Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for our opinion : "Whether, on the facts and in the circumstances of the case, and on a proper interpretation of the agreement dated June 15, 1971, the Tribunal was justified in law in holding that the sum of Rs. 72,000 did not form part of the assessee's income ?"
(2.) The assessee is a private limited company and the assessment years involved are 1982-83 and 1983-84. One Smt. Champabati Devi Chamaria was the owner of four immovable properties including a three-storeyed building situated at 25A, Shakespeare Sarani, Calcutta. The said lady sold her undivided one per cent. share of the immovable properties each to ten of her close relatives through registered deeds. Subsequently, Smt. Champabati Devi and the other co-owners of this property formed a joint stock company in the name of Messrs. Champa Properties (P.) Ltd., namely, the present assessee. Smt. Champabati Devi, held 90 per cent. shares in the company and the other co-owners held the balance 10 per cent. shares. The company was incorporated on September 20, 1966. Before the assessee-company was formed, Smt. Champabati Devi by three separate registered deeds of conveyance dated May 6, 1966, leased out each floor of the building for a term of 20 years with effect from August 1, 1966, to three separate partnership-firms, viz., Benarasilal and Company, Gobinda Prasad and Company and Krishna Kumar and Company, on a monthly lease rent of Rs. 100 exclusive of both owners' and occupiers' share of the municipal rates and taxes payable on the said property. In the lease deeds so executed, it was specifically provided that the term of the lease could be renewed for a further period of 20 years. "But the rent payable during the period of renewal will be such sum as may be determined mutually." The lease-rent was, however, refixed at Rs. 100 per month from August 1, 1966, with each of the three aforesaid parties but the other terms of the lease agreement dated May 6, 1966, remained unaltered, vide deed of modification dated September 16, 1966. Subsequently, the assessee-company entered into an agreement on June 15, 1971, with the aforesaid three partnership-firms in terms of which the lessees agreed to allow the lessor to let out the entire property to a tenant with whom negotiations were going on for some time with the lessor. It was agreed that with effect from August 1, 1971, the lessor shall pay to the lessees a sum of Rs. 1,000 from the rent received by the lessor from the new tenant in lieu of giving vacant possession of each of the floors by the lessees but such arrangement and/ or agreement shall not in any way prejudice the mutual obligations of the lessor and the lessee as agreed upon under the original lease agreement dated May 6, 1966. The agreements entered into by each of the lessees are all on similar lines which mention, inter alia, that in case negotiations for letting out the property by the lessor to the prospective tenant did not materialise within eight weeks from the date of the present agreement, i.e., June 15, 1971, "this agreement shall have no effect and shall be deemed to have been cancelled". It was expressly agreed upon, vide paragraph (?) of each of the aforesaid agreements, that "the lessor shall be liable to pay the said sum of Rs. 3,000 (rupees three thousand) per month to the lessee only as and when the same is received from the incoming tenant and shall not in any manner be deemed to be the personal liability of the lessor". The assessee-company, thereafter, on and from August 1, 1971, let the entire property (all the three floors of the building) and the appurtenant land to the Government of India, Department of Rehabilitation, Branch Secretariat at Calcutta, on monthly basis for a period of one year but renewable for a further period not exceeding five years at Re. 0.85 per sq. ft. comprised of Re. 0.60 per month as occupation rent and Re. 0.25 per sq. ft. for service charges for a covered area of about 14,296 sq. ft.
(3.) The Income-tax Officer, while scrutinising the particulars of the house property income furnished by the assessee for the assessment years 1982-83 and 1983-84, found that the assessee did not include in its computation a sum of Rs. 72,000 being the sum paid by the assessee to the three partnership firms (the lessees), i.e., the sum agreed upon to be paid by the assessee out of the income receivable from the Government of India minus the lease-rent fixed in the original lease agreements dated May 6, 1966, as modified on September 16, 1966. In the assessment year 1983-84, the Income-tax Officer observed thus - "In the details filed, the assessee has show Rs. 44,330.40 only as rent from 25A, Shakespeare Sarani, Calcutta. The assessee-company has, thus, not disclosed the income to the extent of Rs. 72,000.";