TMI Blog1993 (4) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... n the lease deeds. BEML had to pay a substantial sum to each of the lessors (assessees) as advance which was to be adjusted against the rent. The lessee, BEML, had an option to purchase the flats for the payment of a small amount at the termination of the lease. There were the other usual clauses generally found in lease deeds safeguarding the respective interests of both lessors and lessee. The lessee was put in possession of the flats. The flats, as per one of the terms of the lease deeds, were to be used for residential purposes only. 3. In the returns filed by the appellants, the rental income for the year under consideration was offered for tax and the returns were accepted by the Assessing Officer under section 143(1) of the Act. 4. The CIT thereafter initiated proceedings under section 263 for revising the assessments. In his opinion, the acceptance of the returns without scrutiny under section 143(1) was erroneous and prejudicial to the interests of the Revenue. He took the view, on an examination of the record, that the documents styled as lease deeds were in fact documents for the sale of the flats to BEML, that the advance paid by BEML represented the consideration f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions were made to speed up the disposal of income-tax assessments with the manpower available and to reduce the ever increasing back-log. The recommendations made in this Conference have been examined by the Board and I am directed to say that in supersession of all existing instructions on the subject, the following procedure will now be adopted : 2. Assessments in the following types of cases will be completed under section 143(1) on the basis of the returns after linking them with the assessment records : --- All cases, other than company and trust cases with returned income/loss up to Rs. 1 lakh. --- Company cases with returned income/loss up to Rs. 25,000 and paid-up capital not exceeding Rs. 5,00,000. However, the first assessment in all new company cases will be a scrutiny assessment. --- All trust cases and cases of charitable institutions having income below Rs. 1 lakh before applying the provisions of section 11, provided the corpus of the trust does not exceed Rs. 5 lakhs. However, the first assessment in all trust cases will be a scrutiny assessment. 3. In the above cases, the arithmetical accuracy of computation of total income and taxes will be ensured and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fered by the Government to utilise resources for scrutiny and investigations of larger cases. In such cases, CIT should only inform Audit that the cases are completed under the Summary Assessment Scheme.' The above observations of the Member (R A) reflect the views of the Board on the subject and are being brought to the notice of all the Commissioners of Income-tax for their information and guidance. Yours faithfully, Sd/-- V.K. Sachdeva Director of Inspection (Audit) New Delhi ." It is therefore clear that the Government is prepared to suffer the loss of revenue by making summary assessments under section 143(1) on the ground that the time and effort involved in unearthing the loss is not commensurate with the benefit likely to be obtained and they may be better channelised in scrutiny of cases involving larger revenue. A monetary limit of Rs. 1 lakh has therefore been fixed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only followed the instructions of the Board to the letter and cannot be found fault with for having done so. In the case of Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229. The Calcutta High Court held that the Income-tax Officer cannot be said to have committed an error if he has followed an order of the Tribunal. The true ratio or principle of the decision is that whenever there is a decision of a higher or superior authority, the subordinate authorities are bound to follow the same. In the present case, the CIT could not have possibly entertained the view that the assessments completed under section 143(1) were erroneous and prejudicial to the interests of the revenue merely because they were so completed as per the Board's instructions. 9. We now proceed to a consideration of the question as to whether the documents executed by the parties in the present case are documents conferring the rights of a lessee on BEML or are documents by which the property in the flats can be said to have been transferred to BEML for a price so as to constitute BEML the absolute owner of the flats. The answer to the questions involves an examination of the terms and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs rights of absolute ownership on BEML on those flats. It would be impossible for BEML to accept such a course at the suggestion of the appellants since before entering into any transaction likely to have legal overtones there would be a whole lot of formalities to be complied with, approvals to be obtained, clearances to be secured etc. from a hierarchy of officials. It would certainly be against the interests of BEML to describe the transaction as a lease in the documents if it had really obtained full rights of ownership on the flats. It is difficult to imagine that an undertaking of the Government of India would be persuaded to take such a risky step. In this background, we may examine the documents in question. The appellants have granted a lease of the flats for a period of 99 years. It is not a perpetual lease as made out by the CIT. A perpetual lease has to be granted either expressly or by a presumed grant. There must be words which suffice themselves to import permanency of the lease. But a lease where the duration is fixed --- however long the duration may be --- is not a perpetual lease. Duration or the term or the period of a lease is an essential element under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 of the Transfer of Property Act. The documents contain all the essential ingredients of a lease and have rightly been described as 'lease deeds'. There is no transfer of ownership of the three flats in favour of BEML so that the transaction embodied in the documents could be described as 'sale' within the meaning of section 54 of the aforesaid Act. 10. Both the CIT and Mr. Lahiri relied heavily on the presence of a term in the lease deed conferring an option to BEML to purchase the flats for a paltry sum (Rs. 5,000) on the termination of the lease. If anything, the presence of this clause itself shows that the documents are not sale deeds, since no transfer of ownership is envisaged when they were executed. Further, we cannot decide the nature of the document in question merely on the presence of this term, which is to come into effect after a period of 99 years. This term does not per se convert the document granting lease to one of sale. In the case of Narayan Prasad Vijaivargiya v. CIT [1976] 102 ITR 748, the Calcutta High Court laid down the principle to be followed in such cases. At page 754 of the report, it was held as under : "Now, the question is whether the rest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the CIT appears at pp. 107 and 108. The reply by BEML to the first point is as below : "We have taken on long lease of 99 years two flats of 1700 sq. ft. as also one flat of 2093 sq. ft. (approx.) at Rs. 400 per sq. ft. along with car parking/servant quarters for each flat at an additional lump sum price of Rs. 20,000 as per our CMD's approval vide Note No. MDS/011/Cal/135 dated 1-2-1983. The Lease Deeds entered into between the Lessors and BEML have already been furnished to Income-tax Officer during April 1984. After the expiry of lease period of 99 years, we are entitled to exercise our option to purchase the flats from the lessors at or for a lump sum amount of Rs. 5,000 in such condition as will be existing at that time. The terms and conditions of the lease deed clearly shows that this is a transaction of a perpetual lease of 99 years and not a 'Sale' absolute. It is also confirmed that the Lessors are the legal owners of this immovable property." The above reply makes it clear that BEML, whom the CIT considers to have purchased the flats outright and not as mere lessee of the flats, does not think so. It has confirmed that the lessors are the legal owners of the flats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case. It may also be noticed that in Lachmandas Bansilal Rathod v. Zumberlal Surajmal Gandhi AIR 1974 Bom. 115, the Bombay High Court has held that the expression "Lease" in section 105 of the Transfer of Property Act covers a lease accompanied by payment of advance rent. Therefore, there can be no doubt that the documents in question in the appeals before us are documents granting lease hold rights in favour of BEML and not documents of sale. 13. The ld. counsel for the assessee also referred to the plaint filed by BEML in Suit No. 87 of 1989 against one of the appellants in the present appeals. The plaint appears at page 90 of the Paper Book. In the plaint, the claim of BEML is that it is in occupation of the flats as lessee under Registered Lease Deed dated 20-6-1983, that it had paid an advance of Rs. 7,03,296 being advance rent for the flat @ Rs. 592 p.m., that the Defendants (assessee in the appeals) cannot by notice dated 23-10-1989 put an end to the tenancy and stop supply of electricity, generator facility, use of lifts, supply of water and other benefits to which BEML was entitled to under the documents of lease. The Plaintiff (BEML) has prayed for a declaration ..... X X X X Extracts X X X X X X X X Extracts X X X X
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