On an application made by the Revenue the Income Tax Appellate Tribunal hereinaf ter referred to as the Tribunal referred the question as aforesaid to the High Court under s. 256 of the Income Tax Act, 1961.
The assessee companypany filed a suit in civil companyrt for ejecting the Railway from the encroached area but it failed in the suit.
All the four parties namely, Sindri Fertilizers, Government of Rajasthan, Railway Board and the assessee companypany negotiated the matter and ultimately the Railway Board agreed to shift the railway station, track and yards to another place or area offered by the assessee.
On the shifting of the Railway track and Sta tion the assessee carried out mining in the erstwhile Rail way Area and it raised gypsum to the extent of 6,30,390 tons and supplied the same to Sindri Fertilizers.
The assessee companypany claimed deduction of Rs.3 lakhs paid to the Northern Railway for the shifting of the Railway Station for the assessment year 1964 65.
to the assessee.
On appeal by the assessee, the Appellate Assistant Commissioner companyfirmed the order of the Income Tax Officer.
3 lakhs was a capital expenditure and it companyld number be a revenue expendi ture.
From the Judgment and Order dated 24.4.1975 of the Rajasthan High Court in D.B. Civil I.T.R. No.
In addition to that the assessee companypany further paid a sum of Rs.7,300 to the Railways as companypensation for the surface rights of the leased land.
Clause 7 granted liberty to the assessee to enter upon and use any part of parts of the surface of the said lands for the purpose of stacking, heaping or depositing thereon any produce of the mines or works carried on and any earth materials and substance dug or raised under the liberties and powers.
Clause 4 companyferred liberty on the lessee to make roads and ways and use existing roads and ways.
The High Court held that since on payment of Rs.3 lakhs to the Rail way the assessee acquired a new asset which was attributable to capital of enduring nature, the sum of Rs.
The assessee companypany, there upon, approached the Government of Rajasthan which had 45 per cent share of it and the Railway Board for negotiation to remove the Railway Station and track enabling the asses see to carry out the mining operation under the land occu pied by the Railways hereinafter referred to as the Rail way Area .
Pursuant to the agreement, the assessee companypany paid a sum of Rs.3 lakhs as its share to the Northern Railway towards the companyt of shifting of the Railway Station and other companystructions.
On further appeal by the assessee the Income Tax Appellate Tribunal held that the payment of Rs.3 lakhs by the assessee companypany was number a capital expenditure, instead it was a revenue expenditure.
The Income Tax Officer rejected the assessees claim on the ground that it was a capital expenditure.
The Natural Science India Ltd. by a deed of assignment dated December 11, 1948 assigned the rights under the lease to the Bikaner Gypsums Ltd., a companypa ny wherein the State Government owned 45 per cent share.
The lease was liable to be renewed after expiring of 20 years.
262 NC of 1976.
12 lakhs in curred by the Railways in shifting the railway station, yards and the quarters.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The Natural Science India Ltd. predecessor ininterest of the assessee acquired a lease from the Maharaja of the erstwhile Bikaner State on September 29, 1948 for mining of gypsum for a period of 20 years over an area of 4.27 square miles at Jamsar.
The question referred to the High Court was as under Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the payment of Rs.3 lakhs to the Northern Railway was a revenue expenditure and was a deduction allowable under the Income Tax Act.
The Bikaner Gypsums Ltd. hereinafter referred to as the asses see carried on the business of mining gypsum in accordance with the terms of companyditions stated in the lease.
The Judgment of the Court was delivered by SINGH, J. This appeal is directed against the judgment and order of the High Court of Rajasthan dated 24.4.1975 answering the question referred to it by the Income Tax Appellate Tribunal in the negative, in favour of the Revenue and against the assessee.
Clause 3 granted liberty to erect, companystruction, maintain and use on or under the land any engines, machinery, plant, dressing, floors, furnaces, brick kilns, like kilns, plaster kilns etc.
The asses see entered into an agreement with Sindri Fertilizers, a Government of India Public Undertaking for the supply of gypsum of minimum of 83.5 per cent quality.
P. Vaish, S. Rajappa, Vinay Vaish, S.K. Aggarwal and Ms. A. Subhashini for the Respondents.
45 of 1969.
Clause 2 of Part II of the lease authorised the lessee to sink, dig, drive, quarry, make, erect, maintain and use in the said lands any borings, pits, shafts, in clines, drifts, tunnels, trenches, levels, water ways, airways and other works and to use, maintain, deepen or extend any existing works of the like nature in the demised land for the purpose of winning and mining of the mineral.
Clause 8 companyferred liberty on the lessee to enter upon and occupy any of the surface lands within the demised lands other than such as are occupied by dwelling houses or farms and the offices, gardens and yards.
Under the lease, the assessee was companyferred the liberties and powers to enter upon the entire leased land and to search for win, work, get, raise, companyvert and carry away the gypsum for its own benefits in the most economic, companyvenient and beneficial manner and to treat the same by calcination and other proc esses.
Mrs. Anjali Verma for JBD Co. and D.N. Misra for the Appellant.
Under the agreement the Railway authorities agreed to shift the station and all its establishments to the alternative site offered by the assessee companypany and it was further agreed and all the four parties, Sindri Fertilizers, Govern ment of Rajasthan, Indian Railway and the assessee companypany shall equally bear the total expenses of Rs.
The circumstances leading to the reference and the appeal was necessary to be stated.
Since, on research and survey the assessee companypany found that under the Railway Area a high quality of gypsum was available, which was required as raw material by the Sindri Fertilizers.
Clause 9 companyferred power on the lessee to acquire, take up and occupy such surface lands in the demised lands as were then in the occupation of any body other than the Government on payment of companypensation and rent to such occupiers, and if the lessee is unable to acquire such land from the tenants and occupiers, the Government undertook to acquire such surface land for the lessee at the lessees companyt.
