Law:

Section:

Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Assessment year 1944-45 - Assessee was holder of an impartible estate - In 1944 he granted lease of certain mining rights to a company in respect of some land for 30 years, for a consideration of Rs. 2,25,000 as salami, a rent of 8 annas as per acre and a royalty of 6 annas per ton - In 1941 assessee had granted prospecting lease to same company for one year of area which included substantially area leased out subsequently - Terms of 1941 lease were that salami was payable at rate of Rs. 100 per acre and royalty at rate of 8 annas per ton - Based on comparison of both leases Tribunals conclusion was that assessee took under 1944 lease a larger amount by way of salami but a lesser amount by way of royalty, and that out of total salami Rs. 2,20,000 was in substance advance payment of royalty - High Court held that amount to be regarded as salami and treated as a capital receipt could reasonably be estimated at Rs. 20,000 but remaining amount of Rs. 2,00,000 was revenue receipt and was taxable as such - Whether nomenclature used may not be decisive or conclusive but it helps courts, having regard to other circumstances, to ascertain intention of parties - Held, yes - Whether object of prospecting lease was entirely different and, since period was only one year, it was quite reasonable to assume that royalty was fixed at a higher rate because it was not known how much quantity of mineral would be extracted during that period - Held, yes - Whether, however, when assessee created lease for longer period it was legitimate for him to charge more amount by way of salami or premium as he was transferring possession of demised land for a considerably long period and rate of royalty also need not be same as it was in case of the prospecting lease - Held, yes - Whether, therefore, mere fact that amount taken on account of salami was substantial and on face of it looked considerably large, did not justify view that amount represented capitalised royalty - Held, yes - Whether, further, onus was on revenue to show that what was stipulated in lease as a payment by way of salami was royalty camouflaged as salami,…

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