Sankar Prasad Mitra, J.
1. This is a reference under Section 66(1) of the Indian Income-tax Act, 1922. The assessment year is 1945-46. On the 21st March, 1944, the assessee paid Rs. 6,50,000 to Messrs. F.W. Heilgers & Co. Ltd., the managing agents of Churulia Coal Co. Ltd. The amount was paid as consideration for the purchase of the Churulia Coal mine. This colliery was worked till 15th August, 1944.
2. On 1st May, 1944, the assessee paid a sum of Rs. 7,500 to the said F.W. Heilgers & Co. Ltd., as consideration for the purchase of the mines, veins, seams or seam strata layers, and beds of fireclay in the land of the mine called ' Churulia Mine '.
3. On the 13th July, 1944, a company called the New Churulia Coal Co.Ltd, was incorporated. On August 16, 1944, the assessee received a sum ofRs. 6,50,000 from the New Churulia Coal Co. Ltd. as consideration for thepurchase of the coal mine.
4. On January 5, 1945, the assessee sold the mines, veins, seams or seam strata layers and beds of fireclay in the coal mine to the New Churulia Coal Co. Ltd. at a price of Rs. 1,10,000.
5. The conveyance for the sale of the mining rights was executed by the Churulia Coal Co. Ltd. on the 28th August, 1944. There was no deed of conveyance in favour of the assessee at all.
6. As regards the fireclay rights, the conveyance was first executed byChurulia Coal Co. Ltd. in favour of the assessee and, later on, the assesseeexecuted a deed of conveyance in favour of the New Churulia Coal Co. Ltd. on the 27th August, 1945. .
7. The assessee entered the transactions in its account books in the following way:
21-3-1944 : M/s. F.W. Heilgers & Co. a/c.--On a/c. Churulia Coal Co. Ltd. --By amount paid to them through cheque in respect of consideration money for Churulia Colliery--Rs. 6,50,000.
1-5-1944: M/s. F.W. Heilgers & Co.--On a/c. Churulia Coal Co. Ltd.--By amount paid to them in full' settlement of Churulia Fireclay rights as per receipt attached--Rs. 7,500.
16-8-1944: A/c. Churulia Coal Co. Ltd., amount received from them--Repayment of consideration money advanced to a/c. F.W. Heilgers & Co. on their behalf--Rs. .6,50,000.
5-1-1945 ; A/c. New Churulia Coal Co.--Cheque No, received from them being the full value of Churulia Fireclay mining rights sold to them--Rs. 1,10,000.
8. From the above facts the Tribunal was of the view that the assessee purchased both the colliery and fireclay rights attached to the colliery for the purpose of transferring the same to the New Churulia Coal Co. Ltd. The Tribunal has said that the mine was situated at the village, Churulia, and for that reason the company carrying on the mining operations in that area was named Churulia Coal Co. Ltd. The said Churulia Coal Co. Ltd. received a sum of Rs. 6,50,000 from the assessee as consideration for the sale of the mine. About four months after the receipt of this money, says the Tribunal, a new company was incorporated in the name of New Churulia Coal Co. Ltd. on the 1.3th July, 1944. The Tribunal has inferred from the date of, incorporation that the arrangement for incorporating the, new company was made some time before that date. Immediately after the incorporation, the New Churulia Coal Co. Ltd. purchased the coal mine and. paid the sum of Rs. 6,50,000 to the assessee. The cpnveyance was executed, the Tribunal points out, by the Churulia Coal Co. Ltd/directly in favour of the New Churulia Coal Co. Ltd. According to the Tribunal it was clear to the promoters of the newly incorporated company that the said Churulia Coal Mine would be acquired by them, otherwise it was not usual for them to incorporate the company in the name of New Churulia Coal Co. Ltd. The Tribunal says that this new name indicates the intention of incorporation. Further, the Tribunal says, the account books of the assessee showed that on the 16th August, 1944, the assessee received a sum of Rs. 6,50,000 from the New Churulia Coal Co. Ltd. as repayment of consideration money advanced to account F.W. Heilgers & Co. on their behalf. This entry also clearly indicated, according to the Tribunal, that the sum of Rs. 6,50,000 was paid to F.W. Heilgers & Co. on behalf of the New Churulia Coal Co. Ltd.
9. Thus, the intentions were clearly indicated in these transactions and the Tribunal inferred that the purchase was made merely for the purpose of reselling the same to the newly incorporated company, viz., the New Churulia Coal Co. Ltd. The purchase of mines, veins, seams or seam strata layers and beds of fireclay in the land, the Tribunal is of opinion, cannot be detached from the purchase of coal mine and the purchase of these rights must be considered as incidental to the purchase of the coal mine and therefore, the sale of those rights was also incidental to the sale of the coal mine. In view 'of these facts the Tribunal concludes that the assessee carried out the transactions for no purpose except that of resale at a profit.
10. The following question has been referred to this court:
' Whether, on the facts and in the circumstances of the case, the surplus amounting to Rs. 1,01,854 arising from the sale of the fireclay rights was taxable under the Indian Income-tax Act, 1922 '
11. Mr. Debi Pal, learned counsel for the assessee, has argued before us that the Tribunal proceeds on the proposition that the purchase of mines, veins, seams or seam strata layers and beds of fireclay in the land cannot be detached from the purchase of coal mine. The Tribunal has failed to consider the purchase and sale of fireclay rights independently of the purchase and sale of the coal mine. This approach of the Tribunal, submits Mr. Pal, is a misdirection in law. There is no principle of law or assumption of fact that purchase of fireclay rights cannot be detached from purchase of coal mine and the conclusion of the Tribunal is vitiated by that erroneous approach. Mr. Pal points out that the purchase and subsequent sale of the fireclay rights had taken place on dates different from those of the coal mine and! the entries in the assessee's books of account also show that they were independent transactions. But, the Tribunal, without considering these facts, has imputed the intention it found for transferring the coal mine to the transactions relating to fireclay 'rights and has proceeded to hold that the purchase of fireclay rights was incidental to the purchase of coal mine. In these premises, learned counsel has argued, the Tribunal's conclusions cannot be sustained.
12. Upon going through the various orders of the tax authorities below from time to time, we find, that the assessee initially tried to make out the case that the profit that was earned by the sale of the fireclay rights was not the assessee's profits at all but were profits belonging to four different persons. In other words, the purchase or sale of the fireclay rights was not the purchase or sale by the asscssce at all. 'Alternatively, the assessee contended that these were not assessce's profits but were capital receipts. It seems to us that faced with these submissions on behalf of the assessee the tax authorities had to examine closely various transactions that the assessee had entered into from time to time including the transactions relating to the purchase and sale of the coal mine and the fireclay rights' and on an appreciation of the totality of these transactions the authorities below have come to the conclusion : (a) that the purchase and sale of fireclay rights were purchase and sale of the assessee itself, and (b) the purchase and sale of fireclay rights were incidental to the purchase and sale of the coal mine. There is no doubt that the coal mine was purchased for the purpose of resale. The same purpose has been attributed to purchase and sale of fireclay rights as well. It seems to us that the Tribunal has made the correct approach to the facts of the instant case.
13. Our answer to tin: question referred to us, therefore, is in the affirmative and in favour of the department. The assessee will pay to the department the costs of this reference.
14. Let it be recorded that this court made an order for the filing of a supplementary paper book. That order has not been complied with and the assessee has agreed to proceed with the reference on the basis of papers. already on record.
A.N. Sen, J.
15. I agree.