SIKRI, J.: - (1.) THE following Judgment of the court was delivered by
(2.) .These three appeals are directed against the judgment of the Rajasthan High court in a consolidated reference made to it by the Income Tax Appellate tribunal, Bombay Branch, under S. 66(1) of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act). The question referred to by the Appellate tribunal is as follows 'whether on the facts and in the circumstances of the case. the sum of Rs. 96,000.00 paid by the assessee during each of the relevant accounting,, years was rightly allowed as a revenue deduction in computing the business profits of the assessee company.' . The reference arose out of the following facts : The appellant, M/s Gotan Lime Syndicate, hereinafter referred to as the assessee, is a registered firm and carries on the business of manufacturing lime from lime-stone. By an indenture dated 4/03/1949, the assessee was granted the right to excavate lime-stone in certain area at Gotan and Tunkaliyan, subject to certain conditions. It is not necessary to detail the conditions contained in this indenture except that the lease expired on 14/07/1952. The lease was extended from time to time by the government for short periods. The last letter dated 17/12/1952, extending the lease was in the following terms : 'In continuation to this office letter cited above, government have been-pleased to convey extension up to the 31/03/1953, or till the finalisation of the proposals for leasing out the area whichever may be shorter, with the clear understanding that you will have to vacate the area, when you may be asked to do so, and will have no claim whatsoever over the area after it' By letter dated 1/12/1953, the government intimated to. the Director of Mines and Geology, Rajasthan, Udaipur, that the government had adopted a new policy for leasing out lime-stone quarries. The proposal Was to divide the lime-stone quarries in Jodhpur Division in blocks of 5 sq. miles each and the dead rent was to be charged at Rs. 10.00 per acre while royalty was to be charged at Re. -/1.00 per md. of lime-stone. It was further contemplated that the period of lease will be for five years with option to renewal for another five years, and the minimum area to be granted to each party would be 10 sq. miles and maximum 30 sq. miles and the other terms and conditions would be generally the same as were in practice in such cases. But as it was necessary to give legal form to these proposals, the Director of Mines and Geology was directed to frame rules on the lines of the Mineral Concession Rules. It appears that on 4/10/1954, the government sanctioned the leasing out of 15 sq. miles of lime deposits to the assessee. The government in this letter further stated as follows : '2. As regards the payment of arrears by M/s Gotan Lime Syndicate for the period between 30-7-52, and the date the new lease is given effect to, it has been decided that they may pay @ Rs. 96,000.00(Rupees Ninety six thousand) per year which has also been agreed to by them before the Chief Minister (Industries) on the basis of dead rent under the new proposals for 15 sq. miles at Rs. 10.00 per acre. 3. Lease agreement may be got executed by them at an early date and the arrears recovered. 4. The new rules may be incorporated in the Mines Mineral Concession Rules for Rajasthan.' It further appears that the assessee never executed any lease but continued,to work the lime deposits and the payments to be made were finalised by letter dated 30/11/1959 from the Mining Engineer, Jodhpur, to the assesee. The Mining Engineer stated in this letter as follows : 'On checking the figures of export of lime stone, limekali and lime kachra for the settlement of royalty, the figures of royalty amount payable in the following years is as under : JUDGEMENT_1564_AIR(SC)_1966Html1.htm At the end of each financial year the accrued royalty amount is far less actually and as such as per agreement royalty payable is Rs. 96,000.00 in all the years above written. The royalty for each of these years was settled after the end of each year i.e. in the subsequent year.' At this stage it would be convenient to mention the terms on which the assessee remained in possession. It is common ground that these terms are contained in the Jodhpur Division Vindhyan Lime-stone Mining Leases Rules, 1954, and the Rajasthan Minor Mineral Concession Rules, 1955. These rules were made in exercise of the powers conferred by r. 4 of the central Mineral Concession Rules, 1949. In the Jodhpur Division Vindhyan Lime-stone Mining Leases Rules, 1954, 'Mining' lease' was defined to mean 'a lease to mine, quarry, bore, dig, search for, win, work and carry away lime-stone'. Under these rules the assessee had to make an application for a mining lease in response to a Notification issued by Director of Mines and Geology, Rajasthan, inviting applications in respect of a lime-stone deposit. Rules 13 provided that the lease shall be in respect of plots comprising of 5 sq. miles each. The applicant had to deposit security equal to one-fourth of the annual dead rent of the lease in cash or government bonds, for due observance of the terms and conditions of the lease. The lessee was entitled to transfer his lease or any right, title or interest therein, to a person holding a certificate of approval on payment of a fee, subject to the previous sanction of the Director of Mines and Geology, and subject to some other conditions. Rule 18 prescribed a period of five years for a lease and the lease was renewable at the option of the assessee for a further period of five years. Rule 19 prescribed the conditions which had to be inserted in the lease. The following conditions are relevant (1)the lessee shall not encroach upon cultivable land or Bapi holdings, within, the leased area, unless otherwise after ,obtaining permission of Director of Mines and Geology; (2)the lessee shall perform a minimum development work as instructed from time to time by the Director of Mines and Geology, whose instructions in this respect and in maintaining standards of lime products, and arranging an adequate supply of the same in the market at reasonable price shall be binding upon the.' lessee;. (3)On expiry or sooner determination of lease the lessee shall remove all stock of limestone or its products and movable property within six months from the date of expiry of the, lease and shall pay the royalty on the stock within this period. There was a proviso to this condition to the effect that the Rajasthan government would be free to lease out the deposits afresh to any person on expiry of the tenure of the lease, and the lessee shall hand over the quarry to the new lessee in a workable condition. Rule 31 of the Rajasthan Minor Mineral Concession Rules, 1955, prescribed inter alia the following conditions (i) The lessee shall pay the royalty on minerals despatched from, the leased area at the rate specified in the First Schedule to these rules. (ii)The lessee shall pay for the surface area used by him for the purpose of mining, surface rent at such rate 'not exceeding the land revenue as may be specified by the government in such case. (iii) The lessee shall also pay, for every year, such,yearly deadrent within the limits specified in the Second Schedule to these rules as may be. fixed, by the Director in each case, and if the lease permits. the working of more than one mineral in the same area; the government may charge separate deedrent in respect of each,mineral. (iv)The lessee shall keep correct accounts showing the, quantity and particulars of all minerals obtained from the mines, etc. (v)The lessee shall allow existing and future licensees or lease-holders of any land which is comprised in or adjoins or is reached by the land held by the lessee, reasonable facilities for access thereto. (vi) The lessee may erect on the area granted to him any building required for bona fide purposes and such buildings shall be the property of the government after expiry of the lease. (Vii) The lessee if he discovers any new mineral was entitled to apply for a mining lease in respect of the newly discovered mineral. (viii) The government shall the have right of preemption at current market rates over all minerals demised by the lease and shall be indemnified by the lessee against claims of any third party in respect of such minerals. (ix) In case of any breach on the part of the lessee, of any covenant or condition contained in the lease other than a condition regarding rent or royalty, the government may determine the lease and take possession of the said premises, or in the alternative, may impose payment of a penalty not exceeding twice the amount of the annual dead-rent from the lessee. (x) At the end or sooner determination of the lease the lessee shall deliver up the said premises and all mines, if any, dug therein in a proper and workable state, save in respect of any working as to which the government might have sanctioned abandonment.
(3.) FOR each of the assessment years 1954-55, 1955-56 and 1956-57, the assessee paid a sum of Rs. 96,000.00 to government and claimed it as a revenue deduction against its profits for those years. The Income Tax Officer disallowed this expenditure, as being of a capital nature. The Appellate Assistant Commissioner upheld his view, but on appeal, the Appellate tribunal held that the payment should be treated as a revenue expenditure. The High court held on a reference that the payment was capital expenditure and could not be allowed as a revenue deduction in computing the business profit of the assessee. These appeals raise the difficult question of distinguishing between revenue expenditure and capital expenditure. The learned counsel for the assessee, Mr. N. A. Palkhiwala, and the leaned counsel for the Revenue, the Attorney General both cited a number of cases before us but we agree with Hidayatullah J.'s observations in Abdul Kayoom v. Commissioner of Income Tax(1) that 'none of the tests (laid down in various Authorities) is exhaustive or universal. Each case must depend on its own facts, and a close similarity between one case and another is not enough , because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases...... by matching the colour of one case against the colour of another.' Therefore, we do not propose to review all the cases cited before us, especially as this court has, after reviewing the relevant cases, formulated certain tests in Assam Bengal Cement Co. Ltd. v. Commissioner of Income Tax(1). The cases were reviewed again in Pingle Industries Ltd. v. Commissioner of Income-tax, Hyderabad (2) , and Abdul Kayoom v. Commissioner of Income Tax (3). In this case, in view of the-arguments of the respondent and the judgment of the High court, we have to concentrate on the following test laid down by Viscount Cave in British Insulated and Helsby Cables Ltd. v. Atherton (4): 'But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.' The learned Attorney-General, relying on this test, urges that what the assesses got by entering into the mining lease was an asset or advantage of an enduring nature; that this asset or advantage was an interest in land for not only has the assessee the right to go upon the land and excavate but also has the right to use part of the area as premises, and it was by virtue of this that the assessee eventually got raw-material for his manufacturing business. ;