Lease premium characterisation: instalment payments remained capital receipt, not revenue income, because substance prevailed over label.

A premium paid under a lease is characterised by its true substance, not by the label used in the deed. Where the deed separately provides for rent and for a premium payable in instalments, the premium remains the price for parting with rights in the property and has the character of capital, while rent is consideration for use and enjoyment. The instalment structure does not by itself convert the premium into deferred rent. On these facts, the amount was held to be a capital receipt and not revenue income liable to tax.

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Issues: Whether the sum of Rs. 11,250 received under the lease deed was a capital receipt or a revenue receipt.

Analysis: The receipt had to be characterised from the true substance of the lease and the surrounding circumstances, not merely from the label used by the parties. The lease deed separately provided for rent and for a premium payable in instalments. A premium paid for the grant of the lease was the price for parting with rights in the property and had the character of capital, whereas rent was a payment for use and enjoyment of the property. The instalment structure did not alter the character of the premium, and there was nothing to show that the premium was in reality deferred rent.

Conclusion: The sum of Rs. 11,250 was a capital receipt and not liable to tax as revenue income.

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