- (1.) The appellant had taken 25 acres of land on lease for 15 years and had agreed to pay rent at the rate of Rs 35. 00 per month per acre. The land was taken on lease so that it could carry out excavation thereon and recover manganese ore for sale. It claimed that Rs 10,752. 00 being the yearly rent was allowable as a revenue deduction the same having been incurred in connection with the carrying on of its business of mining. Following the decision of this court in Pingle Industries Ltd. v. commissioner OF INCOME TAX the Income Tax authorities, the tribunal as well as the High court have held that the expense of Rs 10,752. 00 has to be regarded as a capital expense and not a revenue expense.
(2.) In Pingle Industries the assessee had acquired a right to extract stones by taking land on lease for a period of 12 years from a Jagirdar. The question which arose was whether the amount paid to the Jagirdar and the amount paid to the government was allowable as a revenue deduction. By a majority judgment (2:1, this court held that the assessee had acquired by his long-term lease the right to win stones. The stones in situ were not stock- in-trade in the business sense but were a capital asset which he converted into stock-in-trade and, therefore, neither the rent nor the royalty which he paid was allowable as revenue deduction as by making these payments, the assessee had acquired a capital asset of enduring benefit.
(3.) Ms Janaki Ramachandran, learned counsel for the appellant, has drawn our attention to another decision of three Judges of this court in Gotan Lime Syndicate v. commissioner OF INCOME TAX. In that case, the assessee which was carrying on the business of manufacturing lime from limestone, was granted a lease with a right to excavate limestone. The lease was initially for a period of five years and contained an option for renewal. Dead rent was charged at the rate of Rs 10. 00 per acre while royalty was charged on the amount of limestone excavated. The question arose whether the dead rent and the royalty whichwas paid was capital expenditure or business expenditure. It was held by this court that the royalty as well as the dead rent which was paid was relatable to the lime deposits and the annual amount paid by the assessee was allowable as a revenue expenditure. Reference in this judgment was made to the aforesaid decision in Pingle Industries' and in regard thereto this court observed as follows: "The case of Pingle Industries Ltd. v. commissioner OF INCOME TAX is distinguishable because on the facts it was a lump sum payment in instalments for acquiring a capital asset of enduring benefit to his trade. ";