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 years 1954-55 to 1959-60 - Assessee engaged in a coal mining business purchased leases of coal bearing areas from a company for a consideration which admittedly was capital required to acquire those coal fields - Deed rent was paid annually under each of leases in respect of coal fields not worked by assessee - Whether dead rent was not a direct payment for enduring benefit but had a relation to raw material to be obtained - Held, yes - Whether, therefore, dead rent paid was a deductible expenditure - Held, yes FACTS The assessee, a company, carried on the coal mining business and took over the business and assets of the another company for a certain consideration. The assets acquired were comprised of the mining leases entered into with the Government. An annual payment known as 'dead rent' was payable under each of the leases. The ITO disallowed the dead rent paid by the assessee on the coal fields not worked. On appeal, the AAC confirmed the order of the ITO. On second appeal, the Tribunal confirmed the order of the AAC. On reference: HELD The assessee had purchased the assets from the company for a certain sum of money, which admittedly was the capital required to acquire the asset. The assets of the company so acquired contained 16 leases of coal bearing areas under each of which dead rent had to be paid annually. This annual rent was relatable to the royalty to be paid on winning the coal, in each of the cases, the rent was at the rate of minimum royalty whether the field was worked or not. The dead rent for one year was computed in the same manner as if quantity of coal sufficient according to the said royalties to produce that sum had been actually worked, got and won. The clauses indicated clearly and without doubt that the dead rent had a direct relation with the working of the coal. Whether the mines were worked or not, they were a part of the assets and the expenditure which the company was called upon to incur had to be borne as if the entire undertaking was one unit and not, as the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492