M/S. Aditya
Minerals Pvt. Ltd. Vs. Commissioner of Income Tax, Andhra Pradesh [1999] INSC
322 (7 September 1999)
D.P.Mohapatro,
S.S.M. Quadri, V.N.Khare Bharucha, J.
These
appeals have been referred to a Constitution Bench to resolve the apparent
conflict between the judgments of two Benches of this Court, of three learned
Judges each, in Pingle Industries Ltd. vs. Commissioner of Income-tax,
Hyderabad [(1960) 40 I.T.R. 67] and Gotan Lime Syndicate vs. Commissioner of
Income tax, Rajasthan & Delhi [(1966) 59 I.T.R. 718].
The
common question to be considered reads thus :
Whether
on the facts and in the circumstances of the case, the sum of Rs.10,752/- paid
by the assessee in the accounting year was not expenditure allowable as a
deduction in computing the business profit of the assessee- company? The
appellant-assessee obtained a lease dated 8th March, 1972 from Aditya Minerals Private
Limited. It was a term of the lease deed that the Lessor will grant lease of
the land more particularly described in Schedule `A attached to this lease deed
and forming part of the same for a period of FIFTEEN YEARS from first December,
One thousand nine hundred and seventy one at a monthly rent of Rs.35/- (Rupees
Thirty Five) only per acre. Clause 2 of the lease deed stated that the Lessee
shall deposit with the Lessor by way of the guarantee for due performance of
this lease deed for fifteen years, the amount equal to the rent of lease of
land for the full period of lease which will be adjustable against rent of
every month. This entire guarantee deposit shall not carry any interest payable
to the Lessee by the Lessor. The lease deed granted to the assessee the liberty
to use the land for excavation purposes and subsidiary purposes.
For
the assessment years in question, the assessee claimed the rent amounts worked
out at Rs.10,752/- per annum as revenue expenditure. The claim of the assessee
in this behalf was turned down by the authorities, the Income Tax Appellate
Tribunal and, finally, by the High Court of Andhra Pradesh, against whose
judgment the assessee is in appeal.
We
find that there is a material difference in the facts of the case of Pingle
Industries Ltd. and the facts of the case of Gotan Lime Syndicate. As the
judgment in Gotan Lime Syndicate, relied upon by the assessee, clearly shows,
in that case there is no payment once for all; it is an yearly payment of
dead-rent and royalty. It is true that if a capital sum is arrived at and
payment is made every year by chalking out the capital amount in various instalments,
the payment does not lose its character as a capital payment if the sum
determined was capital in nature.
But it
is an important fact in this case that it is a case of an annual payment of
royalty or dead-rent. The judgment adds that the case of Pingle Industries Ltd.
was distinguishable because, on the facts, it was a lump sum payment in instalments
for acquiring a capital asset of enduring benefit to his trade. The Court in Gotan
Lime Syndicate took the view that the royalty payment therein was not a direct
payment for securing an enduring advantage;
it has
relation to the raw material to be obtained. The Court thus accepted the
argument on behalf of Gotan Lime Syndicate that what it got was a right to get
lime for manufacturing and the payment had a direct relation to the amount of
lime that was removed.
In the
case before us, as indicated by the lease deed, what was to be paid by the assessee
was rent for the land that was leased. It was payable at the rate of Rs.35/-
per acre per month. The assessee was required to pay in advance the rent
calculated at this rate for the entire period of the lease, i.e., fifteen
years, in the form of a deposit.
The
deposit was by way of the guarantee for due performance of this lease deed for
fifteen years, that is, towards fifteen years rent. It was adjustable against
the rent of each month and it carried no interest.
On the
facts, as it appears to us, this case is on a par with Pingle Industries Ltd.
and accordingly, the civil appeals must fail and are dismissed.
No
order as to costs.
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