Law:

Section:

Section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922] - Business expenditure - Allowability of - Assessment year 1952-53 - Whether amount paid by assessee for obtaining lease of certain areas for mica mining for twenty years which had already been worked by other companies for 15 years, was an expenditure of capital nature - Held, yes - Whether, further, prospecting licence fee paid for one year for initiating business was also an expenditure of capital nature - Held, yes - Whether, therefore, both expenses in question were not allowable as deduction under section 10(2)(xv) of 1922 Act - Held, yes FACTS The assessee was granted lease of certain areas for mica mining for twenty years. Those areas had been worked by other companies for 15 years. The assessee paid Rs. 1,57,150 for that lease which included payment of Rs. 3360 towards the mica scrap lying on the surface. For the assessment year 1952-53, the assessee claimed 1/20th of the lease amount that is to say Rs. 7,857 as revenue expenditure incurred during that year which was rejected by the ITO on the ground that the money was paid for the value of the land which it had acquired because the mine had already been worked. The ITO also disallowed assessee's claim for Rs. 3,200 as the fee paid by it for prospecting licence on the ground that the licence was obtained by the assessee only that year, that the fee was paid in addition to the royalty payable on the value of the emeralds excavated and sold and that it was an initial expenditure for procuring a right to prospect mines On appeal, the Appellate Assistant Commissioner confirmed the disallowance of Rs. 7,857 as, in his view, it was of a capital nature expended for the acquisition of a capital asset. The claim for Rs. 3,200 was negatived on the ground that under the licence the assessee had a right to win and commercially exploit the minerals which the assessee actually carried out. On second appeal, the Tribunal allowed Rs. 3,360 paid for mica scrap lying on the surface as a revenue expenditure incurred in the acquisition of stock-in-trade, but disallowed the claim for the balance of Rs. 1,53,800…

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