Trading Receipts convert salami from repeated sub-leases into taxable business profits when rights are dealt with as stock-in-trade.

Whether sums labelled salami for granting sub-leases are trading receipts under income-tax law is examined by reference to the capital-versus-revenue distinction and statutory heads of income. The analysis emphasises that mere realisation of fixed capital is excluded from income, but repeated acquisition, development and parceling of mineral rights and frequent grant of sub-leases under company objects showing intention to turn rights into account converts receipts into trading receipts. Accordingly, enhanced salami paid for sub-leases is treated as profits of a business rather than a capital realisation.

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Issues: Whether the sums received as salami by the assessee for granting sub-leases were trading receipts assessable as profits of business under the Income-tax Act and the Business Profits Tax Act.

Analysis: The Court examined the statutory heads of income and the distinction between capital receipts and business profits, noting that income does not include fixed capital or mere realisation of fixed capital. The Court considered authorities distinguishing mere realisation/appreciation of investment from receipts arising from carrying on a business, including Californian Copper Syndicate v. Harris, British South Africa Co. v. Commissioner of Income-tax, Kamakshya Narain Singh v. Commissioner of Income-tax, and cases on rent/letting. The Court analysed the assessee's memorandum of association and the nature of its activities, observing that the company, under clauses authorising acquisition and dealing in mining rights, acquired, developed and parceled coal-bearing areas and repeatedly granted numerous sub-leases with an intention to turn the rights to account. The Court held that these operations amounted to dealing in the property as stock-in-trade within the objects of the company rather than mere enjoyment of property as a landowner; accordingly, the enhanced salami represented profits of a trading business rather than a capital realisation.

Conclusion: The sums received as salami for granting sub-leases are trading receipts and the enhanced amounts are taxable as profits of the business; the appeals are dismissed against the assessee.

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