TaxTMI 
TaxTMI 
1971 (8) TMI 16
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....the assessee assessable to tax under the provisions of the, Income-tax Act ? " The original assessee was Maharaja Pratap Udainath Sah Deo, the holder of an impartible estate. On January 22, 1944, the assessee granted a lease of certain mining rights to Aluminium Production Company Ltd. in respect of 171.03 acres of land for a period of 30 years. The main terms were as follows : (i) Salami (inclusive of Moharkari and Dewani Megi amounting to Rs. 5,000) Rs. 2,25,000 (ii) Rent 8 as. per acre (iii) Royalty 6 as. per ton. (iv) Minimum royalty Rs. 22 per acre. Previously, the assessee had granted a prospecting lease of 311 acres of land to the same company on March 20, 1941, for a period of one year. The area covered by that lease, th....
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....allowed the appeal of the revenue and restored the order of the Income-tax Officer. The High Court held that out of the sum of Rs. 2,20,000 the amount which could be regarded to be salami and treated as a capital receipt could reasonably be estimated at a sum of Rs. 20,000 which was assessable to tax but the remaining amount of Rs. 2,00,000 was revenue receipt and was taxable as such. The question referred was reframed as follows ; " Whether, on the facts and the circumstances of this case, the Tribunal was right in holding that the sum of Rs. 2,20,000 or any portion thereof was the income of the assessee assessable to tax under the provisions of the Income-tax Act ? " It was answered partly in favour of the assessee but substantially i....
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.... the other circumstances, to ascertain the intention of the parties. (See Commissioner of Income-tax v. Panbari Tea Co. Ltd.) Now the Appellate Tribunal appears to have based it, decision only on the difference between the amount of salami and the rate of royalty between the prospecting lease which was granted in 1941 and the subsequent lease of 1944. This is what the Tribunal stated in paragraph 7 of its order : " In 1941, the assessee had granted a prospecting lease in favour of the very lessee taking a much smaller premium fixing the royalty at 8 as. per ton. He has not shown any justifiable reason for fixing up a lower amount of 6 as. per ton by way of royalty in the later lease. We found that out of the area of 171 acres that was c....
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.... The object of a prospecting lease is entirely different and, since the period was only one year, it is quite reasonable to assume that the royalty was fixed at a higher rate because it was not known how much quantity of mineral would be extracted during that period. The lease of 1944 was for a much longer period, i.e., 30 years. When a lessor creates a lease for that by way of salami or period it is legitimate for him to charge more amount premium as he is transferring possession of the demised land for a considerably long period. A lessor may also think that the rate of royalty need not be the same as it was in the case of the prospecting lease and taking an overall business view royalty at a slightly less rate may be charged. The Tribuna....
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....the terms of those leases the Income-tax Officer had reached the conclusion that the amount of salami represented the capitalised royalty. We cannot read the order of the Tribunal in that way. The Tribunal agreed only with the operative part of the order of the Income-tax Officer but not with his reasoning. At any rate the Appellate Assistant Commissioner had submitted a remand report pursuant to a previous order of the Tribunal and it does not appear that the facts given in that report were at all considered by the Tribunal although the High Court based its decision largely on them. The terms of the leases on which the High Court relied related to the years 1933, 1938 and 1945 ; the rate of royalty varied from 8 annas to 12 annas per ton a....
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.... these figures showed that the major part of the salami of Rs. 2,25,000 had been taken in exchange for the royalty that would have accrued during the period of the lease. We have already pointed out that a comparison of the terms of the prospecting lease which was only for one year with the subsequent lease of 1944 which was for 30 years could not furnish a proper basis for determining the point in dispute. Moreover, the High Court lost sight of the fact that the report of the Mines Superintendent was made long after the date of the 1944 lease and it could not be assumed that at the time of the granting of that lease the assessee knew how much quantity of the mineral could be extracted from the area which had been leased out. Even the High ....