LAHIRI, C.J. -
(1.) THIS is a reference under s. 66 (1) of the Indian IT Act and it arises out of the assessment of premises No. 12, Lower Chitpur Road, commonly known as Teiretta Bazar. The only question that arises for consideration in this reference is whether the assessment of the assessee under s. 9 of the Indian IT Act was proper. The assessee took a lease of premises No. 12, Lower Chitpur Road by an indenture dt. 14th Feb., 1948. The question referred to this Court will have to be answered by a consideration of the different clauses of that indenture of lease. According to the assessee, it was a mere lease of the premises in question and as such it should have been assessed under s. 12 of the Indian IT Act. THIS contention of the assessee was overruled by the ITO and that decision was confirmed on appeal by the AAC and by the Tribunal on second appeal. Against the decision of the Tribunal the assessee applied under s. 66 (1) of the Indian IT Act and the question which has been forwarded to this Court by the Tribunal is in these terms :
"Whether on the facts and in the circumstances of the case and on a proper construction of the lease deed dt. 14th Feb., 1948, the income from the property which was covered by the said deed and which the applicant company purchased for Rs. 4,00,000 was assessable under s. 9 or under s. 12 of the Act ?"
(2.) THE question as framed assumes that the property covered by the indenture dt. 14th Feb., 1948, was purchased by the assessee for a sum of Rs. 4,00,000. If that were so, the answer to the question would be self-evident; but on hearing learned counsel on both sides, we have come to the conclusion that the question as framed does not bring out the real point in controversy between the parties, and, accordingly, we reframe the question in the following manner :
"Whether on the facts and in the circumstances of the case and on proper construction of the deed of lease dt. 14th Feb., 1948, the assessment of the assessee-company under s. 9 of the Indian IT Act was correct ?"
This was the question suggested by the assessee-company in its application under s. 66 (1) of the Act and, in our opinion, that question brings out the real controversy between the parties. I would, accordingly, answer the question as reframed by us.
In answering this question we shall have to construe the different clauses of the deed dt. 14th Feb., 1948, and come to a conclusion as to whether, upon a true construction of that deed, the assessee-company can be said to be the owner of premises No. 12, Lower Chitpur Road (known as Teiretta Bazar). That document recites that the property belongs to Thakur Sri Radhaballav Jew at Burdwan represented by his Shebait Maharajadhiraj Bahadur Sir Uday Chand Mahatab of Burdwan. It purports to be a lease for 66 years with an option of renewal for a further term of 33 years. The Maharaja of Burdwan as Shebait is described as the lessor and the assessee-company is described as the lessee. It is stated in the lease that the structures standing on the land are very old, mortars whereof had been loosened and dried up and were in a decaying condition; that the Corporation of Calcutta had served various notices under the Calcutta Municipal Act requiring the owner to adequately secure and strengthen the structures and also instituted certain proceedings against the lessor; that after consulting engineers the lessor had ascertained that a sum of about Rs. 12,00,000 would be necessary for the purpose of rebuilding and renovating the structures; that the lessor had no available funds out of which such rebuilding could be carried out and that it was necessary for the purpose of protecting and preserving the property to make immediate provisions for meeting the expenses required for effecting necessary repairs. For this purpose the lessor granted this lease to the assessee-company for a period of 66 years, subject to the payment by the lessee of a sum of Rs. 4,00,000 "being the price of materials of the said old and existing structures including the foundation underneath the ground" and a progressive monthly rent of Rs. 2,000 for the first 25 years, Rs. 3,000 for the next 10 years, Rs. 3,500 for the next 5 years, Rs. 4,000 for the next 10 years, Rs. 5,000 for the next 10 years and Rs. 6,000 for the next 6 years which is the residue of the term. The lease contains various conditions to be observed by the lessee. The sum of Rs. 4,00,000 was to be paid by the lessee in the following manner : Rs. 1,00,000 was to be paid before the execution of the lease and the balance of Rs. 3,00,000 was to be paid in eight equal half-yearly installments of Rs. 37,500 each.
(3.) ACCORDING to the assessee, the lease is a single demise of the land together with all the structures standing thereon for a term of 66 years, whereas according to the CIT the lease can be divided into two parts, one part relating to the land underneath the structures and another part relating to the structures standing on the land. ACCORDING to the CIT, the assessee-company is a lessee in respect of the land underneath the structures, but it is the owner of the structures standing on the land. Mr. Mitra appearing for the assessed company, at one stage suggested that the assessee-company had no opportunity to meet this case and that the question that the assessee-company is the lessee of the land but owner of the structures standing on the land, does not arise upon the order of the Tribunal. I am, however, unable to accept this argument. The finding of the Tribunal is a follows : "The lease deed read as a whole established beyond doubt that the appellant company was the owner of the buildings during the subsistence of the lease." Question No. 2 as proposed by the assessee in its application under s. 66 (1) also indicates that the point as to whether the assessee-company was the owner of the "old structures" as distinguished from land underneath the structures was canvassed before the Tribunal.
I shall now turn to the merits of the arguments advanced before us by Mr. Mitra on behalf of the assessee-company. His first argument is that, prima facie, in a building lease the ownership remains with the lessor and there is nothing in the lease which takes away that presumption. There is no doubt that in the case of a building lease the presumption is that the lessor remains the owner of the subject-matter of the lease. The question before us is whether that presumption has been rebutted by the recitals in the lease itself. In the recitals of the lease it is stated that subject to the payment to the lessor of the sum of Rs. 4,00,000 "being the price of the materials of the old and existing structures including the foundation underneath the ground," the lessee will have the rights conferred by the lease. Mr. Mitra contends that the words "materials of the old and existing structures" mean the materials after the structures have been pulled down, that is to say, according to him, the sum of Rs. 4,00,000 represents the value of the materials of the structures standing of the land after they have been pulled down. In cl. (2), this sum of Rs. 4,00,000 is described as "purchase money for the materials of the existing old structures standing on the property." There can be no doubt that structures standing on the land consists of the component materials and if all the component materials are sold, the structures themselves must be deemed to have been sold. Mr. Meyer, however, relied upon cl. IV (5) of the lease where it is stated that if any "instalment of price for the old and existing structures or any part thereof" remains unpaid, the lessor will have certain rights. On a proper construction of the recital portion and cls. (2) and IV (5), I hold that by the deed the lessor really intended to sell the existing structures for a sum of Rs. 4,00,000. This conclusion is also supported by the fact that in cl. IV (3) of the lease it is provided that in case of compulsory acquisition of the premises the lessor will get the entire compensation in respect of the land and the lessee will get the entire compensation for the old and existing structures, buildings or erections. Clause IV (4) of the lease further provides that in case a betterment fee is levied within twenty- five years from the date of the lease in respect of the demised properties, the lessee will be able to pay such betterment fee. These provisions, in my opinion, leave no room for doubt that by the lease the lessor was conveying his title to the existing structure to the lessee.;