HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
New Savan Sugar & Gur Refining Co. Ltd. v. Commissioner of Income-tax, Calcutta
Civil Appeal No. 1593 of 1968
[1969] 3 SCR 761 ·
Indian Income-tax Act, 1922: sections 10(1), 10(2)(vi), 10(2)(vi-a), 10(2)(vi-b), 12(1), 12(3), 12(4) and 66(1) · Taxation Laws (Extension to Merged States and Amendment) Act, 1949 · Finance Act, 1955
Sources & disclosures includedDownload original judgment / order
3-judge bench; unanimous judgment delivered by V. Ramaswami, J. · J. C. Shah, J. · V. Ramaswami, J. · A. N. Grover, J.
Assessment years: 1955-56
01 · Facts of the case
New Savan Sugar & Gur Refining Co. Ltd. had carried on sugarcane crushing and gur refining. Its managing agents anticipated losses from industry conditions and proposed leasing the undertaking as a running concern. A 15 March 1948 indenture operated retrospectively from 1 June 1945 for five years, with three potential five-year continuations and a shareholder-based termination option that was never exercised. Standard Refinery & Distillery Ltd. obtained the factory, premises and existing machinery, could add and later remove its own machinery, bore operating expenses and received the manufactured goods. Royalty was calculated by sugar output and molasses sold, subject to a minimum Rs.65,000 annually. For AY 1955-56 the assessee claimed business-income treatment under section 10 plus additional depreciation and development rebate. The officer, AAC, Tribunal and High Court treated the receipts under section 12 and denied the two additional allowances (SCR pp.763-764; PDF pp.3-4).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
Section 10 required profits or gains of a business actually carried on by the assessee. Reading the lease as a whole, the Court found an intention to part with the entire factory and machinery and earn in the capacity of owner, rather than continue commercial exploitation itself. The lessee controlled production, while the minimum royalty and absence of a direct nexus showed that output was only a measure of rent. Temporary or partial letting cases such as Shri Lakshmi Silk Mills did not govern this long lease of the whole undertaking, and the Court repeated that each case depends on its own facts (SCR pp.767-771; PDF pp.7-11). Section 12(3) and (4) expressly incorporated only specified section 10(2) allowances. Clause (vi-a), added in 1949, and clause (vi-b), added in 1955, created distinct schemes and were not ancillary parts of clause (vi). Parliament had not added them to section 12, and the Court could not cure that omission by implication (SCR pp.771-772; PDF pp.11-12).
Source: Primary judgment: discussion
03 · Judicial decision
The Court affirmed the Calcutta High Court. The lease receipts were taxable as income from other sources under section 12, not business profits under section 10, and the assessee was not entitled to additional depreciation or development rebate under clauses (vi-a) and (vi-b). Civil Appeal No. 1593 of 1968 was dismissed with costs (SCR p.772; PDF p.12).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of the Commissioner of Income-tax/respondent. Both the head-of-income claim and the additional-allowance claim failed, and the assessee's appeal was dismissed with costs (SCR p.772; PDF p.12).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: classify a historical letting by reconstructing the commercial arrangement, not by its label or payment formula. Check whether the assessee retained an operating role, whether the whole undertaking or only an idle asset was let, the duration and renewal structure, allocation of production and operating costs, and whether the statute expressly carries the claimed allowance into the applicable head. A court cannot add an omitted allowance merely because it appears related to one the statute does include (based on SCR pp.767-772; PDF pp.7-12).
Source: Primary judgment: reviewPoint
Source & verification
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Statutory scope
The decision applies the repealed Indian Income-tax Act, 1922, including time-limited additional-depreciation and development-rebate clauses. It does not determine classification or allowances under the Income-tax Act, 1961 or later legislation. No comprehensive later-treatment or current-law clearance was undertaken.
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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