HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Karanpura Development Co. Ltd. v. Commissioner of Income-tax, West Bengal
Civil Appeals Nos. 376 to 379 of 1960
[1962] 3 SCR 368 ·
Indian Income-tax Act, 1922: sections 2(4), 3, 4(1), 6, 9, 10 and 66A(2) · Business Profits Tax Act: section 19 and chargeable accounting periods in 1948-1949
Sources & disclosures includedDownload original judgment / order
3-judge bench; unanimous judgment delivered by M. Hidayatullah, J. · P. B. Gajendragadkar, J. · K. Subba Rao, J. · M. Hidayatullah, J.
Assessment years: 1949-50, 1950-51
01 · Facts of the case
The company acquired long-term coal-mining rights, developed the fields and granted numerous subleases, receiving salami at Rs.400 per standard bigha after paying Rs.40 under its head leases. It did not itself mine or trade coal. In two income-tax years and two business-profits-tax periods it contested the salami profit as capital realization; enhanced royalties were admitted taxable (SCR pp.369-373; PDF pp.2-6).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
The Court distinguished investment realization from business profit by the company's objects and actual operations, rather than corporate form or the label salami. A receipt capital in a landowner's hands need not remain capital in a trader's hands. Repeated acquisition, development, parcelling and profitable subletting made the mining rights a kind of stock-in-trade; retention of a remote reversion did not alter the trading operation. Mere ownership and rent collection remained distinguishable (SCR pp.374-390; PDF pp.7-23).
Source: Primary judgment: discussion
03 · Judicial decision
All four appeals were dismissed with costs. The High Court's answer that the salami receipts were trading receipts, with the profit assessable, was affirmed (SCR pp.390-391; PDF pp.23-24).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of Revenue on salami profit under income tax and business profits tax. The ruling did not decide the admitted taxability of enhanced royalties as a contested issue (SCR pp.369, 372, 390-391; PDF pp.2, 5, 23-24).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: build the classification from acquisition purpose, development, repeated disposals and reinvestment, and distinguish passive rental enjoyment from commercial dealing in property rights. A company's objects are relevant alongside its proved activities; neither incorporation nor a broad power to sell automatically establishes trading.
Source: Primary judgment: review point
Source & verification
Download original judgment / order · Open cited source rendition
Full 24-page SCR asset read in page-preserving text and visually inspected. The Karanpura judgment ends at the top of PDF p.24; the following Andhra Bank headnote was excluded.
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Statutory scope
Historical 1922 Act and Business Profits Tax Act classification; no present capital-gains, property-income or mining-law clearance.
Later treatment
Source checked 2026-10-11. Later judicial treatment and current statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
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