NATIONAL CEMENT MINES INDUSTRIES, LTD. vs. COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA

CIVIL APPEAL No. 84/1958Supreme Court[1961] 3 S.C.R. 50217 January 1961Bench: 3 JudgesAuthor: J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH13 pages
AI SummaryDismissed

What were the facts?

The assessee, National Cement Mines Industries Ltd., carried on the business of cement and lime manufacture. By a deed dated May 7, 1935, the assessee conveyed certain rights to Associated Cement Ltd., reserving the right to receive a sum of thirteen annas per ton of cement sold by Associated Cement Ltd. manufactured from limestone won from the transferred lands. In the year of account, the assessee received Rs. 77,820 under this stipulation. The Income-tax Officer included this amount in the assessee's total assessable income for assessment year 1946-47. This was confirmed by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The assessee appealed to the High Court, contending that the sum was not of a revenue nature and not assessable as such.

What did the Supreme Court hold?

The Tribunal held that the deed did not represent a transaction of sale or lease. The conveyance was subject to several restrictions, and the assessee retained partial rights in the land. The transaction was substantially a commercial transaction for sharing the profits of the commercial activities of Associated Cement Ltd. Therefore, the receipt under clause (1) of the deed was of the nature of income and not capital, making it assessable to tax. The High Court was correct in its holding. The appeal fails and is dismissed. The Tribunal considered and applied Foley v. Fletcher, Secretary of State in Council of India v. Andrew Scoble, Oswald v. Kirkcaldy Magistrates, Commissioners of Inland Revenue v. Ramsay, State of Bihar v. Sir Kameshwar Singh, Captain Maharajkumar Gopal Saran v. Commissioner of Income-tax, Bihar & Orissa, and Chadwick v. Pearl Life Assurance Co. The Tribunal noted that the inability to ascribe a definite category to the transaction is of little consequence; what is material is its nature in commerce, not under general law. The distinction between capital and revenue receipt, though fine, is real.

What were the issues?

1. Whether, on a proper construction of the Deed of Assignment dated May 7, 1935, and on the facts and circumstances, the sum of Rs. 77,820 received by the assessee represented a receipt of a revenue nature and was assessable to tax? (Question of law and fact) Assessee's contentions: The assessee argued that the receipt under clause (1) of the deed was in the nature of a capital payment. They relied on decisions such as Minister of National Revenue v. Catherine Spooner, Trustees of Earl Haig v. Commissioners of Inland Revenue, and Nethersole v. Withers to support their submission that the payment was capital in nature. Revenue's contentions: The revenue contended that the transaction was commercial in nature and the payment was income. They relied on the High Court's finding that the transaction was commercial and the payment was of a revenue nature. The judgment does not explicitly record separate arguments for the revenue beyond what was upheld by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 66

AI-generated summary — verify with the full judgment below

Cl•lral Talkies Ltd., Kpnpur v.

Dwarha Prasad Hidayatullah ], January z7. 502 SUPREME COURT REPORTS (1961] Criminal Procedure gave ample powers to Mr. Brijpal Singh Seth to accord permission for bringing the suit, a.nd the order of the District Magistrate, even if treated as a. transfer, was valid.

In the result, the appeal fails, and is dismissed with costs.

Appeal dismissed. NATIONAL CEMENT MINES INDUSTRIES, LTD. v. COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA. (J. L. KAPUR, M. HrnAYATULLAH and J.C. SHAH, JJ.)

Income-tax-Conveyance with reservation of rights-Category of-Receipts under the conveyance, if income or capital.

The appellants were carrying on the bnsiness of cement and lime manufacture and supply thereof. By a deed dated May 7, 1935, the appellants conveyed to the Associated Cement Ltd. the rights which had vested in them under an earlier conveyance made in their favour by a company known as Karanpura Co.

Under the deed the appellants reserved to themselves the right to receive from the Associated Cement Company a sum equal to thirteen annas in respect of every ton of cement sold by it which shall have been manufactured from the lime

The order continues below.

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