1975 (8) TMI 14

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....ear. In 1946, the assessee took a mining lease of those lands and developed them by incurring an expenditure of Rs. 1,90,618. The total sum thus spent by the assessee was Rs. 3,54,449 and this amount was shown in its balance-sheet as an asset as on 31 st May, 1954. In the meantime, the assessee surrendered the said lease on February 2, 1954, inasmuch as the mining operation was found to be uneconomical and then, in the next year, after writing off this amount, claimed the sum as a business loss in the assessment year under consideration. The Income-tax Officer has disallowed this claim but on appeal, the Appellate Assistant Commissioner, after taking a report, on remand from the Income-tax Officer, has allowed Rs. 1,90,618 and has disallowe....

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....." It has been argued by Mr. J. C. Pal, the learned counsel for the assessee, that inasmuch as Rs. 1,90,618 has been allowed by the appellate authorities on the basis that the assessee was a dealer in mining leases it should be held that this prospecting licence was the stock-in-trade of the assessee and as such this sum of Rs. 1,63,832 should be allowed as a revenue loss. But, the finding of the Tribunal, namely, that this prospecting licence was not the stock-in-trade of the assessee has not been questioned by the assessee in this reference and, therefore, there is no merit in this contention. Mr. Pal has also argued that this mining lease was acquired by the assessee in the course of its trading activities after the prospecting per....

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...." In cases where the expenditure is made for the initial outlay or for extension of a business or a substantial replacement of the equipment, there is no doubt that it is capital expenditure. A capital asset of the business is either acquired or extended or substantially replaced and that outlay whatever be its source whether it is drawn from the capital or the income of the concern is certainly in the nature of capital expenditure." Hence, the submission of Mr. Ajit Sengupta, the learned counsel for the revenue, is that in view of the finding of the Tribunal that Rs. 1,63,832 was incurred as preliminary expenses it should be held that this expenditure was incurred as an initial outlay for the acquisition of the said mining lease and, th....