- (1.) THIS is a reference under section 66 (1) of the Indian Income Tax act, 1922, at the instance of the assessee for determination of the question. "whether on the facts and in the circumstances of this case, the sum of Rs. 20,000. 00 paid as consideration for granting the lease, was a receipt in the nature of capital, not taxable under the Indian income Tax Act. " the facts of the case are short. In the year 1940, the assessee purchased a plot of land being an area of 8 cottahs 3 chittacks and 41 sq. ft. from the calcutta Improvement Trust in the name of his wife for a sum of Rs. 57,711. 00. On September 18, 1945 the said plot of land was leased out to sylhet Industrial Bank Ltd. to take effect from 1st of April, 1946, on payment of the said consideration of the sum of Rs. 20000. 00. The terms of the lease inter alia are-salami or premium rs. 20000. 00; rent per month Rs. 800. 00 and the period of the lease is 51 years with an option of renewal for a further period of 10 years at the same rent. The lessee also covenanted to build within three years from the date of the lease, on the said plot of land, a brick-built building at his own costs of not less than Rs. 1 lakh, for use and occupation as residential cum office building. On the expiration or sooner determination of the said term, the lessee was to surrender and give up to the lessor the premises thereby demised together with the said brick-built mansion, which (the said mansion) upon such expiration or sooner determination of the said term, with all outhouses, shall become the absolute property of the lessor.
(2.) IN a proceeding started under section 34 of the Income-tax Act, 1922 by the Income tax Officer, the assessee contended that the receipt of the said sum of Rs. 20,000. 00 was a capital receipt and therefore not taxable. In support of the said contention the assessee also produced evidence before the Income-tax Officer showing that another plot of land, about 2 furlongs away from the disputed plot, viz. , at 27, Bentick Street, being an area of 17 cottahs was purchased by the assessee on 1st of March 1941 for a sum of Rs. 1,35,553. 00 from the Calcutta Improvement Trust. The said land was also leased out to Orient movitone Corporation for the same period of 51 years with effect from 1st of November, 1945 at a monthly rental of Rs. 1500. 00 and the assessee also received on March 6, 1945 a sum of Rs. 32,000. 00 as salami or premium for the lease but the said sum of Rs. 32,000. 00 was not assessed in the hands of the assessee as income by the department. The said lease was also a building lease, similar to the terms of the lease under consideration. The assessee further contended that in consideration of the locality, area, advantages and other surrounding facts and circumstances and in particular the said amount of salami of Rs. 32,000. 00 for about double the area of the almost contiguous land, it would appear that the rent of Rs. 800. 00 was not low and the said sum of Rs. 20,000. 00 in the instant case should be taken as a capital receipt and should not be taxed.
(3.) THE Income-tax Officer held that the said sum of Rs. 20,000. 00 is nothing hut rent received, as the monthly rent of Rs. 800. 00 was low and is therefore a revenue receipt and should be taxed. Against the said order, the assessee preferred an appeal to the Appellate assistant Commissioner, which was allowed by him on the finding that the actual rental of Rs. 800. 00 was quite substantial and could not be considered as unreasonably low and he did not accept the finding of the Income-tax officer to the effect that the said sum of Rs. 20,000. 00 really represented as advance of rent.;