Lease lump sum treated as capital receipt, not advance rent, where deed fixed separate rent and no adjustment clause existed.

A lump sum received by a lessor under a lease was held not to be advance rent but a capital receipt in the nature of premium or salami. The lease deed did not provide for any adjustment against rent or treat the sum as prepaid rent, and the monthly rent was separately fixed. The payment was made once for all toward the cost of erecting the cinema house and related expenses, with no refund or adjustment clause, and there was no evidence that the real rent was higher or spread over the lease term. On those facts, the amount was not taxable as revenue income.

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Issues: Whether the lump sum of Rs. 55,200 received by the lessor under the lease was assessable as advance rent and therefore a revenue receipt, or was a capital receipt in the nature of premium or salami.

Analysis: The lease deed contained no stipulation that the amount was to be adjusted against rent or treated as an advance payment of rent. The agreed monthly rent was separately fixed, and the lump sum was paid once for all toward the cost of erecting the cinema house and other expenses. There was no cogent evidence to support the inference that the real rent was higher or that the payment represented consolidated rent spread over the term of the lease. The non-recurring character of the payment, the delayed commencement of rent, and the absence of any provision for refund or adjustment showed that the amount bore the characteristics of a premium rather than income.

Conclusion: The amount of Rs. 55,200 was not advance rent and was not taxable as revenue receipt. The issue was decided in favour of the assessee.

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