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PETITIONER: M/S.  ADITYA MINERALS PVT.  LTD.

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX, ANDHRA PRADESH

DATE OF JUDGMENT:       07/09/1999

BENCH: D.P.Mohapatro, S.S.M. Quadri, V.N.Khare

JUDGMENT:

Bharucha, J.

     These  appeals  have been referred to  a  Constitution Bench to resolve the apparent conflict between the judgments of  two Benches of this Court, of three learned Judges each, in  Pingle Industries Ltd.  vs.  Commissioner of Income-tax, Hyderabad  [(1960)  40 I.T.R.  67] and Gotan Lime  Syndicate vs.   Commissioner of Income tax, Rajasthan & Delhi  [(1966) 59 I.T.R.  718].

     The common question to be considered reads thus :

     Whether  on the facts and in the circumstances of the case,  the  sum of Rs.10,752/- paid by the assessee  in  the accounting year was not expenditure allowable as a deduction in computing the business profit of the assessee- company?

     The  appellant-assessee  obtained  a lease  dated  8th March,  1972 from Aditya Minerals Private Limited.  It was a term  of the lease deed that the Lessor will grant lease of the  land  more  particularly   described  in  Schedule  ‘A attached to this lease deed and forming part of the same for a  period of FIFTEEN YEARS from first December, One thousand nine  hundred  and seventy one at a monthly rent of  Rs.35/- (Rupees  Thirty Five) only per acre. Clause 2 of the  lease deed  stated that the Lessee shall deposit with the  Lessor by  way  of the guarantee for due performance of this  lease deed  for  fifteen  years, the amount equal to the  rent  of lease  of  land for the full period of lease which  will  be adjustable  against  rent  of   every  month.   This  entire guarantee  deposit  shall not carry any interest payable  to the  Lessee  by the Lessor. The lease deed granted  to  the assessee  the  liberty  to  use  the  land  for  excavation purposes and subsidiary purposes.

     For  the  assessment years in question,  the  assessee claimed the rent amounts worked out at Rs.10,752/- per annum as  revenue expenditure.  The claim of the assessee in  this behalf  was  turned down by the authorities, the Income  Tax Appellate Tribunal and, finally, by the High Court of Andhra Pradesh, against whose judgment the assessee is in appeal.

     We  find  that there is a material difference  in  the facts  of the case of Pingle Industries Ltd.  and the  facts of  the  case of Gotan Lime Syndicate.  As the  judgment  in Gotan  Lime Syndicate, relied upon by the assessee,  clearly

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shows,  in that case there is no payment once for all;   it is  an yearly payment of dead-rent and royalty.  It is  true that  if  a  capital sum is arrived at and payment  is  made every  year  by chalking out the capital amount  in  various instalments,  the  payment does not lose its character as  a capital payment if the sum determined was capital in nature. But  it is an important fact in this case that it is a  case of an annual payment of royalty or dead-rent.  The judgment adds   that  the  case  of   Pingle  Industries  Ltd.    was distinguishable  because,  on the facts, it was a lump  sum payment  in  instalments  for acquiring a capital  asset  of enduring  benefit  to his trade.  The Court in  Gotan  Lime Syndicate took the view that the royalty payment therein was not  a  direct payment for securing an enduring  advantage; it  has  relation to the raw material to be  obtained.  The Court  thus  accepted the argument on behalf of  Gotan  Lime Syndicate  that  what  it got was a right to  get  lime  for manufacturing  and the payment had a direct relation to  the amount of lime that was removed.

     In the case before us, as indicated by the lease deed, what  was  to be paid by the assessee was rent for the  land that  was leased.  It was payable at the rate of Rs.35/- per acre per month.  The assessee was required to pay in advance the  rent  calculated at this rate for the entire period  of the  lease, i.e., fifteen years, in the form of a deposit. The deposit was by way of the guarantee for due performance of  this  lease  deed for fifteen years, that  is,  towards fifteen  years rent.  It was adjustable against the rent of each month and it carried no interest.

     On  the facts, as it appears to us, this case is on  a par  with Pingle Industries Ltd.  and accordingly, the civil appeals must fail and are dismissed.

     No order as to costs.