Law:

Section:

Income-tax----   ---Capital or income expenditure-Opencast coal mining-Payment for right of entry on land-Compensation payment for diminution in value-Payments normal and recurrent incident of trade-Whether revenue or capital expenditure -Whether "wholly and exclusively laid out . . . . . for the pur poses of the trade "Profits tax-Income-tax Act, 1952 (15 & 16 Geo. 6 & 1 Eliz. 2, c. 10), S. 137 (a).   A company which carried on the business of opencast coal mining entered into an agreement dated December 16, 1957, with a land-owner, whereby certain land was let to the company for one year on payment of a royalty for every ton of coal won from the land, the company covenanting to restore the surface of the land on the completion of the opencast mining operations. The company further agreed to pay to the lessor 250 for the right to enter upon the land demised and a further sum of 250 as compensation for the diminution in value of the land and the destruction of land drains, etc. In 1958 the company made two further agreements with land-owner in substantially the same terms. The pay ments for the right of entry and for diminution in value of the land provided for in all three agreements were a normal and recurrent incident in the trade of opencast coal mining as carried on by the company and others in the industry.   On an appeal by the company against assessments to profits tax on the ground that the whole of the payments made by them for the right of entry and for diminution in value pursuant to the agreements were revenue expenditure and fell to be allowed as deductions under section 137 of the Income-tax Act, 1952 ["Income-tax Act, 1952, section 137: " . . . . in com puting the amount of the profits or gains to be charged under Case I or Case II of Schedule D, no sum shall be deducted in respect of-(a) any disbursements or expenses . . . . . . exclusively laid out . . . . for the purposes of the trade, profession or vocation, .. ]   Held, that no distinction could be drawn between the payments for the right of entry and the payments for dimi nution in value, and that, since the company in making the payments…