1. This is an application for leave to appeal to the Supreme Court of India. The Assessee Company was at all material times carrying on business of winning mica and selling the same after refinement. In course of business, it entered into several contracts of leases. One of such lease is dated February 12, 1936 made between Madan Lal and others, Mica Merchants of Giridih, on the one part and the Assessee Company on the other part. A copy of the said lease was made an annexure A to the statement of the case. The said lease was for a term of 5 years commencing from 7th of March, 1935. Under the terms of the lease the Assessee covenanted to pay to the superior landlords of the lessors, either direct or through the lessors, the rents and royalties payable by the lessors to their landlords. In the year of account corresponding to the assessment year 1947-48, a sum of Rs. 28,726 was paid by the assessee company to the superior landlord towards rent on account of the lease.
2. The Assessee contended that the payment of the annual rent was in the nature of a revenue expenditure. The Department on the other hand, contended that the said payment was in the nature of capital.
3. The Income-tax Officer, Company District IV, Calcutta, by his order dated March 19, 1082 assessed the assessee of his income including the mining rent, in the sum of Rs. 26,726 to tax treating the same as capital expenditure Consequently there was an assessment as excess profit tax.
4. By a petition of appeal, the Assessed appealed to the Assistant Commissioner of Income-tax. By his order of November 24, 1956 the Appellate Assistant Commissioner expresses the opinion that when lease rent is paid to enable the Assessee to have the right to set up mining operations, it is an expenditure on capital account. The assessment was confirmed.
5. The Assessee appealed to the Appellate Tribunal In their opinion the said payment is on account of annual charge for the use and occupation of factories, godowns, out-houses, structures etc. along with the right of winning mica. Therefore, the said payment was held as payment of a revenue nature and admissible under Section 10(2) (xv) of the Indian Income-tax Act, 1922.
6. By an application under Section 66(2) of the Act, the following question was referred to this Court:
'Whether on the facts and in the circumstances of the case, the sum of Rs. 28.726 was a payment of a revenue nature and as such allowable as a deduction under Section 10(2)(xv) of the Indian Income-tax Act.' A statement of the case was drawn up exhibiting a specimen of the mining lease referring the above question to this Court.
7. S. P. Mitra and K. C. Sen JJ. heard and disposed of in one judgment two References and answered the question In the affirmative. Their Lordships are of opinion that the Appellate Tribunal was right in holding that the annual payment was of a revenue nature and therefore was admissible under Section 10(2) (IT).
8. Before the Reference Bench, it was contended on behalf of the Commissioner, that the annual payments were expenditures necessary for the acquisition of the property or rights of a permanent character and therefore should be considered as capital expenditure. It was further contended that the Assessee was merely winning mica and selling the same after refinement and was not carrying on any manufacturing business. The decision in the case of Commr. of Income-tax v. S. V. Reddy : 17ITR15(Mad) was relief on.
9. Various English and other Indian cases were cited on either side they were collected and explained by the Reference Court. On consideration of the same, their Lordships gave the opinion as indicated above. I do not think it necessary to repeat here that has been explained in the judgment in Reference.
10. The instant application for leave to appeal is at the instance of the Commissioner.
11. The Indian Income-tax Act, 1922, which was a consolidating Act, is, both in its general frame work and its particular provisions, different from the English Income-tax Acts, so that the decisions upon the English Acts are in general should not be taken as of prime assistance in construing the Indian Act. On some fundamental concepts, reference to some extent however may be usefully made to the English decisions. Income which consists of mining royalties however was taxed in Schedule A under the English Acts and according to relevant Rules of Schedule D and the English decisions were based on such provisions of the Statute.
12. The question in the instant application is, as to whether it is a fit case so that leave may be granted to the applicant for appeal to the Supreme Court of India.
13. In my view, the answer to the question would touch successive References and it affects the substantial property rights of the party. The point is capable of arising frequently in courts affecting the assessees generally. It depends upon general principles. The question is of great private and of paramount importance It is fairly arguable and is not free from difficulty, as there is room for difference of opinion. It is also necessary to be settled from the point of view of principle, legality and procedure as to whether an order by the Income-tax Officer without any reason as in this case is sufficient and whether a sample lease of a previous year and not current for the accounting period, would be sufficient to proceed with.
14. I am therefore of opinion that it is a fit case where a certificate for leave to appeal to the Supreme Court of India should be granted. Costs of this application will be costs in the Supreme Court Appeal.
15. Let an appropriate certificates under Section 66A(2) of the Income-tax Act be drawn up and issued.
16. I agree.