TMI Blog1986 (9) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... e southern portion of the land for a period of 98 years. Indenture of lease was executed on 16th Nov., 1979. Under the deed of sub-lease executed on the same day, the assessee sub-leased the property to palm Grove Beach Hotels Pvt. Ltd. of which the assessee is one of the Promoter Directors. While the assessee had taken the land on lease for 98 years. The assessee gave it on sub-lease to Palm Grove Beach Hotels Pvt. Ltd. on a monthly rent of Rs. 5,000 for the first 47 years and monthly rent of Rs. 7,500 for next 50 years. As per the provisions of cl. 1(D) of the lease agreements executed on 5th June, 1979, between the assessee and Shri Gopal L. Raheja and the assessee himself as Promoter Director of the Palm Grove Beach Hotels Pvt. Ltd. i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the decisions of the Andhra Pradesh High Court reported in Nagasuri Raghaveswara Rao vs. CIT (1967) 66 ITR 496 (AP), Calcutta High Court in Durga Das Khanna vs. CIT (1967) 64 ITR 544 (Cal) and another Calcutta High Court decision in CIT vs. Purnendu Mullick (1979) 116 ITR 591 (Cal) and held that the amount was taxable. 4. The assessee came up in appeal before the CIT (A) who upheld the order of the ITO and distinguished the decision of the Tribunal in the case of Mr. Mrs. H.N. Kelawala. He also followed more or less the same decisions which the ITO had followed. He, however, held that the subsequent purchase of the share capital of the company by the assessee showed that this was of income in an investment which cannot be easily liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as and by way of advance rent deposit to be adjusted at the rate of Rs. 2,500 per month out of the then rent of Rs. 7,500 for the last 50 years of the initial lease period of 97 years. The Department's case is that the amount is taxable as revenue receipt while the ld. counsel for the assessee contends that neither it is a revenue receipt nor a capital receipt. We have been supplied with a copy of the decision of the Tribunal in the case of Mr. and Mrs. H.N. Kelawala decided by the Bombay Bench 'D' of the Tribunal on 19th Nov., 1976 and reported in 1977 ITC (5) 219 (Bom Trib). The facts in that case were that the assessee had taken certain vacant land long lease of 98 years. The same is the case before us. 40 per cent of the land was develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by way of advance rent and he determined the advance rent component or commuted part of the same at Rs. 60,000 which he held to be taxable as revenue income while the balance was treated as capital receipt taxable to capital gains. 8. Both the assessee and the Department appealed to the Tribunal. The Tribunal considered the matter at great length. The Tribunal also considered the various rulings on which reliance is placed before us and the provisions of s. 105 of the Transfer of Property Act which defines a lease of immovable property as a transfer of right to enjoy such property and held that lease hold interest are capital assets. Though the Tribunal further held that grant of sub-lease amounts to a transfer in para 11 of its orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had brought out the distinction between the price paid for the transfer of the right to enjoy a property and the rent to be paid periodically to the owner of a lease of the property. When the interest of the leasor is parted with for a price the price paid is premium or salam. But periodically payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. The former is a capital income and the latter is a revenue receipt. To make it clear that the point at issue before us is only whether it is a revenue receipt but since the matter has come up in the light of the rulings relied upon the authorities below and the ld. departmental representative we make these observations also whether it is a capital re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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