Salami receipts before tenancy are capital receipts, not trading income, where they do not arise from a trading adventure.

Lump-sum salami received from prospective tenants before the tenancy came into existence, and before completion of the building, was held to be a capital receipt rather than trading or revenue income. The receipts were treated as consideration for being let into possession of premises and were not shown to arise from a trading adventure comparable to leasing operations. The addition was therefore deleted, and the Revenue's contention failed.

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Issues: Whether the salami receipts received from prospective tenants before creation of tenancy and before completion of the building were assessable as trading or revenue income, or were capital receipts not chargeable to tax.

Analysis: The amount was received before the tenancy came into existence and was paid as consideration for being let into possession of premises that were not yet fully constructed. On the facts, the receipts were not shown to arise from a trading adventure comparable to the leasing operations in the cited coal-leasing case. The legal position regarding ownership of the superstructure during the lease term also supported the view that the assessee did not receive the amounts as trading profits from dealing in tenancy rights.

Conclusion: The salami receipts were capital receipts and not trading or revenue receipts. The addition was rightly deleted and the contention of the Revenue failed.

Ratio Decidendi: A lump-sum salami received from prospective tenants before creation of tenancy, in the context of letting premises and without the receipts forming part of a trading adventure, is a capital receipt and not taxable as trading income.

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