PANBARI TEA COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question of law has been referred to us by Income-tax Appellate Tribunal, Calcutta Bench, Calcutta, under section 66(1) of the Indian Income-tax Act (hereinafter called "the Act" for opinion :

(2.) THE assessment year is 1952-53 and the relevant accounting year is the financial year 1951-52. THE assessee is a public limited company owning two large tea estates named "Panbari Tea Estate" and "Barchola Tea Estate" in the district of Oarrang. THE tea leaves grown in both these estates were processed in the factory called the "Panbari Tea Factory" belonging to the assessee. By a deed of lease dated March 31, 1950, both the tea estates including the factory and all oppurtenances thereto were demised to one Messrs. Hiralal Ramdas for a period of ten years with effect from January 1, 1950. THE annual rents reserved in the deed was Rs. 54,000. In addition to that a premium of Rs. 2,25,000 was agreed to be paid by the lessee to the lessor. Rs. 45,000 out of the said amount of premium were payable at the time of the execution of the lease and the balance of Rs. 1,80,000 was payable in sixteen half-yearly instalments of Rs. 11,250 each on or before January 31 and July 31, every year commencing from 1952 until July 31, 1959. In the year of account in pursuance of the aforesaid terms of the lease a sum of Rs. 11,250 was paid by the lessee to the assessee company. THE Income-tax Officer was of opinion that this receipt of Rs. 11,250, though described as a part of the premium, was in reality rent and, therefore, it was a receipt of a revenue nature and was liable to be taxed. This amount was thus included in the total income of the assessee. THE contention of the assessee was that the receipt was of a capital nature and was not liable to be taxed. THE assessment was confirmed by the Appellate Assistant Commissioner. On appeal the Tribunal affirmed the decision of the Appellate Assistant Commissioner. But on an application by the applicant the question has been referred to this court for its opinion as stated above.

(3.) THE court has got to determine what is the true character of the receipt or the expenditure irrespective of the stand taken by the Department or the assessee. In the same case Lord Macmillan further held as follows :