TaxTMI 
TaxTMI 
1960 (11) TMI 25
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....r and owns considerable properties. In the accounting years he granted licences to different parties to prospect for Bauxite. The particulars of the licences are : Received from Date of the Period of Assessment Amount licence licence year received Rs. 1. Aluminium Corporation of India Ltd. 20-1-1945 6 months 1945-46 15,290 2. Indian Aluminium Co. Ltd. 26-5-1945 1 year 1946-47 1,24,789 3. Dayanand Modi 7-5-1945 6 months 1947-48 1,500 4. Indian Aluminium Co. Ltd. 14-8-1945 1 year 1947-48 70,146 The Income-tax Officer held that these amounts were received as revenue payments and were, therefore, taxable. On appeal to the Appellate Assistant Commissioner, the amounts were held to be capital receipts but this order was set ....
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....r courses, roads and ways and to set up, erect and construct such temporary engines, machinery sheds and things as may be reasonably necessary for effectually carrying on the prospecting operations hereby licensed. (c) To remove, take away and appropriate samples and specimens of bauxite of every quality, kind and description and in reasonable quantities not exceeding one hundred tons in all during the terms of this grant. (d) For the purposes aforesaid to clear undergrowth brushwood and to make use of any drains or water courses on the lands or for clearing sites of working from any water which may flow or accumulate thereon or therein. The periods of the licences were comparatively short, 6 months in two cases and a year each in the....
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....s the lessees paid a sum by way of salami (premium) and an annual sum as royalty on the amount of coal raised subject to minimum annual royalty. The lessor had the right to re-enter in case of failure to pay the royalty. It was contended by the assessee there that the sums received as salami and royalty were capital receipts representing the price of the minerals removed. It was held that salami was a single payment paid for the acquisition of the right to enjoy the benefits granted by the lease and was a capital asset and that the two other forms of royalty--both minimum and per ton--flowing from the covenants in the lease were not on capital account and fell within the meaning of other income under section 12 of the Act. Lord Wright said ....
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....ts were capital or revenue and it was held that the amount of Rs. 5,25,000 received as salami and the amounts received as cesses were capital receipts and, therefore, not taxable. Manohar Lai, A. C. J., held that the amount was received by way of settlement and not by way of salami but S. K. Das, J. (as he then was), held that salami was a lump sum payment for rights which were being given to the licensee, namely, the right to prospect for a certain number of years and also the right to get mining leases and, therefore, salami in question was undoubtedly a capital receipt. In Province of Bihar v. Maharaja Pratap Udai Nath Sahi Deo it was contended that payments in the nature of premium or salami were not part of the income of the assessee....
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....g but that was not the ground on which this court decided the case of salami. The definition of salami was a general one, in that it was a consideration paid by a tenant for being let into possession for the purpose of creating a new tenancy. In Raja Bahadur Kamakshya Narain Singh's case also the Privy Council laid down the definition of salami in general terms and described the characteristics of a payment by way of salami without any reference to the nature of the lease. In reply to the argument of counsel for the appellant, Mr. Rajagopala Sastri for the respondent argued that the question was whether the licensor had allowed the licensee to take his capital or he had allowed him to use the capital. If it was the former, the receipts we....
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.... The terms of the covenant in the present case which have been quoted above show that the transaction was not one merely of the user of capital assets but of their realisation. By this test, therefore, the receipts were on capital account and not revenue. Counsel then referred to a judgment of the Patna High Court in H. P. Bannerji V. Commissioner of Income-tax where it was held that compensation received by the assessee for use by the military of his lands for a short period was a revenue receipt. In that case the assessee purchased 13 bighas of land for purposes of setting up a market. That plot was requisitioned by the military authorities under the Defence of India Rules and the assessee received compensation for the use of the land. It....