred and thirty four hereinbefore recited and hereinafter expressed to be hereby transferred and Whereas the Purchaser hath paid to the Vendor the said sum of Rupees twenty five thousand as the Vendor doth hereby acknowledge NOW THIS INDENTURE WITNESSETH that in consideration of the covenants on the part of the Purchaser hereinafter contained the Vendor hereby grants assigns and transfers unto the Purchaser and the Karanpura Company at the request and by the direction of the Vendor hereby grants assigns transfers and confirms unto the Purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and payments becoming due under the (four) hereinbefore recited Indenture of Lease (subject as regards the Limestone lease to the modifications effected by the agreement for reduction of royalty dated the thirtieth day of September One thousand nine hundred and thirty-four hereinabove recited) in respect of the premises agreements options rights or benefits hereby assigned and transferred and observe and perform the covenants agreements stipulations and conditions, therein contained and henceforth on the part of the Lessee or grantee to be observed and performed in respect of the aforesaid premises or under the said Bauxite agreement or under the said Tori Option agreement or under the said agreement for reduction of royalty And also will at all times from the date hereof save harmless and keep indemnified the Vendor its successors and assigns from and against all proceedings costs claims and expenses on account of any omission to pay the said rent, royalty or payments or any breach of any of the said covenants agreements stipulations and conditions. (7) That the Purchaser will not work raise remove, or use stone or clay in the properties comprised in the leases and agreements he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ton was imposed. By clause (7), the Associated Cement Ltd. undertook not to remove or use or allow any one to raise work remove or use stone or clay in the lands. By clause (8), the Associated Cement Ltd. undertook not to do any acts or omissions causing the leases and agreements to be determined or the rights thereunder to be prejudiced. By clause (9), rights of other persons under leases and agreements in lands not containing limestone were not to be affected. By clause (10), the right of the appellants to utilise clay and shale lying with in the areas not containing limestone except for the purpose of manufacturing cement was retained. There were certain exceptions to this and the ninth clause where by the Associated Cement Ltd. were entitled to excavate, use or remove all kinds of clays in and from the areas within the boundary lines marked in the plan and they were also authorised to make permanent structures and use certain strips of lands. By clause (6) the Associated Cement Ltd. agreed to pay rent stipulated under the original leases and agreements and also undertook to keep indemnified the appellants from and against all proceedings, costs, claims and expenses on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of all the facts, to assess whether a transaction is commercial in character yielding income or is one in consideration of parting with property for repayment of capital in instalments. No single test of universal application can be discovered for a solution of the problem. The name which the parties may give to the transaction which is the source of the receipt and the characterization of the receipt by them are of little moment, and the true nature and character of the transaction have to be ascertained from the covenants of the contract in the light of the surrounding circumstances. The decision of the question is, however, not left to the application of any arbitrary standards. There are certain broad principles which guide the determination of the character of the receipt. The distinction between a capital receipt and revenue receipt though fine is real. The dividing line may be thin, and often at first sight imperceptible. Where capital is repaid in instalments, it is not liable to income-tax ; for instance when a person sells his property and agrees to receive the price stipulated in instalments, by whatever name such instalments are called, they are not liable to income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be found by the purchaser. As the value of the land depended on this contingency, the price, not unnaturally was made to depend in part in the event of oil being struck. 'The judgment lays down no new principle ; it proceeded merely upon interpretation of the document in the light of the circumstances. In Trustees of Earl Haig v. Commissioners of Inland Revenue the question which fell to be determined was whether a share of the royalties received in consideration of allowing the use of the diaries of the late Earl Haig for writing his biography were, in the hands of the trustees under the will of Earl Haig, capital receipts. That was undoubtedly a case in which payments received by the trustees were dependent upon the professional activities of the author and the proceeds derived from the sales of the biography he wrote. By the agreement, the author was authorised to extract and publish from the diaries what he thought fit. The diaries were undoubtedly an asset, and after they were used by the author for publication of the biography, their value as an asset was, if not wholly, largely exhausted and their future value was negligible. The agreement was, therefore, regarded a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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