Mining rights receipts are trading income, but taxable profit must allow deduction of acquisition cost.

Receipts from the transfer or realisation of mining rights were not assessable as rents, royalties, premiums or other property income under section 5(f), because the sums arose from outright sales rather than payments for property remaining in the owner's hands. They were, however, trading receipts under section 5(a) where the company's business included acquiring and realising mining rights. Taxable profit had to be computed by deducting the cost of acquisition from the proceeds; gross realisations could not be charged as income without that allowance. The assessments were therefore required to be recomputed on the correct basis.

---

---

Issues: (i) Whether the sums received on the transfer or realisation of mining rights could be assessed as rents, royalties, premiums or other profits arising from property under section 5(f). (ii) Whether those receipts were taxable as profits or gains of trade under section 5(a) without allowing deduction of the cost of acquisition, and whether the assessments required reassessment on the proper basis.

Issue (i): Whether the sums received on the transfer or realisation of mining rights could be assessed as rents, royalties, premiums or other profits arising from property under section 5(f).

Analysis: The receipts arose from transactions which were, in substance, transfers or sales of the company's mining rights and not payments for property remaining in the owner's hands. Amounts received for an outright transfer do not answer the description of rents, royalties, premiums or other profits arising from property. The receipts also could not be segregated from the company's trading earnings for separate treatment under that head.

Conclusion: The receipts were not assessable under section 5(f); this point was decided in favour of the assessee.

Issue (ii): Whether those receipts were taxable as profits or gains of trade under section 5(a) without allowing deduction of the cost of acquisition, and whether the assessments required reassessment on the proper basis.

Analysis: The company's business included acquiring and realising mining rights, so the receipts were trading receipts brought within section 5(a). However, taxable profit is not determined by treating gross realisations as income without regard to the cost of acquisition. Where the article realised is the very asset acquired for the purposes of trade, the ordinary rule of computing profit by deducting the cost from the proceeds applies. The Commissioner had proceeded on the wrong footing by charging the full receipts without any deduction, and the assessments were therefore excessive. The proper course was to remit the matter for reassessment to the best of the Commissioner's judgment on a correct basis.

Conclusion: The receipts were taxable as trading receipts, but only after allowing proper deductions for cost; the assessments were set aside for reassessment, in favour of the assessee.

Final Conclusion: The decision upheld the trading character of the receipts, rejected the property-income basis, and required the assessments to be recomputed after allowing proper deductions for the cost of the realised assets.

Ratio Decidendi: Where a taxpayer's business is to acquire and realise assets, the proceeds of their sale are trading receipts, but taxable profit must be computed by deducting the cost of acquisition from the proceeds; gross realisations cannot be assessed as income without that deduction.

---