Lease term under section 269UA(f): option to renew or extend counted toward the twelve-year threshold.

A lease deed with an initial nine-year term and a lessee's option to renew or extend it for a further nine years was treated as a transfer involving a lease for not less than twelve years under section 269UA(f) of the Income-tax Act. The decisive factor was the terms of the executed deed itself, not whether the option was later exercised. The court held that the distinction between "renewal" and "extension" did not alter the substance where the deed contemplated an assured further term at the lessee's option, and the aggregate term was eighteen years. Chapter XX-C therefore applied, and the challenge to the prosecution proceedings failed.

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Issues: Whether a lease deed providing for an initial term of nine years with an option in the lessee to renew or extend it for a further nine years amounts, for the purposes of Chapter XX-C of the Income-tax Act, 1961, to a transfer involving a lease for not less than twelve years under section 269UA(f).

Analysis: The Explanation to section 269UA(f) treats a lease as one for not less than twelve years where the lease itself provides for extension and the aggregate of the original term and the further term or terms is not less than twelve years. The decisive factor is the terms of the executed lease deed, not whether the lessee actually exercises the option later. A distinction between the expressions "renewal" and "extension" does not alter the substance where the deed itself contemplates an assured further term at the lessee's option. On a conjoint reading of the relevant clauses, the lease was intended to endure for eighteen years in the aggregate, subject to the lessee's option.

Conclusion: The lease fell within the deeming provision in section 269UA(f), attracted Chapter XX-C, and the challenge to the prosecution proceedings was rejected.

Ratio Decidendi: For the purpose of section 269UA(f), a lease is to be treated as one for not less than twelve years if the lease deed itself provides for an additional term or terms and the aggregate of the original and stipulated further term is twelve years or more, regardless of whether the additional term is described as renewal or extension.

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