1. In this case the assessee company had purchased, on 16-5-1934, six pies share in the Zamindari of Masnodih Gaddi from one Tufani Singh for a sum of Rs. 40,000. On 3-3-1938, the assessee company similarly purchased 3 annas 9 pies share of the same Zamindari for Rs. 1,27,500 from Christian, Mica Company.

2. There are 120 Mica mines located in the portion of the zamindari acquired by the assessee company. On 7-12-1946, the assessee company executed an indenture of lease in favour of Kedarnath Singh for a consideration of Rs. 92.000 and a reserve rent of Rs. 3,000 per year. The lease was granted for 99 years and comprised an area of 325 acres of the zamindari. The lease related to surface right together I with nine mica mines located in the area demised.

The Income-tax Officer determined that the cost of the mineral right with respect to the nine mines transferred to the company would be Rs. 12,562, on a proportionate basis.

3. After deducting this amount from the Salami of Rs. 92,000 which the Company received from Kedarnath Singh the Income-tax Officer found that the assessee company had made a capital gain of Rs. 79,438 and taxed this amount under Sec.12B, Income-tax Act.