TaxTMI 
TaxTMI 
1969 (1) TMI 1
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.... term of 99 years on a monthly rental of Rs. 750. It was stipulated, inter alia, that the lessee could assign the lease with the consent of the lessor. He could alter the structures on the premises so as to convert it into a cinema if necessary. After expending Rs. 35,000 on some alterations to the premises the assessee felt the necessity of having some more money in order to convert the building into a cinema. He entered into a lease on February 23, 1946, with three persons, namely, Nani Gopal Dutt, Makhan Lal Dutt and Shiv Kumar Khanna. By this lease, the building which was called " Khanna cinema house " at 157, Upper Circular Road, Calcutta, was demised to the lessees for a period of 30 years. The lessees agreed to pay under the indentur....
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....ting shows there. For the assessment year 1947-48, the corresponding accounting year being the financial year ending March 31, 1947, the Income-tax Officer sought to treat the sum of Rs. 55,200 received by the assessee as his income. The contention of the assessee was that the aforesaid amount should be treated as capital receipt. Alternatively, if it was to be treated as salami (premium) and was to be taxed as a revenue receipt, it should be distributed evenly over the entire term of the lease, i.e., 30 years. The Income-tax Officer did not accept either of the contentions of the assessee. It was held by him that the lease was not permanent but was temporary and that the salami had been fixed as an advance payment of rent and not as paym....
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.... a result of this lease he has got a rent of Rs. 2,100 for a term of 30 years. Thus, there is no question of payment of any salami as no further inducement for grant of the lease was necessary. It is obvious that if the cost of construction of the cinema house would have been met in its entirety by the assesssee and, thereafter, if the assessee would have granted the lease to the lessee, the rent would certainly have been much higher. Thus, the said sum of Rs. 55,200, in the absence of a different recital, can only be deemed to have been paid as an advance rent in respect of the said cinema house. " On behalf of the appellant-assessee it has been urged that the sum of Rs. 55,200 was paid to the lessor in lump for completing the cinema hou....
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....complete it in accordance with the suggestion and requirement of the lessees. The lessees agreed to pay him the aforesaid amount by way of a lump sum without making any provision for its adjustment towards the rent or repayment by the lessor. The essential question, however, is whether, on the terms of the lease and in the absence of any other material or evidence, it could be held that the sum of Rs. 55,200 was paid by way of advance rental ? The view which has been expressed by the Tribunal as also the High Court that the lease was for a comparatively short period of thirty years and that the aforesaid amount had to be spread over that period by way of rent in addition to a rental of Rs. 2,100 per month cannot be sustained as no foundatio....
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....d it cannot be income. As pointed out by Sir George Lowndes in Commissioner of Income-tax v. Shaw Wallace & Co. 'income' in the Indian Income-tax Act connotes a periodical monetary return, coming in with some sort of regularity or expected regularity from definite sources. The premium or salami which is paid once for all and is not recurring payment, hardly satisfies this test. I concede that in some cases where the rent is ridiculously low and the premium abnormally high, it may be possible to argue that the premium includes advance rent...... " It has not been even remotely suggested in the present case that the rent of Rs. 2,100 per month was ridiculously low as compared with the amount Rs. 55,200 paid in lump sum. It is true that the ....