Judgment

BHAGWATI J.: This appeal from the judgment and order of the High Court of Judicature at Calcutta with leave under Section 66-A(2) of the Indian Income-tax Act raises an interesting question as to the line of demarcation between capital expenditure and revenue expenditure.

2. On the 14th November 1938 the Appellant company acquired from the Government of Assam a lease of certain limestone quarries, known as the Komorrah quarries situated in the Khasi and Jaintia Hills District for the purpose of carrying on the manufacture of cement. The lease was for 20 years commencing on the 1st November 1938 and ending on the 31st October 1958, with a clause for renewal for a further term of 20 years. The rent reserved was a half yearly rent certain of Rs. 3,000 for the first two years and thereafter a half-yearly rent certain of Rs. 6,000 with the provision for payment of further royalties in certain events.

In addition to these rents and royalties two further sums were payable under the special covenants contained in Clauses 4 and 5 of the lease as "protection fees". Under Clause 4 the protection was in respect of another group of quarries called the Durgasil area, the lessor undertaking