Hidayatullah, J. - (1.) These are four appeals filed by the assessee Company (Karanpura Development Co., Ltd.) in respect of two assessment years, 1949-50 and 1950-51 and two chargeable accounting periods under the Business Profits Tax Act, January 1, 1948 to December 31, 1949. By these appeals, the assessee Company impugns the judgment of the High Court of Calcutta, dated September 18, 1958, answering a common question "whether on the facts and in the circumstances of the case, the sums received as salami by the assessee for granting sub-leases were trading receipts in its hands and the amount of profit therein is assessable under the Indian Income-tax Act" in the affirmative and against the assessee Company. The case was certified to this Court by the High Court under S. 66A (2) of the Income-tax Act and presumably also read with S. 19 of the Business Profits Tax Act. "
(2.) The facts of the case are as follows:In 1915, the Court of Wards representing the proprietor of the Ramgarh Estate granted a prospecting licence to M/s Bird and Co., of an area of coal-bearing lands described as the Karanpura Coal Fields. The licence was for 12 years but was renewable for another term of 12 years. The licence reserved to the licensee the right to take coal mining leases of the Karanpura Coal Fields or any part thereof. The licence was transferable. The assessee Company was incorporated in 1920. The objects for which the assessee Company. was formed, inter alia, were: " (1) to purchase and acquire from the owners or proprietors thereof or other persons interested therein underground coal mining, relative rights of and in the Karanpura Coal Fields in the Province of Bihar and Orissa at such price or prices for such period or periods and generally upon such terms and conditions as the Directors may determine and for that purpose to adopt, enter into and carry into effect all contracts, agreements and other documents and in particular to enter into and carry into effect, with or without modifications either before for after the execution thereof the agreement referred to in Art. 3 of the Company) Article., of Association. (2) To sell, dispose of and otherwise deal in all such underground coal mining and relative rights upon such terms and conditions as may appear for the benefit of the company. 3. To carry on the trades or businesses of colliery proprietors, coal merchants miners, smelters, engineers limeburners and manufacturers of brick, tile cement lime, coke and other bye-products of coal in all their respective branches. ********** ********** (6) To prospect for, crush, win, get quarry, smelt, calcine, refine, dress, amalgamate, manipulate and prepare for market coal, ore, metal, and mineral substances of all kinds, and to carry on any other prospecting, mining or metallurgical operations, which may seem conducive to any of the company's objects and to buy, sell, manufacture, and deal in minerals, plants, machinery implements, conveniences, provisions, and things capable of being used in connection with prospecting, mining or metal lurgical operations or required by workmen or others employed by the company. ********** (34) To acquire by purchase, lease, exchange, or otherwise, lands, buildings, and hereditaments of any tenure or description and any estate or interest therein, and any rights over or interest, therein, and any rights over or connected with land, and either to retain the same for the purpose of the company's business or to turn the same to account as may seem expedient. ********** (52) To sell, improve, manage, develop, exchange, lease, mortgage, dispose of turn to account, or otherwise deal with all or any part of the property and rights of the company."
(3.) On May 30, 1921, M/s Bird and Co., assigned their right's under the prospecting licence to the assessee Company. The assessee Company then acquired from time to time diverse coal mining leases over areas aggregating 20,000 standard bighas. The assessee Company developed these coal fields by providing means of communication, etc., and then sub-leased them to collieries and other companies. In the head leaseses which the assessee Company had obtained, the term was 999 years. In the sub-leases the term was the balance of the period minus 2 days. Apart from obtaining head leases, developing the coal fields and sub-leasing its rights, the assessee Company admittedly did not do any business. It never worked the coal fields with a view to raising coal; nor did it acquire or sell coal raised by the sub-lessees. As a condition of the acquisition of the head leases, the assessee Company had paid salami at the rate of Rs. 40 per standard bigha, and had agreed to pay royalty at certain rates. From the sub-lessees, the assessee Company charged salami at the rate of Rs. 400 per standard bigha and royalties at higher rates. For the assessment year, 1949-50, the assessee Company realised Rs. 19,14,035 as salami for the mining sub-leases granted in the relevant account year, and in the assessment year, 1950-51, it realised Rs. 3,96,000 on the same account. We are not concerned with the income of the assessee Company arising from the enhanced royalty because the assessee Company admit that that income would be taxable. assessee Company's contention that the excess amount realised by way of increased salami was on capital account and could neither be included in the assessable income for purposes of income-tax nor in the profits for purposes of business profits tax was rejected. Two orders in the income-tax cases and two in the business profits tax cases were passed on January 30, 1952. The assessee Company filed four appeals before the Appellate Assistant Commissioner, who dismissed them on March 31, 1953. Four appeals. were then filed before the Income-tax Appellate Tribunal, Calcutta Bench, but were dismissed by a common order dated December 31, 1953. The Appellate Tribunal was then moved for a reference in all the four appeals, and the common question to which we have referred, was raised and referred by the Tribunal with the result already indicated.;