S.K. JAIN, J.M.: This Department appeal and cross objection of assessee thereto against order of AAC of IT relating to asst. yr. 1973-74, arise under these facts and circumstances: assessee for purpose of taking out and selling sand purchased lands and right to take out sand from some other lands for certain period and also took certain lands on lease for same purpose by entering in to seven transactions and thereby incurred expenditure of Rs. 2,19,998, during accounting period from 1st April, 1972 to 31st March, 1973 relevant to asst. yr. 1973-74. After taking out and selling sand from those lands he valued cost of lands together with his right to take out sand at Rs. 2,06,000 at end of accounting year and thus claimed difference of Rs. 13,998 as revenue expenditure. In opinion of ITO it was capital expenditure. He, therefore, disallowed same and added back to profit of assessee. assessee took up appeal before AAC who held that said amount was allowable as revenue expenditure. Aggrieved by said order of AAC Department has come up in appeal, supporting order of ITO that said amount should not be taken as revenue expenditure. assessee on other hand in cross objection claimed that entire amount of Rs. 2,19,998 should have been taken as revenue expenditure incurred for acquiring stock-in- trade. Thus, his cross objection is in excess of his claim in appeal before AAC. His claim in appeal before AAC was limited to amount of Rs. 13,998 disallowed by ITO. In order to appreciate controversy it is necessary to examine nature of seven transaction in which assessee incurred expenditure of Rs. 2,19,998. There was outright sale of certain pieces of land in favour of assessee and others for consideration of Rs. 36,000, Rs. 30,000 and Rs. 19,393.65p., by virtue of three sale deeds dt. 1st Aug., 1972, 1st Aug., 1972 and 11th March, 1973. assessee and contract- purchasers named in those sale deeds acquired absolute right, title and interest in those lands purchased for taking out sand therefrom. Total amount spent on those lands was Rs. 85,393.65 p. other set of two transactions was by virtue of two lease deeds dt 13th March, 1973 corresponding to 29th Falgoon, 1379 B.S., and dt. 14th March, 1973 corresponding to 30 Falgoon, 1379 B.S., by these two lease deeds certain pieces of lands were taken on lease for period of eight years ending on 30 Chaitra, 1387 B.S., for consideration of Rs. 19,878.44 p., and Rs. 44,847.70 p. said consideration has been described in documents as compensation money. lease as mentioned in documents is in respect of raising sub-soil sand, for storing same, for movement of vehicles and for construction of houses for employees. total amount spent on those two leases was Rs. 64,726. Yet there is third type of transaction which entered into by indentures dt 5th April, 1972 and 5th Aug., 1972. By those two documents right, title and interest for raising sub-soil sand on digging surface of lands was purchased for period of nine years and 11 (eleven) years & 11 (eleven) months respectively for consideration of Rs. 24,878 and Rs. 30,000 respectively, total Rs.58,978. Contention of ld. departmental representative is that entire expenditure incurred by assessee was in capital field. According to him, by virtue of three documents effecting outright sales assessee acquired capital asset. Further, it is contended by him that by remaining four documents assessee acquired leases of lands which too according to common law were capital assets. Any loss in value of capital assets due to extraction of sand was capital loss and, therefore, assessee was rightly disallowed Rs. 13,998 as revenue expenditure. Purchase of right, title and interest to take out sand for period of 9 years and 11 years & 11 months by virtue of two documents dt. 5th April, 1972 and 5th Aug., 1972 is taken by ld. counsel for assessee as lease. According to him, assessee took for leases by documents dt. 5th April, 1972, 5th Aug., 1972, 13th March, 1973 and 14th March, 1973. His contention is that assessee is entitled to deduction of lease money spent by him for acquiring stoc- in-trade. On same parity of reasoning his further contention is that sale consideration spent on three lots of lands should also be deductible. Alternatively it is also contended by him that deductions allowable may be spread over number of years for which assets are utilisable. He in support placed reliance upon Gotan Lime Syndicate vs. CIT (1966) 59 ITR 718 (SC), M.A. Jabbar, vs. CIT (1968) 68 ITR 493 (SC) and Associated Stone Industries (Kotah) Ltd vs. CIT 1973 CTR (SC) 498: (1971) 82 ITR 896 (SC). By three transactions of outright purchase of lands evidenced by deeds of conveyance dt 1st Aug., 1972, 1st Aug., 1972 and 11th March, 1973 t h e assessee incurred expenditure of Rs. 85,393. This expenditure is plainly capital expenditure. In this connection reference may be made to judgment of Hon'ble Supreme Court in case of Madnani Development Corpn. (P) Ltd. vs. CIT (1986) 58 CTR (SC) 117: (1986) 161 ITR 165 (SC). other set of transaction is acquisition of two leases for period of eight years each which is evidenced by lease deeds dt. 13th March, 1973 and 14th March, 1973. These leases, as lease deeds mention, were in respect of raising sub-soil sand, for storing same, for movement of vehicles, for construction of houses for employees of sand pits and for purchase and sale of sand. cases of M.A. Jabbar (supra) and Gotan Lime Syndicate (supra) are not applicable to such situation. Hon'ble Supreme Court considered case of M.A. Jabbar (supra) in Madnani Development Corpn. (P). Ltd. (supra) and observed as under: "Learned counsel for assessee relied on M.A. Jabbar vs. CIT (1968) 68 ITR 493 (SC), but that was case where land was taken on lease for limited period of 11 months with right to enter, occupy and use for quarrying purpose and to render marketable and carry away sand within or on land. This Court held that lease money paid by assessee was deductible as revenue expenditure. Court referred to short period of lease, which indicated that lease was not asset of enduring nature, that only right under lease was to take away sand lying on land, and, in fact, as sand lay on surface, no question arose of digging and excavating for sand, and no operations were to be performed on land". What is significant is that sand to be excavated was not on surface of land but was to raised from sub-soil and for that purpose pits were to be dugged. Hon'ble Supreme Court considered their earlier judgments in cases of Pingle Industries Ltd. vs. CIT (1960) 40 ITR 67 (SC). K.T.M.T.M. Abdul Kayoon and Anr., vs. CIT (1962) 44 ITR 689 (SC) and M.A. Jabbar vs. CIT (1968) 68 ITR 493 (SC) in case of R.B. Seth Moolchand Suganchand vs. CIT 1972 CTR (SC) 430: (1972) 86 ITR 647 (SC). Following observations of Hon'ble Mr. Justice Jaganmohan Reddy in case of R.B. Seth Moolchand Suganchand vs. CIT (supra) are pertinent: "The principles enunciated for determining nature of expenditure have been sought to be applied to different situations arising on facts of each case, but difficulty in matching them with seeming irreconcilability are perhaps explicable only on ground that determination in any particular case is dependent on character of lease or agreement, nature of asset, purpose for which expenditure was incurred and such other factors as in facts and circumstances of that case would indicate. If we confine our attention to mining leases, what appears to us to be empirical test is that where minerals have to be won, extracted and brought to surface by mining operations, expenditure incurred for acquiring such right would be of capital nature. But, where mineral has already been gotten and is on surface, then expenditure incurred for obtaining right to acquire raw material, that is, mineral, would be revenue expenditure laid out for acquisition of stock-in-trade. expenditure incurred for acquiring right to take away sand from surface of river beds has been treated as if sand was stock-in-trade M.A. Jabbar vs. CIT (supra), in same way as tendu leaves have been treated by Privy Council in Mohanlal Hargovind's case." In this view sand in sub-soil of lands taken by assessee on lease were not stock-in-trade in business sense but capital asset from which, after excavation he converted sand into his stock-in-trade. expenditure incurred on obtaining leases was, therefore, capital expenditure. There was yet third type of transaction. assessee by two sale deed d t . 5th April, 1972 and 5th Aug., 1972 purchased right, title and interest for raising sub-soil sand on digging surface of lands mentioned in said sale deeds for consideration of Rs. 24,878 and Rs. 35,000 respectively for period of 9 years and 11 years 11 months respectively. Such right is definitely benefit to arise out of land and is immovable property within meaning of s. 3(26) of General Claus s. Act. Since right is to extract sub-soils sand it cannot be placed on different footing that that under lease considered above. Thus, entire expenditure was capital expenditure and assessee is not entitled to deduction of any part of it as revenue expenditure. order of AAC is, therefore, reversed and that of ITO is restored. In result, appeal is allowed and cross objection is dismissed. *** INCOME TAX OFFICER v. MANOJ KUMAR CHATTERJEE