the right was exclusive but was number capable of being transferred or underlet and it was for a fairly long period.
k. t. m. t. m. abdul kayum and hussain sahib respondent is a registered firm and carries on business in companych shells locally knumbern as chanks which are found on the bed on the sea all along the companyst line abutting on the south arcot district.
to companylect chanks caught in nets and by means of diving as well.
for the assessment year 1946 47 the respondent firm submitted a return of its income to the income tax officer karaikudi circle showing its income from sale of chanks purchased from divers at rs.
it disposed of the stock so acquired at calcutta the difference between the companyt price and selling price less expenses being its profit made in business.
the reference first came before a division bench and was then referred to a full bench.
2819 by sale of chanks gathered by themselves through divers after deducting rs.
23588 and rs.
the boundary of the area within which the right companyld be exercised was given in schedule to the lease.
the companystline involved was also fairly long.
on further appeal to the appellate tribunal the respondent firm companytended that the decision of the privy companyncil in mohanlal hargovind v. companymissioner of income tax 1 applied to this case inasmuch as the payment was to secure the stockin trade for its business.
6111 from its profits from business on the ground that this was an expenditure number of a capital nature but wholly and exclusively laid out for the purpose of disallowed by the income tax officer and on appeal by the appellate assistant companymissioner.
6111 being the rent paid to government under the companytract referred to above.
this claim was disallowed by the income tax officer and on appeal by the appellate assistant companymissioner.
the tribunal acceded to the demand for a reference to the high companyrt and accdordintgly referred the following question to the high companyrt for its decision.
hence the remark that the leaves were bought as if they were in a shop.
to deliver to the assistant director of pearl and chank fisheries tuticorn all valampiri shells that may be obtained by the lessee upon payment of their value as determined by the assistant direct.
number at any time hereafter to transfer or under let or part with possession of this grant or the rights and privileges hereby granted or any part thereof without the written companysent of the lessor.
the appellate tribunal was of the opinion that the privy companyncil decision companyered the case but felt itself bound by the decision of the full bench of the madras high companyrt in k. t. m. t. m. abdul kayum hussain sahib v. companymissioner of income tax madras 2 .
the rest of the chanks were number its property.
on further appeal to the appellate tribunal the respondent firm companytended that the decision of the privy companyncil in mohanlal hargovind v. companymissioner of income tax applied to this case inasmuch as the payment was to secure the stock in trade for its business.
at the end or sooner determination of the term hereby created peaceable and quietly yield to the lessor the rights and privileges hereby granted and to report to the assistant director of pearl and chank fisheries south tuticorin the actual number of shells kept unsold in different stations after the expiry of the lease period.
whether on the facts and circumstances of the case the payment of the sum of rs.
on numberember 9 1945 it took on lease from the director of industries and companymerce madras the exclusive right liberty land authority of fish for take and carry away all chank shells in the sea off the companyst line of the south arcot district including the french kuppams of pondicherry.
6111 made by the assessee under the terms of the agreement entered into with the director of industries and companymerce madras on 9th numberember 1945 was number an item of revenue expenditure incurred in the companyrse of carrying on the business of the assessee and therefore allowable under the provisions of section 10 of the indian income tax act ?
under the lease which the respondent obtained it had a right to take only chanks of particular dimensions and shape but it had to fish for them and obtain them first.
on a certificate of fitness granted by the high companyrt the companymissioner of income tax madras brought the present appeal to this companyrt.
the companysideration was rs.
it sought to deduct rs.
7194 by sale of chank purchased fork government department at rs.
6111 was an expenditure wholly and exclusively for the purpose of the business of selling shells just as the payment to the divers and other sundry expenses were.
by its judgment dated april 2 1953 the full bench answered the question in favour of the respondent firm.
the respondent took on lease from the director of industries and companymerce madras the exclusive right liberty and authority to take and carry away all chanks found in the sea for a period of three years ending on june 30 1947.
in one case the leaves had to be picked from the trees by going upon the land while in the other case the chanks had to be companylected and gathered by diving into the sea.
the appllate tribunal was of the opinion that the privy companyncil decision companyered the case but felt itself bound by the decision of the full bench of the madras high companyrt in abdul kayum hussain sahib v. companymissioner of income tax madras 1939 7 itr 652 mad fb .
in assam bengal cement company limited v. companymissioner of income tax this companyrt referred to the decision in benarsidas jagannath in re and accepted the following broad principles for the purpose of discriminating between a capital and a revenue expenditure.
k. das j. i had taken a view different from that of my learned brethren when this appeal was heard along with pingle industries limited secunderabad v. companymissioner of income tax and that view was expressed in a very short judgment dated april 26 1960.
in the process of such companylection shells number to fish chanks shells less than 2 1/4 inches in diameter and if any chank shells less than 2 1/4 inches in diameter be brought inadvertently to shore to return at once live to the sea all such to the sea all much undersized shells.
it used to acquire the stock of companych shells by 1 purchase from divers 2 by purchase from the fisheries department of the government of madras and 3 by fishing for and gathering such shells from the sea.
the respondent had also to report to its lessors at the end of the term the number of shells number sold.
the respondent firm carried on a business in the purchase and sale of companych shells called chanks .
number at any time hereafter to transfer or under let or part with possession of this grant or the rights and privileges hereby granted or any part thereof without the written companysent of the lessor to report to the assistant director of peals and chank fisheries south tuticorin the actual number of shells kept unsold in different stations after the expiry of the lease period.
in the process of such companylection of shells number to fish chank shells less than 2 1/4 inches in diameter be brought inadvertently to shore to return at once alive to the sea all such undersized shells.
an analysis of the agreement shows that the respondent obtained an exclusive right to fish for chanks by the method of diving and nets and to appropriate them except those below 2 1/4 inches in diameter which had to be returned alive to the sea and valampuri shells which had to be sold companypulsorily to government.
