TMI Blog1969 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the case, the sum of Rs. 55,200 was a revenue receipt being rent received in advance thus liable to be taxed ? " On July 19, 1945, the assessee took on lease premises No. 157, Upper Circular Road, Calcutta, for a term of 99 years on a monthly rental of Rs. 750. It was stipulated, inter alia, that the lessee could assign the lease with the consent of the lessor. He could alter the structures on the premises so as to convert it into a cinema if necessary. After expending Rs. 35,000 on some alterations to the premises the assessee felt the necessity of having some more money in order to convert the building into a cinema. He entered into a lease on February 23, 1946, with three persons, namely, Nani Gopal Dutt, Mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lessor the said sum of Rs. 55,200 (Rupees fifty-five thousand and two hundred) for which separate receipt has been granted by the lessor. " After the cinema house had been completed the lessees entered into possession and started exhibiting shows there. For the assessment year 1947-48, the corresponding accounting year being the financial year ending March 31, 1947, the Income-tax Officer sought to treat the sum of Rs. 55,200 received by the assessee as his income. The contention of the assessee was that the aforesaid amount should be treated as capital receipt. Alternatively, if it was to be treated as salami (premium) and was to be taxed as a revenue receipt, it should be distributed evenly over the entire term of the lease, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of lease is only for 30 years and the assessee's investment on the cinema is about Rs. 60,000, Rs. 35,000 being the cost of construction and Rs. 25,000 being cost of machinery, with a liability to pay Rs. 750 rent to the owner of the plot. As a result of this lease he has got a rent of Rs. 2,100 for a term of 30 years. Thus, there is no question of payment of any salami as no further inducement for grant of the lease was necessary. It is obvious that if the cost of construction of the cinema house would have been met in its entirety by the assesssee and, thereafter, if the assessee would have granted the lease to the lessee, the rent would certainly have been much higher. Thus, the said sum of Rs. 55,200, in the absence of a different re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transaction embodied in the indenture of lease was clearly business-like. The lessees wanted the building for running it as a cinema house and the lessor agreed to give it to them but apparently represented that he did not have enough money to complete it in accordance with the suggestion and requirement of the lessees. The lessees agreed to pay him the aforesaid amount by way of a lump sum without making any provision for its adjustment towards the rent or repayment by the lessor. The essential question, however, is whether, on the terms of the lease and in the absence of any other material or evidence, it could be held that the sum of Rs. 55,200 was paid by way of advance rental ? The view which has been expressed by the Tribunal as al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned judge, is clearly recognised in section 105 of the Transfer of Property Act which defines both premium and rent. This is what was observed at page 545 : " It is obvious that if the premium represents the whole or part of the price of the land it cannot be income. As pointed out by Sir George Lowndes in Commissioner of Income-tax v. Shaw Wallace Co. 'income' in the Indian Income-tax Act connotes a periodical monetary return, coming in with some sort of regularity or expected regularity from definite sources. The premium or salami which is paid once for all and is not recurring payment, hardly satisfies this test. I concede that in some cases where the rent is ridiculously low and the premium abnormally high, it may be possible to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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