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11. In connection with his first submission mentioned above, her relied upon the decisions in the case of Commissioner of Income-tax v. Vazir Sultan & Sons and P. H. Divecha v. Commissioner of Income-tax,

12. In reply, Mr. Joshi for the revenue contended that the forest leases granted to the assessee-company were trading agreements made by it in the ordinary course of business and did not constitute the assessee's capital assets or profit-making apparatus. He emphasised that in connection with its timber business the assessee-company had made the forest leases with the Government of Burma continuously from time to time from 1862 onwards. In his submission, the repeated necessary of these agreements for the timber business of the assessee-company clearly indicated that the forest lease were agreements to acquire for a number of years raw materials and/or stock-in-trade. In this connection, he relied upon the decision of the Privy Council in the case of Mohanlal Hargovind v. Commissioner of Income-tax, and argued that agreements for removal of forest produce for the purpose of the ordinary business of an assessee must be held to be on revenue account. Such agreements were not purchase and/or acquisition of a capital asset or source of income. In his submission, on a true construction, the agreement dated June 10, 1949, provided for adjustment of the rights arising to the assessee-company under trading agreements of forest leases made in the ordinary course of business. Delivery of the 43,860 tons of logs was merely towards adjustment of the trading rights acquired by the assessee-company under clause 27. The delivery of logs by the Government to the assessee-company was accordingly on revenue account. The agreement had not the effect of sterilizing and/or damaging and/or affecting in any manner the business structure of the assessee-company. The first contention of the assessee-company should not, therefore, be accepted. In support of this submission, he referred to the decision in the case of Commissioner of Income-tax v. Rai Bahadur Jairam Valji. His further submission was that even if the forest leases like the specimen lease dated October 28, 1925, are held to be capital assets, the delivery of the 43,860 tons of logs cannot be held as capital receipt. The submission was that the periods mentioned in the result was that the profit-making apparatus that was obtained under the forest leases by the assessee-company had come to an end when the agreement dated June 10, 1949, was made. The residuary rights under clause 27 of the forest leases were towards enabling the assessee-company to take away non-duty paid 1,02,000 tons of logs upon payment of duty from the forest areas. These logs were stock-in-trade for the timber business of the assessee-company. He emphasised that all the 2,02,000 tons of logs had been completely extracted and had only remained to be removed by the assessee-company from these areas upon payment of royalty. The extraction having been completed, this quantity of 2,02,000 tons of logs would be stock-in-trade for the timber business of the assessee-company. Towards adjustment of the rights of the assessee-company of removal of these logs, after payment of royalty, the assessee-company had received delivery of a part of the above 43,860 tons of logs. The agreement dated June 10, 1949, accordingly was not for termination of any source of income or profit-making apparatus obtained by the assessee-company. He, therefore, submitted that the logs delivered to the assessee-company for adjustment of the residuary rights under clause 27 should be held to be on revenue account. In support of his submission, he relied upon the decision in the cases of Senairam Doongarmall v. Commissioner of Income-tax; and Hood Barrs v. Commissioner of Inland Revenue (No. 2).

"The contractor shall be entitled to have the timber which has been measured for royalty marked at the time of measurement with a Government hammer-mark denoting that the timber has been so measured and after payment of such royalty the timber thus marked shall become the property of the contractor."

17. Clause 23 provides :

"Until teak timber has been marked and royalties have been paid thereon...... it shall be deemed to be the property of the Government and the contractor shall have no right to sell, mortgage or hypothecate it or create any charge or lien thereon."

24. Now, the above discussion makes it clear that these forest leases were not ordinary trading agreements for sale of any stock-in-trade. There is no doubt that having regard to its necessities of obtaining stock-in-trade for its timber business the assessee-company made these forest leases from time to time during the period 1862 to 1940. The number of such forest leases obtained during the above period by the assessee-company was accordingly numerous. It appears to us that these forest leases were transactions and/or contracts for acquisition by the assessee-company of benefit of enduring and long lasting duration. These were essentially and necessarily made for acquiring a source of income. By their very nature these leases were not made for transfer by the grantor thereof of any stock-in-trade of timber to the grantee - the assessee-company. The duration of the leases was always long. The operations under the leases were always to be done only by one side, viz., the assessee-company. To get the timber produce of the forest areas of these leases for ultimate sale in its ordinary business the assessee-company had the necessity of obtaining these forest leases. These leases by themselves did not give any produce of timber to the assessee-company. As already stated, all and singular, all the operations for extraction of timber from the forest areas of these leases had to be done by the assessee-company alone. The Government had no concern with any operations at all. Under the above circumstances, the true nature of the contracts and transactions at the date of their making by the assessee-company appears to us to be contracts and transactions for acquisition of a source of income. These forest leases must accordingly be held to be capital assets.

44. In respect of the assessment year 1953-54, the questions referred are as follows :

"1. Whether, on the facts and in the circumstances of the case, the amount of Rs. 5,58,188 or any part thereof was exempt from tax as being a receipt of a capital nature ?
2. Whether, on the facts and in the circumstances of the case, the amount of Rs. 9,493, being the amount of compensation received for stores acquired by the Burmese Government, was liable to tax under the Act ?"

45. The facts relating to this assessment year are that nothing was paid by the Government to the assessee-company in connection with the 1/3rd of the forest areas which the Government had taken over from the assessee-company on June 1, 1948. The assessee-company filed a suit against the Government in connection with the timber logs and stores taken over by the Government on June 1, 1948. The facts in connection with the delivery of these goods appear in the letter of the Government to the assessee-company dated January 24, 1948, which is annexure "C" to the statement of the case. Now, in the suit filed by it, the assessee-company succeeded to obtain decree for Rs. 5,58,188. The Tribunal held that the timber taken over by the Government in respect of this 1/3rd area was stock-in-trade and the proceeds were taxable. Mr. Kaka is right in his submission that the timber taken over was towards the residuary rights in respect of and the assets lying within 1/3rd area taken over on June 1, 1948. The price of the timber as such was never paid by the Government. In the decree, this sum is awarded in lieu of the rights which the assessee-company had under clause 27 in respect of 1/3rd area taken over by the Government. To these facts, what we have discussed about the delivery of 43,860 logs of timber delivered under the agreement dated June 10, 1949, is applicable. This sum of Rs. 5,58,188 could not, therefore, be held to be receipt on revenue account and was not taxable.