Ajit K.Sengupta, J. - (1.) In this reference at the instance of the Commissioner of Income-tax under Section 256(2) of the Income-tax Act, 1961, the following question of law has been referred to this court for the assessment year 1977-78 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 2 (two) lakhs received by the assessee was a capital receipt and not chargeable to tax"
(2.) The facts of the case, in brief, are that the assessee, during the relevant previous year, received Rs. 2 lakhs as "salami" for giving the third floor of premises No. 7, Red Cross Place, on leave and licence basis to Ramnagar Cane and Sugar Company Ltd. According to the Income-tax Officer, it was not a lease on long-term basis nor was the agreement registered, it was merely an agreement of leave and licence which was for less than 20 years (5 years only in the present case). He observed that the provisions of the West Bengal Premises Tenancy Act, 1956, would apply, and the receipt cannot be treated as capital in nature. He held that the assessee could not show that the rent charged per sq. ft. was the normal rate at the relevant time and that no evidence was shown that the Rent Control Authorities had fixed the rent or held the same to be excessive. Accordingly, he treated the above sum as a revenue receipt.
(3.) The assessee took up the matter before the Commissioner of Income-tax (Appeals) contending that, on termination of the managing agency agreement, the right of occupation by the tenant ceased to exist and, therefore, the leave and licence agreement was executed. It was urged that the authorities below never wanted the assessee to establish that the rent charged at Rs. 2.50 per sq. ft. was fair and normal at the relevant time. It was also urged that the salami or the premium was not taxable being a capital receipt, relying on the decision of the Bombay High Court in the case of CIT v. Eatilal Tarachand Mehta [1977] 110 ITR 71 and also on the decision of the Supreme Court in the case of Durga Das Khanna v. CIT [1969] 72 ITR 796. The Commissioner of Income-tax (Appeals) considered the facts of the case and the ratio of the above decisions and agreed with the contention made on behalf of the assessee. His finding was that the authorities below had not established that the rent of Rs. 2.50 per sq. ft. was less than the market rate and that the Income-tax Officer had not discharged this burden. He also found that the Income-tax Officer had not established that the amount received was in the nature of advance rent and that no evidence was led to show that the rent charged was low. He observed that, on the other hand, prima facie, it was seen that the rent per month agreed in the year 1977 could not be said to be low compared to the general rates prevailing in Calcutta at that time. He therefore, accepted the appeal by the assessee, following the decision in the case of Durga Das Khanna.;