On the 19th November, 1931 the assessee acquired from the Rajah of Ramnad the exclusive right to collect conch shells from certain conch beds belonging to him. The period for which the concession was granted was three years and seven months from 1st December 1931 to 30th June 1935 and the consideration was the sum of Rs. 10,500 payable in instalments. The assessee at or about the same time acquired a similar right from the Zamindar of Sivaganga. The concession obtained from the Zamindar was a much smaller one and the consideration here was only Rs. 3

50. The question which the Court is called upon to decide is whether the assessee is entitled in law to deduct the two sums of Rs. 10,500 and Rs. 350 for the purpose of arriving at his assessable income for the year 1936-

37. The Income-tax authorities have treated these sums as being in the nature of capital expenditure and have refused to allow the amounts to be deducted. The assessee says that here the Income-tax authorities erred in law as the moneys which he had to pay for these concessions were in the nature of expenses which may be deducted under Section 10(2)(ix) of the Indian Income-tax Act, 1922. The case is governed by authority of this Court, and the answer which must be given to this reference is against the assessee

This very question arose in Commissioner of income-tax, Madras v. Chengalvaraya Mudaliar which was decided by a Full Bench consisting of Beasley, C.J., and Ramesam and Sundaram Chetty, JJ. There the assessee entered into an agreement with the Secretary of State for India in Council for the excavation of lime Shells from certain Government lands. He was given the exclusive privilege of excating these shells within a specified area for a period of three years, for which privilege he was called upon to pay a sum of Rs. 27,7

50. It was held that this sum was neither rent nor the purchase money of the shells lying upon and under the land covered by the agreement, but it was capital expenditure. In the course of his judgment the learned Chief Justice referred to the judgments in City of London Corporation v. Styles 1887 (2) Tax(Cas) 239 and John Smith & Son V. Moore 1921 (2) AC

13. In the first of these cases Bowen, L.J., pointed out the difference between spending money for the purpose of acquiring a concern and spending money for the purpose of the concern. In the former case the expenditure was of a capital nature in the latter case it was of the nature of an ordinary business expenditure. The same question arose with regard to a shell concession in Commissioner of Income-tax, Madras v. Messrs. P. T. Chengalvaraya Chettiyar and P.L.M.M.V.S. and Company, Madras, where a Full Bench consisting of Beasley, C.J., and Mockett and Lakshmana Rao, JJ. affirmed the decision in Commissioner of Income-tax, Madras v. Chengalvaraya Mudaliar. The same view was taken in Shankar Shambhaji Gangla v. The Commissioner of Income-tax, Bombay (9 I.T.C. 350), in which the Income-tax authorities relied on the decision in Commissioner of Income-tax, Madras v. Chengalvaraya Mudaliar. The judgment shortly answers the question referred but it is clear that in doing so the Court accepted the reasoning in Commissioner of Income-tax, Madras v. Chengalvaraya Mudaliar The learned Advocate for the assessee has quoted in support of his argument the case of Golden Horse Shoe (New) Ltd. v. Thurgood (H. M. Inspector of Taxes) 18 Tax(Cas) 280). In that case a company purchased the right to treat tailings in certain dumps for the purpose of extracting gold. The Crown contended that the companys rights were part of the undertaking which the company was formed to acquire and any money paid for the acquisition of the dumps was capital expenditure. It was held that it was not and that the dumps were part of the stock-in-trade of the company. Romer, L.J., put the position very concisely

" Are the dumps the raw material of the Appellants business, or do they merely provide the means of obtaining that raw material In my opinion, they are the raw material itself " *

Now in the present case what the assessee paid for was the right to win conch shells. He was not purchasing the right to any specified quantity of conch shells. It was merely the right to win what he could from the beds where the conch shells were lying. What he got was the means of obtaining the material for his business, not the material itself. This case is clearly governed by decisions in Commissioner of Income-Tax, Madras v. Chengalvaraya Mudaliar and Commissioner of Income-tax, Madras v. Messrs. P. T. Chengalvaraya Chettiar and P. L. M. M. V. S. and Company, Madras

The answer that I would give to the reference is that the sums of Rs. 10,500 and Rs. 350 are expenses of a capital nature and therefore are not permissible deductions

As the assessee has failed he must pay costs, Rs. 250

MOCKETT, J.---I agree

KRISHNASWAMI AYYANGAR, J.----I agree

Reference answered.