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TMI Blog1965 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... 50. The lease was executed in consideration of a sum of Rs. 2,25,000 as and by way of premium and an annual rent of Rs. 54,000 to be paid by the lessee to the lessor. The premium was made payable as follows : Rs. 45,000 to be paid in one lump sum at the time of the execution of the lease deed and the balance of Rs. 1,80,000 in 16 half yearly iristalments of Rs. 11,250 on or before January 31 and July 31 of each year. The annual rent of Rs. 54,000 was payable as follows : Rs. 1,000 per month to be paid on or before the last day of each month, making in all Rs. 12,000 per year, and the balance of Rs. 42,000 on or before December 31 of each year. On February 25, 1957, for the assessment year 1952-53, the Income-tax Officer made the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income-tax, thus : " It (salami) is a single payment made for the acquisition of the right of the lessees to enjoy the benefits granted to them by the lease. That general right may properly be regarded as a capital asset, and the money paid to purchase it may properly be held to be a payment on capital account. But the royalties are on a different footing." It is true that in that case the leases were granted for 999 years ; but, though it was one of the circumstances, it was not a decisive factor in the Judicial Committee coming to the conclusion that the salami paid under the leases was a capital asset. This court in Member for the Board of Agricultural Income-tax, As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of a right to enjoy the property made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent. The section, therefore, brings out the distinction between a price paid for a transfer of a right to enjoy the property and the rent to be paid periodically to the lessor. When the interest of the lessor is part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to the lessor and for using the estates the lessee had to pay an annual rent of Rs. 54,000. Both the premium and the rent were payable in instalments in the manner provided in the document. The parties were businessmen presumably well-versed in the working of tea estates. They must be assumed to have known the difference between the two expressions " premium " and " rent "; and they had designedly used those two expressions to connote two different payments. The annual rent fixed was a considerable sum of Rs. 54,000 and the premium, when spread over 10 years, would work out to Rs. 22,500 a year. There is no reason, therefore, to assume that the parties camouflaged their real intention and fixed a part of the rent in the shape of premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this clause it shall be lawful for the lessor to re-enter and in that event in terms of clause 8 he will be entitled only to recover the balance of the instalment of unpaid premium and not the entire balance of the premium. This construction, though appears to be plausible at first sight, really ignores the main terms of the lease. The default clause is pressed into service to destroy the main term of the lease. Under clause 1 of the lease deed the sum of Rs. 2,25,000 is the consideration by way of premium to be paid by the lessee to the lessor. Under clause 4 thereof the said entire premium has to be paid in instalments ; under clause 8 the lessor has the option to terminate the lease and re-enter the premises in the circumstances menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing three items of expenditure: Rs. Transit charges ... 10,605 Legal expenses ... 7,518 Gratuity to managing director ... 10,000 -------------- 28,123 -------------- Before comparing the figures given for the two periods, i.e., the period before March, 1950, and the period thereafter, it is necessary to add back the said three items of expenditure totalling Rs. 28,123 to the net profit of the year ended with 31st March, 1952, if they were added, instead of Rs. 17,686, the profit would be Rs. 45,809. A comparative study of the said figures discloses a higher return in the second period than during the earlier period. But an attempt is made to show that the figures of the later period include other items and if they are deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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