TRADERS AND MINERS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) RAMASWAMI AND CHOUDHARY, JJ. - In this case the assessee company had purchased, on the 16th of May, 1934, six pies share in the zamindari of Masnodih Gaddi from one Tufani Singh for a sum of Rs. 40,000. On 3rd of March, 1938, the assessee company similarly purchased 3 annas 9 pies share of the same zamindari for Rs. 1,27,500 from Christian Mica Company. There are 120 mica mines located in the portion of the zamindari acquired by the assessee company. On the 7th of December, 1946, the assessee company executed an indenture of lease in favour of Kedarnath Singh for a consideration of Rs. 92,000 and a reserve rent if Rs. 3,000 per year. The lease was granted for 99 years and comprised an area of 325 acres of the zamindari. The lease related to surface right together with nine mica mines located in the area demised. The Income-tax Officer determined that the cost of the mineral right with respect to the nine miles transferred to the company would be Rs. 12,562 on a proportionate basis. After deducting this amount from the salami of Rs. 92,000 which the company received from Kedarnath Singh the Income-tax Officer found that the assessee company had made a capital gain of Rs. 79,438 and taxed this amount under section 12B of the Income-tax Act. The assessee preferred an appeal to the Appellate Assistant Commissioner but the appeal was dismissed. A further appeal was taken to the Appellate Tribunal who took the view that the cost price of the nine mines would be Rs. 20,000 and the assessee was liable to be taxed only on the amount of Rs. 72,000. It was argued before the Tribunal on behalf of the assessee that the transaction was not hit by section 12B of the Act but this argument was rejected by the Tribunal. It was contended on behalf of the assessee that section 12B of the Act was constitutionally invalid, but this contention also was rejected by the Tribunal. It was contended on behalf of the assessee that section 12B of the Act was constitutionally invalid, but this contention also was rejected by the Tribunal.

(2.) AT the instance of the assessee the Tribunal has submitted the following questions of law for the opinion of the High Court :