TMI Blog1981 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate deduction against the income of the year?" K.R.DIXIT, J.M. The assessee, in this case had taken an assignment of lease for a period of 99 years from its sister concern Calama Industries Pvt. Ltd. This letter company had taken a lease from the Gujarat Industrial Development Corpn. on payment of a lump sum of Rs. 1,62,500 agreeing also to pay yearly rent of Rs. 10. At the time when the assignment of lease took place in favour of the assessee a sum of Rs. 26,012,71 was paid by it to the Gujarat Industrial Development Corpn. over and above a sum of Rs. 1,62,500 paid to the first lessee viz. Calama Industries Pvt. Ltd. The assessee has claimed 1/99th part of the total sum of Rs. 1,62,500 plus Rs. 26,012,71 as revenue expenditure for the assessment year in question. 2. On behalf of the assessee, the ld. counsel has laid great stress on the fact that the yearly rent of Rs. 10 is extremely low for the large piece of land i.e.10,000 sq. yds. in respect of which the lease has been granted. He has, therefore, argued that the said total amount of Rs. 1,88,512,71 is nothing but advance rent paid by the assessee. He has drawn our attention to the decision of the Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. The provisions of the lease indicate that the lease has been granted for specific use. There are other conditions in it for the fulfilment of which the G.I.D.C. is concerned. In order to prevent any other user of the land and to enforce other conditions the G.I.D.C. should have some continuous control with regard to the assessee. This could only be done by a lease rather than an outright sale. The option of renewal in favour of the lessee for a further period of 99 years only for a rent upto double the present rent further goes to show the real purpose of the lease. The fixing of rent even if it be nominal was necessary for this purpose. This would show that the lump sum amount of Rs. 1,62,500 is the real consideration for the transaction and has been charged by the lessor in order to give the land on lease at a very low rent. 5. Therefore, on totality of all the circumstances, we are of the opinion that the said lump sum amount was premium and not advance rent. The assessee would, therefore, not be entitled to the deduction claimed. 6. In the result, the appeal is dismissed. V.BALASUBRAMANIAN, A.M. 7. I have read the order drafted by my ld. brother. I do not with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eements on the part of the Lessee hereinafter contained the Lessor doth hereby demise upto the Lessee all that piece of land consisting of plot No.173.................unto the Lessee for the term of 99 years computed from the last day of June, in the year one thousand nine hundred seventy one subject nevertheless to the provisions of the Bombay Land the Revenue Code, 1979, this thus Rules thereunder paying therefor yearly on or before the 31st day of March, of each year during the said term unto the Lessor at the office of the Chief Executive Officer or as otherwise required the yearly rent of Rs. 10 (Rupees ten only) provided that at the end of 99 years computed from the date as hereinbefore mentioned the Lessee as aforesaid shall have the right to renew this lease for a further period of 99 years and in the event of Lessee exercising such option in the manner hereinafter provided, the Lessor shall have the right to increase the sum of yearly rent as hereinbefore stipulated by a further sum which shall be 100 per cent of the original sum of rent and provided further that is the Lessee shall have duly performed and observed the convenants and the conditions on the part of the Lesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee." "(o)That it will use the demised premises only for the purpose of manufacturing of submersible pumps factory and matters connected therewith and shall not use the demised premises or any part thereof for any other purpose without the permission in writing of the Chief Executive Officer, provided that the demised premises shall not be used for a factory, or any industry which by reason of omission of odour, liquid, effluvia, dust, smoke, gas, noise, vibrations or fire hazards is declared an obnoxious by the Lessor." "(s)..............in the event of such transfer, assignment, underletting or parting with 50 per cent of the unearned increment that may be accrued to the Lessee shall be paid by the Lessee to the Chief Executive Officer of the Lessor, provided further that the unearned increment shall be valued by the Architect of the Lessor and decision of the Architect will be binding on the Lessee." 12. The assessee took over the lease under the same conditions as the predecessor under the 'Indenture of Assignment' dt. 29th March, 1975. Under this latter agreement, the assessee had to pay Rs. 26,013 "being the amount increased in the value of land as required by G.I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nomenclature used may not be decisive or conclusive but it helps the court, having regard to the other circumstances, to ascertain the intention of the parties". 14. In the present case, the assessee has taken over a lease for 99 years and paid an over-all amount of Rs. 1,18,513. The stipulation in the lease deed that Rs. 26,013 was to be paid to G.I.D.C. for the assignment of the lease would on the principle stated by the Supreme Court smack of a capital payment. The assessee, however, while it has a lease for 99 years is subject to several of the conditions above quoted in the retention of the lease or the further continuation of the same. It would not therefore be proper to hold that the assessee got a right to continue in the lease without any payment of rent. If that be not so, there would not have been any stipulation for the payment of the rent of Rs. 10 per year. Either the assessee could take over the premises by paying for the lease by way of premium a lump sum or retain the lease by payment of an annual rent. The principle laid down by the Supreme Court clearly indicates that the nomenclature given by the party is not decisive of the nature of the payment which shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he initial payment made. Taking into account the interest accretions the annual rental would be much more than the sum of Rs. 1,930. I do not see, therefore, why, the assessee should not get deduction of the smaller amount in computing its income. I, therefore, hold that the sum of Rs.1,930 claimed by the assessee should be allowed as deduction as annual rent. 16. It was pointed out for the Department that a lump sum payment should at any rate be considered as a revenue or capital account during the year of payment there being no provision in the IT Act for allowance of a deferred expenditure. The position here factually as well as legally is not one of deferred expenditure but a payment of rent in advance. The conditions of the lease such as the obligation to construct a building, carrying on particular business etc. which, if not complied with perhaps may result in the termination of the lease, would support over view about the advance payment of rent. The fact that the stipulated rent Rs. 10 per year is absurdly low, would also support the case that what is paid is an advance amount towards rent and not a premium or a one-time down-right payment of rent. Taking into account a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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