K.S. Hegde. J. - (1.) These appeals by certificate arise from the decision of the High Court of Delhi in a reference Under Section 66(1) of the Income Tax Act, 1922 which will be hereinafter referred to as 'the Act'.
(2.) The controversy in these appeals relate to the assessment of the assessee appellant for the assessment years 1948-49 and 1949-50. The assesses was taxed as a non-resident. The assessee is a company incorporated on January 17, 1945 as a Public Company with its Head Office at Ramganjmandi in the State of Kotah an Indian State at that time The Maharaja of Kotah granted to the assessee company a monopoly for excavating kacha stone slabs in the Nizamat, Chechat and-Ramganjmandi in the State on May 2, 1945. Clauses '8 and 19 of the agreement entered between the Maharaja and the assessee are relevant for the present purposes. Clause 18 says: (i) In consideration of concessions and privileges granted by the grantor and in lieu of income-tax, super-tax and excess Profit Tax, the grantee covenant to pay to the grantor royalty on the stone excavated at the rate of rupee one per 100 sq. ft. subject to the minimum amount of Rs. 1,50,000/-per financial year. Provided that the aforesaid rate of Rs. 1/-per 100 sq. It will be operative so long as the selling rate of unpolished slabs does not exceed Rs. 10/-per 100 sq. ft. In the event of the selling rate going above this figure the royalty per 100 sq. ft shall be increased by 26% of the excess over ten rupees. (ii) The minimum royalty will be payable in four equal instalments in advance every quarter. Provided that if in any quarter the royalty payable calculated at the rate mentioned in sub-para (1) exceeds in instalments of minimum royalty paid in advance for that quarter, the balance shall be made up within the next quarter. 19. In addition to the Royalty mentioned in clause 18 the grantee have expressly covenanted to pay royalty on polished stone at the rate of Rs. 1/-per 100 sq. ft. payable every quarter.
(3.) So far as the minimum royalty is concerned both the Appellate Assistant Commissioner as well as the Tribunal have come to the conclusion that the same is deductible allowance Under Section 10(2)(xv) of the Act. But as regards the excess royalty, they held that the same cannot be given deduction to in view of Section 10(4) of the Act on the ground that it was given in lieu of Income tax, Super-tax and Excess profit tax.;