Law:

Section:

Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Assessee purchased coal mine and fireclay rights in coal mine from company - About four months after purchase new company was incorporated which purchased coal mine and fireclay rights from assessee - Whether on facts Tribunal rightly held that assessee carried out transactions for no purpose except that of resale at profit and, therefore, surplus arising on sale of fireclay rights was taxable income - Held, yes FACTS The assessee purchased coal mine and fireclay rights in coal mine from company. About four months after purchase new company was incorporated which purchased coal mine and fireclay rights from the assessee. The Tribunal viewed that the assessee purchased both the colliery and fireclay rights attached to the colliery for the purpose of transferring the same to the new company. The Tribunal observed that the purchase of mines, veins, seams or seam strata layers and beds of fireclay in the land could not be detached from the purchase of coal mine and the purchase of these rights must be considered as incidental to the purchase of the coal mine and therefore, the sale of those rights was also incidental to the sale of the coal mine. In view of these facts the Tribunal concluded that the assessee carried out the transactions for no purpose except that of resale at a profit. On reference : HELD On an appreciation of the totality of the transactions the authorities below had come to the conclusion : (a) that the purchase and sale of fireclay rights were purchase and sale of the assessee itself, and (b) the purchase and sale of fireclay rights were incidental to the purchase and sale of the coal mine. There was no doubt that the coal mine was purchased for the purpose of resale. The same purpose had been attributed to purchase and sale of fireclay rights as well. The Tribunal had made the correct approach to the facts of the instant case. Note : The case was decided against the assessee. JUDGMENT Sankar Prasad Mitra, J.-This is a reference under section 66(1) of the Indian Income-tax Act, 1922. The assessment year is 1945-46. On the 21st March, 1944, the assessee paid Rs. 6,50,000 to-Messrs.…

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