Sahai, J.:— Under Section 66(1) of the Income-tax Act, the Appellate Tribunal has referred the following question of law to this Court:

“Whether in the facts and circumstances of these cases the sums of Rs. 15,209, Rs. 1,24,789, Rs. 1,500 and Rs. 70,146 received by the assessee are income assessable to tax under the Indian Income-tax Act?”

2. The assessee is an individual. The assessment years which are in question are 1945-1946, 1946-1947 and 1947-1948. The corresponding accounting years are 1944-1945, 1945-1946 and 1946-1947. In each of these accounting years, the assessee granted licenses to different parties to prospect for bauxite and aluminous laterite ores. On 20-1-1945, he granted such a license to Aluminium Corporation of India Limited for six months and received Rs. 15,290 as premium. On 26-5-1945, he granted another prospecting license to the same company and received Rs. 1,24,789 as premium. On 7-6-1945, he granted a prospecting license to Dayanand Modi for six months and received a premium of Rs. 1,500. On 14-8-1945, he granted a prospecting license to Indian Aluminium Company Limited for one year and received a premium of Rs. 70,146. The asses-see's case is that these amounts were capital receipts and were not taxable. The Income-tax Officer held that these receipts were income and were taxable.

3. On an appeal being taken to the Appellate Assistant Commissioner of Income-tax, he held that the amounts were capital receipts. The Income-tax Department appealed to the Income-tax Appellate Tribunal who held that the amounts were income and were taxable as such. At the instance of the assessee, the Tribunal has made this reference to this Court.

4. Mr. Mazumdar has contended that the amounts which the assessee received in the accounting years in question were lump sum payments and were, therefore, in the nature of capital receipts. In support of his argument, he has relied upon the case of — ‘Commr. of Income-tax v. Kamakshya Narain Singh’, AIR 1947 Pat 252 (A). In that case, one of the questions was whether a sum of Rs. 5,25,000 received by the assessee as salami was taxable and it was held that the amount was not assessable to tax.

5. It appears, however, that the circumstances in which the amount was received in that case were quite different. During the minority of the assessee, the period of prospecting license granted to Bokaro Coal Syndicate was extended from time to time by the Court of Wards. When the assessee attained majority, a notice was given on his behalf to the Managing Agents of the Coal Company that the prospecting licenses granted by the Court of Wards were not binding upon him.

6. It was also asserted that the leases which had been granted in the meantime on the basis of the terms of the license were ultra vires. Thereafter, there was a settlement between the assessee and the Coal Company whereby the licenses and leases granted to the Coal Company were validated and the periods for which the licenses were granted were further extended.

7. The assessee received Rs. 5,25,000 in respect of the extension of the prospecting licenses and Rs. 40,000 for validating the leases and licenses. Manohar Lall, Ag. C.J, who was one of the members of the Bench, based his decision that the amount of Rs. 5,25,000 was capital receipt on the footing that

“the salami was received not on account of any rent due to the assessee but for the settlement of his claim which he had put forward that the licenses and the leases under which the Coal Company was holding the lands were invalid and ultra vires of the Court of Wards and, therefore, the assessee was requiring the Coal Company to vacate the premises”.

8. Das, J. (as he then was), who was the other member of the Bench agreed with the conclusion of Manohar Lall, Ag. C.J, but he gave his own reasons. He pointed out that a sum of Rs. 8,000 per annum was payable as minimum royalty in addition to the salami of Rs. 5,25,000 and that the salami was not therefore, an advance payment of rent.

9. Hence that case has no application to the facts of this case. I may mention, however, that the finding of the Appellate Tribunal in that case was that the sum of Rs. 5,25,000 was a capital receipt and was therefore not taxable. The Bench accepted that finding and Manohar Lall, Ag. C.J, observed as follows:

‘The question raised, therefore, is a question of fact in the main except in so far as it may be urged that on the facts found the inference in law follows that this particular salami was income”.

10. The next case upon which Mr. Mazumdar has relied is the decision of their Lordships of the Judicial Committee in the case of — ‘Kamakshya Narain Singh v. Commr. of Income-tax, B. and O.’, AIR 1943 PC 153 (B). In that case the assessee received in respect of some coal mining leases some payments which could be classed under three categories: “(i) the salami or premium; (ii) the minimum royalty; (iii) the royalties per ton”.

11. The question before their Lordships was whether the minimum royalty received by the assessee was income and they held that it was income although the lessee was entitled to remove coal from the mines. Lord Wright who delivered the judgment of the Judicial Committee observed in respect of the premium received by the assessee that had been rightly held to be a capital receipt because it was

“a single payment made for the acquisition of the right of the lessees to enjoy the benefits granted to them by the lease. That general right may properly be regarded as a capital asset, and the money paid to purchase it may properly be held to be a payment on capital account”.

12. It is true that a single payment or a lump sum payment has to be held in some circumstances to be a capital receipt; but their Lordships have not in this case laid down any general proposition that a lump sum payable must be regarded as a capital receipt. This case also therefore is not of any help to the assessee in the present case.

13. The last case to which Mr. Mazumdar has drawn our attention is the case of — ‘Nilkantha Narayan v. Commr. of Income-tax, B. and O.’, AIR 1951 Pat 165 (C). The Bench which decided that case consisted of my learned brother Ramaswami, J. and Sarjoo Prosad, J. Mr. Mazumdar has relied upon an observation of Sarjoo Prosad, J., to the effect that the cases which were relied upon before him on behalf of the Taxing Department were all cases where “the lump sum payment specifically carried the attribute of the periodical payment as income and was definitely identifiable as such”. On this basis, Mr. Mazumdar has contended that a lump sum payment cannot be regarded as income unless it carries the attribute of periodical payments. There is no force in this contention. Sarjoo Prosad, J., has himself made it perfectly clear that a salami may also be held in some circumstances to be advance payment of the annual rent or royalty for the period of the lease. At the end of his judgment, he has observed:

“The question whether a certain amount is capital receipt or income has always to be decided on the facts and circumstances of each case, and no hard and fast rule can be laid down for the purpose”.

14. The observation of my learned brother Ramaswami, J. at page 168 of the report makes the position perfectly clear. He has said that “there is no magic in the distinction between a lump sum and a periodical sum and the only material question in the case is that what is the true nature of the sum”.

15. He has referred to several decisions in which lump sum payments were held to be income and has stressed the fact that in some of those decisions it was held that the question whether a lump sum payment was income or capital receipt was a question of fact.

16. Another case to which reference may be made is the decision of a Special Bench of this Court in — ‘Province Of Bihar v. Maharaja Pratap Udai Nath Sahi Deo*’, AIR 1941 Pat 289 (D). In that case, Harries, C.J observed that, prima facie, salami was not income but it was open to the Income-tax authorities to show that salami constituted income and not capital receipt.

17. In the present case, the two members of the Tribunal have written separate orders but they have both come to the conclusion that the amounts in question were income and not capital receipts. Both the members have given plenty of good reasons for coming to their conclusion.

18. I consider it unnecessary to mention all those reasons but some of the important ones are that no possession over any land or property of the asses-see was given to the licensees nor was any interest in any property created in the licensees' favour; that the licensees were to do as little damage as possible; that no rent was separately payable; that the assessee frequently granted such short term licenses; and that in some cases the licensees were to report on the progress of work each month.

19. In each of the four licenses granted by the assessee, the period for which the license was granted was rather short. In two cases, the period was six months and in the other two cases, the period was one year. The sums paid to the assessee as premiums could not therefore be in the shape of eriodical payments. The Accountant member has, however, specifically held that

“the premiums received by the assessee under the various agreements were merely advance payments of the fee due from the various licensees”.

20. Mr. Mazumdar has drawn our attention to condition (c) in the deed whereby one of the lictases was created in favour of the Aluminium Corporation of India Limited. This is exhibit A and the condition (c) is as follows:

“(c) To remove, take away and appropriate samples and specimens of Bauxite of every quality, kind and description in reasonable quantities not exceeding one hundred tons in all during the term of this grant”.

21. He has contended that this condition enabled the licensees to remove the capital asset of the; assessee to the extent of 100 tons of Bauxite and hence the payment made by the licensees must be held to be a capital receipt. I do not think that there is any substance in this contention. In spite of this condition, the licensees might or might not remove any quantity of Bauxite. The payment which was made cannot, therefore, be considered in any sense to be the price of 100 tons of Bauxite which might be removed by the licensees.

22. There is thus no difference between this condition and the condition in a coal mining lease whereby a minimum royalty is fixed. In connection with such minimum royalty, Lord Wright has observed in — ‘Kamakshya Narain Singh's case (B)’, already referred to, as follows:

“The minimum royalty is only payable if in any year the royalties on coal raised and despatched are less than the sum fixed as the minimum royalty. This amounts to a species of annual guarantee: it does not correspond to any coal in fact extracted and taken away: it is simply ‘income flowing from the covenants in the lease, contingently on the lessees’ failure to take the minimum quantity of coal.

23. It would be payable if in any year the lessees took no coal at all, or if the coal in the mine was completely exhausted before the termination of the lease. The minimum royalty is therefore in their Lordships' judgment ‘income’ and in no sense a payment on capital account”.

24. In my opinion, the condition that the licensees could take away Bauxite up to the extent of 100 tons does not make the payments made to the assessee payments on capital account.

25. In my opinion, there is no doubt at all in this case that the Appellate Tribunal's finding that the amounts in question were income is a finding of fact and there is plenty of material in support of that finding. No ground has at all been made out for holding that the amounts were capital receipts. The question must therefore be answered in favour of the Income-tax Department and against the assessee. The assessee must pay the cost of this reference which is assessed at Rs. 250.

Ramaswami, J.:— I agree. Counsel on behalf of the assessee pointed out that the parties have described the amounts paid to the assessee as “premium” in the various prospecting licenses. Counsel made the submission that the amounts said to the assesseas in respect of these prospecting licenses should, therefore, be treated prima facie as capital receipts, and in support of the submission Counsel referred to the decision of this Court in — ‘AIR 1941 Pat 289 (SB) (D)’. In my opinion, the argument of the assessee on this point has no substance.

26. In the law of Income-tax it is well settled that the name given to a transaction by the parties does not necessarily decide the nature of the transaction. It is the substance and not the form of the contract that should be regarded by the Court. If upon an analysis of the whole transaction and upon a consideration of the surrounding circumstances it appears that the amounts paid to the assessee for the prospecting licenses are of the character of income receipts, no dressing up of the transaction cam alter its true character.

27. It is open to the High Court not merely to look at the documents but also to consider the surrounding circumstances in reaching an inference as to what is the real character of the transaction.

28. The principle is stated by Lord Greene in — ‘Commissioners of Inland Revenue v. 36-49 Holdings, Ltd. (in liquidation) (1944) 25 Tax Cas 173 at p. 182 (E)’:

“The true nature of a sum payable to a recipient for purposes such as the present is to be ascertained from all the circumstances relevant to that matter. The true nature of the sum is not necessarily its nature in law, but ts nature in business or in accountancy whichever way one likes to put it, because from the legal point of view there may be no difference whatsoever as between the parties between a capital and an income sum. It may be totally irrelevant to the legal relationships into which they are proposing to enter.

29. When, however, the ‘tertius gaudens’, in the shape of the Revenue, appears on the scene, that matter which as between the parties may have been a matter of not the slightest importance becomes immediately a matter of very great importance, and it is necessary to examine the circumstances of each individual case, including any documents which require to be construed, in order to ascertain what is the character to be attributed to the payment”.

30. In the present case, all the agreements under which the amounts were paid to the assessee are more or less in identical terms. It is apparent upon a perusal of the various clauses of the agreement that the amount described as “premium” was consideration paid by the licensee for the “right, liberty and license” to enter upon the scheduled lands for the purpose of prospecting for bauxite and for doing incidental acts thereto. It is also clear that no right of possession was given to the licensee of the scheduled lands.

31. He was merely given reasonable facilities for the purpose of prospecting for bauxite. There was no lease of the land, and no estate or interest in land was conveyed to the licensee in consideration of the so-called “premium”. It should also be noticed that the periods of license are short. In two documents, the period was for six months each anti in the other two documents the period was for one year each.

32. It is also stipulated in the agreement that the licensee should do as little damage as possible and he should also pay compensation to tenants and remove excavations and plug them. The licensee also agreed in each case to restore all the lands to the original condition as far as practicable after the license was terminated. There was no waste contemplated and no damage to capital was suffered.

33. The inference must, therefore, be drawn that the amount described as “premium” is really a fee paid by the licensee for the privilege of prospecting for bauxite in the lands owned by the assessee. To put it differently, the amount of so-called premium is in substance an advance payment of fee by the licensee. The amount is in reality the profits derived by the assessee from the use and exploitation of his property. In my opinion the amounts received by the assessee in respect of prospecting licenses are stamped with the character of income. The argument of Mr. Mazumdar to the contrary must be rejected as unsound. For these reasons in addition to those stated by my learned brodrer, I agree that the question referred to the High Court must be answered in favour of the Income-tax Department and against the assessee.

G.M.J

34. Order accordingly.