Mohanlal Hargovind vs Commissioner Of Income-Tax, C.P. Berar on 28 July, 1949
Perhaps, the case before us is not as bad as the
cases which the Master of the Rolls had in mind
when he made the above observations. It is,
however, a truism that each case must turn upon
its own facts. Nevertheless the decisions are
useful as illustrations of some relevant general
principles. The nearest illustration that we can
get is the decision of the Privy Council in
Mohanlal Hargovind v. Commissioner of Income-
tax(2). That decision was binding on the Indian
Courts at the time when it was given and as I
think that it is still good law and is
indistinguishable from the present case, I offer
no apology for referring to it in great detail.
The facts of that case were these. The assessees
there carried on a business at several places as
manufacturers and vendors of country-made
cigarettes known as bidis. These cigarettes were
composed of tobacoo rolled in leaves of a tree
known as tendu leaves, which were obtained by the
assessees by entering into a number of
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short term contracts with the Government and other
owners of forests. Under the contracts, in
consideration of a certain sum payable by
instalments, the assessees were granted the
exclusive right to pick and carry away the tendu
leaves from the forest area described. The
assesees were allowed to coppice small tendu
plants a few months in advance to obtain good
leaves and to pollard tendu trees a few months in
advance to obtain better and bigger leaves. The
picking of the leaves however had to start at once
or practically at once and to proceed
continuously. On these essential facts, the Privy
Council held that the contracts were entered into
by the assessees wholly and exclusively for the
purpose of supplying themselves with one of the
raw materials of their business, that they granted
no interest in land, or in the trees or plants,
that under them it was the tendu leaves and
nothing but the tendu leaves that were acquired,
that the right to pick the leaves or to go on to
the land for the purpose was merely ancillary to
the real purpose of the contracts and if not
expressed would be implied by law in the sale of a
growing crop, and that therefore the expenditure
incurred in acquiring the raw material was in a
business sense an expenditure on revenue account
and not on capital, just as much as if the tendu
leaves had been bought in a shop. I can find no
distinction which would make any difference
between the facts of that case and the facts of
the present case. Let me compare the essential
facts of these two cases and see whether there is
any difference.