Composite resale scheme made surplus on fireclay rights taxable as income, not a capital receipt.

The surplus from the sale of fireclay rights was taxable as income because the rights were acquired and disposed of as part of a composite scheme connected with the purchase and resale of the coal mine. The Court accepted examination of the entire chain of transactions and held that the fireclay rights were incidental to the assessee's own resale arrangement, showing acquisition for profit-making rather than as a capital holding. The resulting gain was therefore income and not a non-taxable capital receipt.

---

---

Issues: Whether the surplus arising from the sale of the fireclay rights was taxable as income under the Indian Income-tax Act, 1922.

Analysis: The assessee contended that the fireclay rights transaction was independent and that the profit was either not its own profit or was a capital receipt. The Court accepted the tax authorities' overall approach of examining the entire chain of transactions and held that the fireclay rights purchase and sale were part of the assessee's own transactions. On the facts, the fireclay rights were treated as incidental to the acquisition and resale of the coal mine, and the arrangement showed that the property was acquired for the purpose of resale at a profit.

Conclusion: The surplus was taxable, and the answer to the reference was in the affirmative, in favour of the Revenue.

Ratio Decidendi: Where related property rights are acquired and disposed of as part of a composite scheme of purchase for resale at a profit, the resulting surplus is taxable as income and not as a non-taxable capital receipt.

---