1982 (1) TMI 44

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.... of the assessee-firm for the year 1973-74. The facts briefly stated are that Rani Padmavati Devi, wife of the former ruler of Khairagarh, obtained the lease of a forest block from the ruler on 29th December, 1947. The area included within the block was 5,585 acres. After the merger of the State of Khairagarh, the Governor of Madhya Pradesh on 23rd June, 1953, executed a lease deed in favour of the Rani. Under this lease the Rani is required to pay annual rent of Rs. 100. The lease is a perpetual lease. The lease authorises the Rani to exploit the forest within the leased area in accordance with the working plan sanctioned by the Government. It further provides that the Rani shall have a right over all the timber and fuel trees and all othe....

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....e activity of selling the forest produce could not be held to be business. The ITO strongly relied upon the case of Ramakrishna Deo v. Collector of Saks Tax [1955] 6 STC 674 (Orissa) in support of the finding that the activity of merely selling forest produce does not constitute business. The case of Ramakrishna Deo was decided under the Orissa Sales Tax Act. Under the Sales Tax Acts, what is relevant is whether the person concerned is a dealer carrying on the business of sale or purchase which may make him liable for payment of sales tax. As the Government and other proprietors of forest while granting leases for cutting and removing forest produce cannot be said to indulge in the sale of forest produce with frequency and continuity, it ha....

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....or did it acquire or sell coal raised by the sub-lessees. The Supreme Court held that the transaction of granting sub-leases was in the nature of a trading transaction. It was observed that the ownership of property and leasing it out may be done as a part of a business, or it may be done as a land owner. Whether it is the one or the other must necessarily depend upon the object with which the act is done. This case was followed in S. G. Mercantile Corpn. P. Ltd. v. CIT [1972] 83 ITR 700 (SC). In this case a company took on lease a market place. It developed the same and let out the portions thereof as shops, stalls and ground spaces to shopkeepers, stall-holders and daily casual market vendors. It was held that the taking of property on le....