HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Income-tax, West Bengal II v. Rajasthan Mines Ltd., Calcutta
Civil Appeals Nos. 1627 and 1628 of 1968
[1971] 1 SCR 517 ·
Indian Income-tax Act, 1922: section 66(1); assessment of business income
Sources & disclosures includedDownload original judgment / order
3-judge bench · J. C. Shah, J. · K. S. Hegde, J. · A. N. Grover, J.
Assessment years: 1948-49, 1950-51
01 · Facts of the case
The company acquired proprietary interests in mineral-bearing lands and the vendors' rights to pre-conveyance arrears of rent and royalty. Revenue assessed arrears of Rs.2,55,733 and Rs.3,00,332 and a recomputed property-sale surplus of Rs.2,80,000. The Tribunal treated the subsequent sale as a trading transaction, relying on the company objects, indebtedness, restricted mining opportunities, profit and short holding period. The High Court answered both referred questions for the company.
Source: SCR pp. 518-520 / PDF pp. 2-4
02 · Discussion by the Hon’ble Court
The company received the arrears as purchaser of existing rights, rather than as owner earning rent or royalty before the conveyance. Whether the arrears had influenced the price did not alter that character. On the sale surplus, the primary facts individually and collectively did not rationally establish an adventure in trade. A power to deal in properties, a profitable sale and a short interval were not decisive on this record. Although reference jurisdiction is limited, an inference may be challenged where unsupported by legal evidence or not rationally possible from the proved facts.
Source: SCR pp. 520-521 / PDF pp. 4-5
03 · Judicial decision
The Court agreed that both questions must be answered in favour of the assessee and dismissed Revenue's appeals. It sustained the High Court's rejection of the impugned income assessments on the purchased arrears and property-sale surplus.
Source: SCR p. 521 / PDF p. 5
04 · Outcome / in whose favour
The assessee prevailed on both referred questions. The ruling rests on the character of the purchased rights and the absence of an evidentiary basis for the particular trading inference.
Source: SCR pp. 520-521 / PDF pp. 4-5
05 · AKHB REVIEW POINT
AKHB analysis: distinguish income accruing from ownership from acquisition of a pre-existing receivable. Preserve conveyances, accrual dates and acquisition-purpose evidence. For a trading-adventure dispute, analyse the combined facts instead of treating an objects clause, resale profit or short holding period as conclusive. A reference challenge to a factual inference needs the specific evidentiary or rationality defect.
Source: AKHB analysis based on SCR pp. 520-521 / PDF pp. 4-5
Source & verification
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Statutory scope
The decision concerns the 1922 Act and the particular purchased rights and primary facts. It does not decide all capital-gains consequences or exempt every receipt of rent, royalty or sale proceeds.
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