Lease covenant liability for mine-related cess upheld, but income tax on royalties was not recoverable.

A lease covenant requiring the lessee to pay taxes, rates, assessments and other public impositions charged on the mines was construed broadly to include recurring mine-related levies. On that construction, road cess and mine cess paid on royalties reserved under the lease were recoverable from the lessee. Income tax paid on the royalties was not recoverable, because income tax was treated as a personal tax on total income and the materials did not show a separate assessment attributable only to the demised mines. The covenant therefore applied to mine-related cess liabilities but not to income tax on the facts shown.

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Issues: (i) Whether, under the lease covenant, road cess and mine cess paid on the royalties reserved under the lease were recoverable from the lessee; (ii) Whether income tax paid on the royalties was recoverable under the same covenant.

Issue (i): Whether, under the lease covenant, road cess and mine cess paid on the royalties reserved under the lease were recoverable from the lessee.

Analysis: The covenant required the lessee to pay and discharge all taxes, rates, assessments and impositions of a public nature charged, assessed or imposed upon the mines or any part thereof by governmental authority, except land revenue. The expression was construed broadly so as not to confine liability only to charges directly laid on the mines in a narrow statutory sense. On that construction, recurring public demands connected with the mines, including road cess and mine cess, fell within the covenant and the lessee had undertaken to bear them.

Conclusion: The road cess and mine cess were recoverable from the lessee.

Issue (ii): Whether income tax paid on the royalties was recoverable under the same covenant.

Analysis: Income tax was treated as a personal tax assessed on the total income of the assessee and not separately on income from the mines alone. The statutory scheme under sections 6, 23, 2(15) and 16 of the Income-tax Act, 1922 showed that the tax could not be segregated as a distinct levy on the mines or on the royalty from the mines alone. In the absence of any material showing a separate assessment attributable only to the demised mines, the claim could not be sustained.

Conclusion: Income tax was not recoverable under the covenant on the materials before the Court.

Final Conclusion: The covenant covered the recurring mine-related cess liabilities, but the claim for income tax failed, and the second appeals were dismissed.

Ratio Decidendi: A covenant to pay taxes and impositions charged upon or in respect of mines extends to recurring mine-related public demands, but income tax assessed on total income as a personal tax cannot be treated as a separable charge on the mines unless separately shown to be so assessed.

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