Full Judgment Text
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PETITIONER:
R. B. SETH MOOLCHAND SUGANCHAND
Vs.
RESPONDENT:
THE COMMISSIONER OF INCOME-TAX, DELHI
DATE OF JUDGMENT19/09/1972
BENCH:
REDDY, P. JAGANMOHAN
BENCH:
REDDY, P. JAGANMOHAN
KHANNA, HANS RAJ
CITATION:
1973 AIR 15 1973 SCR (2) 360
1973 SCC (3) 257
CITATOR INFO :
D 1991 SC 227 (9,10)
ACT:
Income tax Act (11 of 1922) s. 10 (2) (xv)-Amount paid for
lease of mica mine already worked and fee for prospecting
licence-Capital or Revenue expenditure-Tests.
HEADNOTE:
The assessee, a firm carrying on mining business, took on
lease for 20 years certain areas which had been worked
previously by. others, and in which mica pillars had been
exposed by those earlier mining operations. Mica scrap was
also lying on the surface. The assessee paid a sum of
money, part of which was towards the mica scrap lying on the
surface. The assessee also paid at Re. 1 /- per acre per
year as fee for prospecting licence., The assessee claimed
the 1/20th part of the money paid for the lease as well as
the fee paid for the prospecting licence as revenue expen-
diture for purposes of income tax. The Tribunal allowed the
money paid for the mica scrap lying on the surface as
revenue expenditure, but disallowed the other claims. The
High Court also, on reference, held against the assessee
(appellant).
Dismissing the appeal to this Court,
HELD : The expenditure incurred for the lease, as well as
the fee paid for the prospecting licence, were not allowable
as revenue expenditure. [362G-H; 371C]
(1)The test for ascertaining whether the amount spent for
the lease is of a capital nature, is whether it was spent
for obtaining a right of an ,enduring character, which, in
the case of mining lease is to acquire rights over land for
winning the mineral. In other words, where the mineral is
part of the land and some mining operations have to be
performed to extract it from the earth, the amount paid to
acquire a right over, or in the land, to win that mineral,
is of an enduring character, and hence, a capital
expenditure. But where the mineral has already been gotten
and is on the surface, then the expenditure incurred for
obtaining the right to acquire the raw material, that is,
the mineral would be a revenue expenditure laid out for the
acquisition of a stock-in-trade. [365A-B; 368G-H]
In the present case, the findings of the Tribunal are clear
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and consistent with those given by the Income-tax Officer
and the Appellate Assistant Commissioner, in that, all of
them distinguished between the raw-materials which had
already been extracted and brought to the surface, and those
that are still to be extracted. The mica pillars which had
been exposed by the earlier mining operations, had enhanced
the value of the right which was leased to the appellant,
but none the less, the appellant still had to carry out
some mining operations to extract the mineral from the
pillars which were embedded in the land. The lease was for
a long period and it conferred a right to excavate the mica.
The amount paid was therefore for acquiring a right of an
enduring nature to extract and remove the mica, to bring it
to the surface, grade it, and pay royalty to the Government
in accordance with the quality of each grade of mica
extracted. [368C-D, H; 369A-C; 370B-D]
Pingle Industries Ltd. v. Commissioner of Income-tax
Hyderabad, 40 I.T.R. 67, followed.
361
Artherten v. British Insulated and Helsby Cables Ltd. [1926]
A.C. 205, 213, Kauri Timber Co. Ltd. v. Commissioner of
Taxes, [1913] A.C. 771, Golden Horse Shoe (New) Ltd. v.
Thurgood (H.M. Inspector of Taxes), 18T.C. 280, Abdul ayoom
v. Commissioner of Income Tax, 64 ITR 689 at 703, Mohanlal
Hargovind v. C.I.T., 17 I.T.R. 473 and M.A. Jabbar v.
Commissioner of income Tax, 68 I.T.R. 493, referred to.
(2)The term prospecting licence’ shows that the mine has
not yet started working as a mine. The finding by the
authorities and the Tribunal that the fee paid for the
prospecting licence was a payment for initiating the mining
operations was a finding of a fact. It was, in fact, a fee
paid irrespective of the quantity of minerals obtained
showing that the object of the payment was to initiate the
business. The period for which the licence was obtained,
namely one year, does not also make it a revenue payment.
The fee paid to obtain the licence to carry out,
investigate, search and find the mineral with the object of
conducting the business of extracting ore from the earth, is
a fee paid for indicating the business and therefore, is of
a capital nature and could not be equated to a payment for
the purposes of stock-in-trade. [370D-H; 371A-B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: C. A. No. 2020 of
1972.
Appeal by certificate from the judgment and order dated
March 28, 1968 of the Rajasthan High Court at Jodhpur in
Income-tax’ Reference No. 1 1 of 1963.
N. D. Karkhanis and A. G. Ratnaparkhi, for the appellant.
S. C. Manchanda, P. L. Juneja, S. P. Nayar and R. N.
Sachthey, for the respondent.
The Judgment of the Court was delivered by
JAGANMOHAN REDDY, J. This appeal is by special leave
against the judgment of the High Court of Rajasthan in I an
income-tax reference under s., 66 (1 ) by which it answered
the two questions referred to it in the negative. Before
this appeal was filed, Appeal No. 1238/1969 had been filed
on a certificate but that is dismissed without costs because
this Court had in several cases’ held that in Income-tax
references if the High Court does not give any reasons while
granting the certificate, the certificate can be revoked.
The assessee, a firm carrying on mining business at Udaipur
with a branch at Mandal, had pursuant to an invitation to
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tender for mica mining in accordance with the terms and
conditions prescribed in the Mineral Concession Rules,
tendered for certain areas for Rs. 1,57,150/- of which Rs.
3,360/- was payable towards the mica scrap lying on the
surface. The lease was for 20 years and the areas which
were offered had been worked by other Private companies for
15 years. This offer of the appellant was accepted and the
lease was granted to it. In the relevant assessment year
1952-53 for which the previous year for the head office
ended on October 30, 1951 and for the branch ended
362
on March 30, 1952, the appellant claimed Rs. 7,857/- being
the 1/20th of the tender money as revenue expenditure
incurred during that year. The claim of the assessee was
rejected by the Income-tax Officer on the ground that the
money was paid for the value of the land which it had
acquired because the mine granted to the assessee had
already been worked by the private companies. In an appeal
against this order, the Appellate Assistant Commissioner
confirmed the disallowance of the expenditure as in his
view, it was a capital nature expended for the acquisition
of a, capital asset. Against this order, an appeal was
filed to the Appellate Tribunal. The Tribunal however
allowed Rs. 3,360/paid for mica scrap lying on the surface
as a revenue expenditure incurred in the acquisition of
stock-in-trade, but disallowed the claim for the balance of
Rs. 1,53,800/- which was paid under the tender as a capital
expenditure.
The assessee had also claimed Rs. 3,200 as the fee paid by
it a the rate of Re. 1/- per acre per year for prospecting
licence. The income-tax Officer disallowed this amount
under s. 10(2) (xv) of the Indian Income-tax Act, 1922
(hereinafter called the ’Act’) on the ground that the
licence was obtained by the assessee only that year, that
the fee was paid in addition to the royalty payable on the
value of the emeralds excavated and sold and that it was an
initial expenditure for procuring a right to respect mines.
The Appellate Assistant Commissioner in an appeal by the
assessee negatived the claim on the ground that under that
licence the assessee had a right to win and commercially
exploit the minerals which the assessee actually carried
out. The Tribunal while dismissing the appeal filed against
the order of the Appellate Assistant Commissioner observed
that the prospecting licence fee cannot be equated to a
payment made for the purchase of stock-in-trade, that it was
not based, on any quantity of minerals, that the minerals
had to be won and extracted from the earth and the term
"prospecting licence" shows that the mine had not yet
started working as a mine and that the payment was to
initiate the business.-It also held that the period of on,--
year for which the licence was obtained cannot justify the
fee paid as a revenue expenditure. The assessee thereafter
filed’ application under s. 66(1) of the Act and as in its
opinion a question of law did arise, the, Tribunal referred
the following two questions to the High Court for its
opinion :-
1. Whether on the facts and in the circumstances of the
case, the prospecting licence fee of Rs. 3,200/is allowable
as revenue expenditure ?
2. Whether on the facts and in the circumstances of the
caste the appropriate Part of Rs. 1,53,800/- was allowable
as revenue expenditure ?
363
Taking the second question first, it is contended before us
by the learned advocate for the appellant that Rs.
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1,53,800/- paid for pillars of mica standing in the land
leased out after the other private companies had worked it
was a revenue expenditure because the tender which was given
and accepted was on the basis of the calculations in the
Indian Mining Hand Book for a specific quantity of mica in
the mines which was the assessee’s stock-intrade. The
revenue however submits that the amount of the lease was a
capital outlay incurred for the initiation of the business,
and that the pillars of mica cannot be stock-in-trade unless
the mica was excavated, and brought to the surface. A large
number of cases decided in this country and in England,
dealing with different topics were referred and arguments
addressed before us dealing with many analogies of one kind
or other, tendu leaves mangoes, apples, sand, brickearth,
lime and other commodities all with a view to persuade us to
ascertain what is the true test to be applied to the
particular facts of this case’ We do not however propose to
refer to cases dealing with variety of topics except perhaps
to determine the nature of the expenditure incurred in this
case by the assessee.
This Court in Pingle Industries Ltd. v. Commissioner of
Income-tax, Hyderabad(1) had occasion to examine
exhaustively the relevant Indian and English cases for
determining what is a capital expenditure and what is a
revenue expenditure. That was also a case of mining where
the assessee obtained leases for excavating Shahabad stones
for a period of 12 years for which an annual payment of Rs.
28,000 was agreed upon. The majority of Judges, Kapur, J.
and Hidayatullah, J. (as he then was) (S. K. Das, J.
dissenting) held that the assessee acquired by his long term
lease the right to win stones, that the stones in situ were
not its stock-in-trade in a business sense but a capital
asset from which after extraction it converted the stones
into its stock-in-trade. It was also held that the payment
was neither rent nor royalty but a lump payment in
instalments for acquiring a capital asset of enduring
benefit to its trade; the amounts being out goings on
capital account, were therefore not allowable deductions.
The proposition as qualified by Lord Cave in Atherton v.
British insulated and Helsby Cables. Ltd.(2) that in the
absence of any special circumstances leading to the
’opposite conclusion, when an expenditure is made, not only
once and for all, but with a view to bringing it into
existence an asset or advantage for the enduring benefit of
a trade, has been applied, explained and varied from time to
time as the circumstances of the particular case required.
The application of these principles to the various cases and
the conclusions reached by courts in those cases often
(1) 40 I.T.R. 67. (2) [1926] A. C. 205,213.
6-L498Sup CI/73
364
lead to irreconciliable results. It is because the topic
itself is a troublesome one and is not rendered any the less
difficult by resorting to principles. "It is not always
easy" observed Romer, L.J. in (;olden Horse Shoe (New) Ltd.
v. Thurgood (H. M. Inspector of Taxes(1) "to determine
whether a particular asset belongs to one category or the
other" nor does it depend in any way "on what may be the
nature of the asset in fact or in law." In our own Court
this difficulty has been put very tersely,. if we may say so
with respect, by Hidayatullah, J. (as lie then was) in Abdul
Kayoom v. Commissioner of Income-tax(2) when he said:
"...... none of the tests is either exhaustive
or universal. Each case depends on its own
facts, and a close similarity between one case
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and another is not enough, because even A
single significant detail may alter the entire
aspect. In deciding such cases, one should
avoid the temptation to decide cases (as said
by Cordozo. The nature of the Judicial
Process, p. 20) by matching the colour of one
case against the colour of another. To
decide, therefore, on which side of the line a
case falls, its broad resemblance to another
case is not at all decisive. What is decisive
is the nature of the business, the nature of
the expenditure, the nature of the right
acquired, and their relation inter se, and
this is the only key to resolve the issue in
the light of the general principles, which are
followed in such cases."
The determining factor will depend largely on the nature of
the tract-, in which the asset is employed. The several
cases which do not deal with the mining leases but are
concerned with different assets are of little help in the
same way as in Mohanlal Hargovind v. C.I.T.(3), cases
relating to the purchase or leasing of mining quarries,
deposits of brick earth were considered not to be of
assistance by the Privy Council in case of a contract for
collecting and removing tendu leaves. The principles
enunciated for determining the nature of the expenditure
have been sought to be applied to different situations
arising on the facts of each case, but the difficulty in
matching them with the seeming irreconciliabiliiy are
perhaps explicable only on the ground that the determination
in any particular case is dependent on the character of the
lease or agreement, the nature of the asset, the purpose for
which the expenditure was incurred and such other factors as
in the facts and circumstances of that case would indicate.
If we confine our attention to the mining leases, what
appears to us
(1) 18 T.C. 280.
(3) 17 I.T.R. 473.
(2) 64 I.T.R. 689 at 703.
36 5
to be an empirical test is that where minerals have to be
won, extracted and brought to surface by mining operations,
the expenditure incurred for acquiring such a right would be
of a capital nature. But where the mineral has already been
gotten and is on the surface, then the expenditure incurred
for obtaining the right to acquire the raw material-that is-
the mineral, would be a revenue expenditure laid out for the
acquisition of stock-in,trade. An expenditure incurred for
acquiring a right to take away sand from the surface of
river beds has been treated as if the sand was stock-in-
trade,-M.A. Jabbar v. Commissioner of Income-tax(1) in the
same way as tendu leaves have been treated by the Privy
Council in Mohanlal Hargovind’s case. In the former case,
Bhargava, J. indicated a number of factors which led to the
conclusion that the expenditure incurred by the assessee in
obtaining the lease was revenue expenditure for the purpose
of obtaining stock-in-trade and not capital expenditure
which were : (1) that the lease was for a very short period
of 11 months only; (2) that the sole right which was
acquired by the assessee under the lease deed was to take
away the sand lying on the surface of the leased land where
no question of raising, digging or excavating for the sand
before obtaining it was involved. In other words, no
operation had to be performed on the land itself and "is not
a case where the gravel is in any true sense" as appointed
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out in Golden Horse Shoe (New) Ltd.’s case "was won from the
soil .... it is merely shovelled up where it lies." In the
latter case the Privy Council said that the leases for the
right to collect and remove tendu leaves under which a
certain sum was payable by instalments as a consideration
for the grant of that was a revenue expenditure it
pointed ’Out that the contracts were short term contacts,
that the picking of the leaves had to start at once or
practically at once and to proceed continuously and that
under the contract it is tendu leaves and nothing but tendu
leaves that are acquired. At page 478 while comparing that
case with the case of Kauri Timber Co. Ltd. I.,.
Commissioner of Taxes(2 )where the company’s business
consisted in cutting and disposing of timber and it had in
some cases acquired timber-bearing lands and in other cases
it purchased the standing timber, the lease itself being for
99 years, the Privy Council observed
"In the present case the trees were not
acquired nor were the leaves acquired until
the appellants had reduced them into their own posse
ssion and ownership by picking them.
The two cases can, in their Lordshops’
opinion, in no sense be regarded as
comparable. If the tendu leaves had. been
stored in a
(1) 68 I.T.R. 493 (2) [1913] A.C. 771.
366
merchant’s godown and the appellants had
bought the right to go and fetch them and so
reduce them into their possession and
ownership it could scarcely have been
suggested that the purchase price was capital
expenditure. Their Lordships see no ground in
principal or reason for differentiating the
present case from that supposed."
The analogy referred to in the above passage is sought to be
applied to the facts of this case but in our view there is
hardly any justification for such a conclusion having regard
to the findings of the Tribunal and the income-tax
authorities.
The learned advocate for the assessee contends that the
Income-tax Officer, the Appellant Assistant Commissioner and
the Tribunal, each of them had given different findings for
coming ,to the conclusion that the expenditure was of a
capital nature while the High Court gave yet another reason
to answer the questions against the assessee. Inasmuch as
the correctness or otherwise of the order depends greatly
upon what has been found as facts. of this case, it would be
useful to examine the respective orders.
The Income-tax Officer, as we have earlier stated held that
the money was paid for the value of the land which the
assessee had acquired because the mine granted to the
assessee had already been worked by other private companies.
This finding, according to the learned advocate, is contrary
to the facts set out in the statement of the case by the
Tribunal in which a reference was made to paragraph 5 of the
invitation to tender. It reads
"As the area has been worked by a private com-
pany during the past fifteen years, all the
known mines and quarries and prospecting pits
have acquired a value which can be determined
on the principles of ’mine valuation’.
Intending applicants are therefore requested
to visit the area before April 15, 1950 and
assign their own value and offer it.
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According to the assessee, as already pointed out, it had
offered Rs. 1,57,150/ after the mica had been valued on the
principles of mine valuation which represented a payment of
stock-in-trade. The Appellate Assistant Commissioner has
rejected the claim of the assessee with these observations
:-
"On merits the appellant’s claim cannot be
sustained because the circumstances detailed
above, clearly indicate that the payment of
tender money was for the acquisition of
capital asset and not, as sought to-be made
out, for the stock of ores. The stock was not
367
here on the surface but it was still embedded
with the only difference that its availability
could be more definitely gauged than in the
case of an unworked area. It would not make
any material difference whether the miner
acquires a lease on ordinary terms for an area
which does not give a clear indication of the
possible existence of ore or he acquires on
more expensive terms an area which is in such
a condition that it gives definite indication
about the possibility of existence of ore
therein and also broadly the extent thereof.
Acquisition in either case would be of a
capital asset and payment therefore, small or
large, a capital expenditure."
Earlier the Appellate Assistant Commissioner had stated that
when the lease was allotted to the appellant by the Mining
Department "it was made clear that any mica scrap left by
the predecessor exploiters M/s. Duduwala & Co., on the
surface would be removed either by these exploiters within
three months or if not so removed it would stand forfeited
to the Rajasthan Government in any case it was not to come
to the appellants." In the light of what has been stated, it
is clear that the Appellate Assistant Commissioner made a
distinction between mica that has been ,excavated and
brought it; the surface and the mica which was still
embedded and had to be excavated even though it was more
easily avail-able because of the labour already expanded in
the working out of the mine by the other private companies.
The conclusions of the Tribunal are set out in the following
passage .-
"In our opinion, the amount paid cannot be
equated to payment for raw materials. The raw
materials have to be won and extracted before
they could be said to be stock-in-trade. The
sum represents the price that was paid by the
assessee for obtaining the right to, extract
and win emerald and mica in an area which had
already been worked and developed by a
predecessor for 15 years. If the assessee had
to start running a mine, it had to incur
similar expenditure. In this case, the amount
had been incurred and was paid for by the
assessee. Thus this amount in our opinion
represents capital expenditure incurred for
the purpose of obtaining certain benefits of a
capital nature. This is not in the nature of
any royalty or rent paid by the assessee to
the authorities. In this connection,
reference was made on behalf of the assessee
to the provisions of Rule 51 of the Mineral
Concession Roles which prohibits premium being
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paid for obtaining such a licence. This rule
occurs in Chapter 5 which applies to grant
368
of mineral concessions by Private persons and
we do not consider that the rule is relevant
for considering the question in issue before
us where the grant is by the State. We do not
also think that this is in the nature of any
premium. This is merely for the purpose of
getting benefits of certain structures and
other works carried out in the area which had
already been worked as a mine previously.
This cannot be equated to a premium that is
contemplated by rule 5 1. We therefore agree
with the authorities below in holding that the
assessee has not made out the claim for de-
duction of the amount."
The finding of the Tribunal given in the above excerpt is
clear and consistent with that given by the Income-tax
Officer and the Appellate Assistant Commissioner in that all
of them distinguished between raw materials which had
already been extracted and brought to the surface and those
that have still to be extracted. Apart from the objection
that no question was formulated by which the findings of the
Tribunal were challenged on any admissible grounds, there
are, in our view, no contradictions in the fin-ding of the
Tribunal as submitted by the learned advocate for the
assessee because what the Tribunal was dealing with in the
latter part of the passage cited above, were the contentions
urged on behalf of the assessee, firstly, that the amount
was a royalty or rent ’paid to the authorities and secondly,
what was paid was in the nature of premium. While rejecting
these contentions the Tribunal gave its reasons but that is
not to say that the conclusion that the amount was a capital
expenditure was not based on the finding that mica had to be
extracted and brought to the surface before it could be
considered as the assessee’s stock-in-trade.
In our view the principles which have been applied in the
Pingle Industries’ case are equally applicable to the facts
and circumstances of this case. The test for ascertaining
whether the amount spent is of a capital nature is, whether
it was spent for obtaining a right of an enduring character
which in the case of mining leases is to acquire rights over
land for winning the mineral. In other words, where the
mineral is part of the land and some mining operations have
to be performed to extract it from the earth, the amount
paid to acquire a right over or in the land to win that
mineral is of an enduring character and hence a capital
expenditure. In this case the mica pillars which have been
exposed by the mining operation of other private companies
had no doubt enhanced the value of the right which was
leased
369
to the appellant but nonetheless.the appellant still had to
carry out some mining operations to extract the mineral from
the pillars which was embedded in the land. If the private
companies before the mica was exposed had taken the lease,
they would have paid a much lesser amount which nonetheless
would have been a capital expenditure.. It is the labour and
expense which the private companies expanded that has enured
for the benefit of the Government and enhanced the capital
value of the lease. This is not a case as is contended,
of mica having been given so as to form part of the
stock-in-trade of the assessee as in the case of Golden
Horse Shoe (New) Ltd. v. Thurgood (H. M. Inspector of
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Taxes) (1) In that case the company had acquired rights in
certain dumps of ’tailings’ or residuals that remained after
the extraction of gold from ore taken from certain gold
mines. It was contended on behalf of the revenue that the
company’s rights in tailings and dumps were part of the
undertaking which the company was formed to acquire and any
sum paid therefore was capital expenditure, and that the
company’s rights in the dump was the purchase of a wasting
asset. This contention was negatived and it was held that
the purchase price of, the tailings was an admissible
deduction in computing the company’s profits for income-tax
purposes . Lord Hanworth, M.R. at page 298 observed
"After careful consideration of, the present
case, in the course of which my mind has
fluctuated on either side, I think it is- to
be decided upon its own facts-that none of the
tests suggested affords a strict rule of guid-
ance. It seems, then, that the Company bought
these dumps-which were no longer in a natural
but in an artificial condition; which were in
such a state that they would not have passed
under a lease-of "beds opened, or unopened,
minerals", see Boileau v. Heat Ch. D. 301)-for
the purpose of treating them as the stock-in-
trade, lying stored and ready to their hand,
at a fair- price of pound 122,750, and their
intention was to use them up and make what
they could of them by and after treatment.
They had not to win them from the soil; they
had been gotten already. If the metaphor of
working a mine be applied, it might be said
that the purchase of the dumps was a capital
outlay. If the metaphor of making
gas or coke from coal, or of a miller making
flour from wheat, be applied, it may be said
that it was an outlay to be placed in the
profit and loss account. But metaphors do not
provide exact definitions and are often
misleading. It is safer
(1) 18 T.C. 280.
370
to give an interpretation to the facts of this
case as found in the case stated and upon the
law relevant to them. "
This passage at once indicates the difficulties which he in
common with other Judges have felt When called :upon
determine the nature of the expenditure.
The lease in this case was for a long period it conferred a
right to excavate the mica because on the findings of the
Tribunal mica had to be extracted from the mine though, the
,earlier working out of the those mines by other companies
had made it much easier to perform the final operations and
because of it a higher amount had to be paid. Nonetheless
the amount paid was for acquiring a right of enduring nature
to extract and remove the mica to bring it to the surface,
grade it and pay royalty to the Government in accordance
with the quality of Leach grade of mica extracted. We
accordingly hold that the ,expenditure incurred is a capital
expenditure and that the second question has been rightly
answered.
On the first question whether the prospecting licence fee of
Rs. 3,200/- is allowable as revenue expenditure, the
contention on behalf of the assessee is that it is a
licence fee, not a lease amount nor does it create an
interest in the land. The Income-tax Officer, the Appellate
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Assistant Commissioner and the Tribunal have all held that
the fee paid for prospecting licence was not ,of a revenue
nature. It was submitted before the Tribunal that under a
prospecing licence issued under Chapter 3 of the Mineral
Concession Rules, 1943 the licensee had a right to win and
carry away the minerals for commercial purposes, and for
that reason the amount should be treated as in the nature
‘of a purchase price of a stock-in-trade. In support of
this contention the provisions of T. 23 were referred to but
the Tribunal rejected that contention because in its view
the amount was paid, as and by way of prospecting fees which
was for initiation of a business as in the case of other
minerals and that the character of the licence did not
change merely because the licensee had certain rights over
the minerals obtained under the prospecting licence nor was
it based on any quantity’ of minerals. The minerals had to
be won and extracted from the earth and the term
’prospecting licence’ shows that the mine has not yet
started working as a mine. It was a fee paid irrespective
of the quantity of minerals obtained which demonstrated
clearly that the object of the payment was to initiate the
business. That apart, the period for which the licence was
obtained viz., one year, does not also make it a revenue
payment and consequently it held that the authorities
Tightly disallowed the amount. The finding by the Income-
tax ;authorities as well as the Tribunal that it was a
payment for
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initiating the mining operations was a finding of fact. In
oar view also the, fee was paid to obtain a licence to
carryout, investigate, search and find the mineral with the
objectof conducting the business of extracting ore
from the earth.It is therefore clear that the fee was paid
for initiating the business and is of a capital nature. By
no stretch of argument can the fee paid for a prospecting
licence be equated to a payment made for the purposes of
stock-in-trade. We think that the Income-tax authorities,
the Tribunal and the High Court are right in coming to that
conclusion. Our answer to the first question is, therefore
also in the negative. The two questions having been
answered against the assessee, the appeal is dismissed with
costs.
V.P.S. Appeal dismissed.
372