COMMISSIONER OF INCOME TAX Vs. RAO THAKUR NARAYAN SINGH

JUDGEMENT

(1.) THIS is a reference under section 66(1) of the Income-tax Act. The question referred to this court for opinion is :

(2.) THE reference arises out of the assessees assessment for three assessment years, namely, 1948-49, 1949-50 and 1950-51. During these three years the assessee, as the holder of an impartible estate comprising of 33 villages, parcelled out certain pieces of land and leased out those parcels in perpetuity on certain terms and conditions. THE lease was executed in a standard form which is appended as an annexure to the statement of the case. THE form of lease contains the recital that lease was granted to the lessee for building purposes in perpetuity on payment of a certain fixed sum of money called nazrana or salami. It was a lump sum, not depending upon the area of the leased land. It was realized first and then the lease was granted or executed. It was nothing but premium exacted as the consideration for the granting of the lease. In addition to the payment of the premium, the lessee was liable for payment of an annual rent, certain fixed sums of monies on the occasion of marriage or death in the grantors family or on the occasion of a girls marriage in the family of the grantee. THE lessee was also liable for payment of certain percentage of sale or mortgage consideration in case of sale or mortgage or if a gift was made of the demised property.

(3.) THE next case is Province of Bihar v. Maharaja Pratap Udai Nath in which a Full Bench of the same High Court laid down :