Mining sub-lease salami treated as trading receipt where mineral rights were exploited through a profit-making commercial venture.

Salami received on granting mining sub-leases was held to be a trading receipt because its character depended on the true nature of the assessee's business activities and memorandum objects. The Court distinguished mere ownership and enjoyment of property from acquisition and exploitation of mineral rights as part of a profit-making venture. As the assessee had acquired large mining areas, developed them and parcelled them out through a series of sub-leases commercially, the receipts were treated as business profits rather than a capital accretion.

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Issues: Whether the salami received by the assessee on granting mining sub-leases was a capital receipt or trading receipt assessable as business profits.

Analysis: The receipts had to be classified by reference to the true nature of the assessee's activities and the objects of its memorandum. The Court distinguished cases where property is merely owned and enjoyed as property from cases where property, mineral rights, or concessions are acquired and dealt with as part of a profit-making business. The assessee had not merely realised a fixed capital asset; it had acquired large mining areas, developed them, parcelled them out, and granted a series of sub-leases as a commercial operation with an eye to profit. In that setting, the salami was not a mere premium on capital account but part of the gains of a trading venture.

Conclusion: The salami received on the sub-leases was taxable as trading receipt and assessable as business profits, not as capital receipt.

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