LexDURGA DAS KHANNA versus COMMISSIONER OF INCOME-TAX, CALCUTTA
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i>i.JRGA DAS kHANNA
v.
COMMISSIONER OF INCOME-TAX, CALCUTTA
January 30, 1969
[J.C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]
lncome•tax--CapitaL or Revenue-Thirty years
lease of cine1na-
Lessee contributing part of 1noney for construction of cinema-No stipula-
tion that it wt:t.· to be trea1ed as advance rent or salami-Nature of re ..
ceipt-Whether taxable.
On July 19, 1945 the asscssee took on lease certain premises in Cal-,,
cutta on a monthly rentaJ.
He made some alterations in the premises so
as to convert it into a cinema house but found himself shore of money.
As permitted by the terms of his lease he leased the premises on February
23, 1946 to certain parties.
According to the terms of the indenlure the
lessees agreed to pay him Rs. 55,200 towards construction of the cinema
house which would on completion be let to them ,at a monthly renLal of
Rs. 2,100 payable with effect from June I, 1946. The Income-tax autho-
rities treated the sum of !ls. 55,200 thus received as taxable and the High
Court on reference held '!1e same.
In .appeal by the. assessee this Court
had to consider whether the receipt was taxable.
HELD : (i) The departmental authorities as well as the High Court
were in error in treating the amount of Rs. 55,200 as advance payment of
rent.
The lease by which the cinema house was demised did not contain
any condition or stipulation from
whi'ch
it could be inferred that the
aforesaid amount had been paid by way of advance rent. The transac-
tion embodied in the indenture o! lease was clearly business-like. The
lessees wanted the building for running it as a cinema house and the lessor
agreed to give it to them but apparently represented that he did not have
enough money to complete it in accordance with the suggestions and re·
quirement of the lessees.
The lessees agreed to pay him the aforesaid
amount by way of a lump :$Um without making any provision 1for its ad~
justment towards the rent or repayment by the lessor.
10n the terms of
the lease and in the absence of any other material or evidence it could
not be held that the sum of Rs. 55,200 was paid by way of advance
rental. [465 G-466 BJ
(ii) The question whethe1· premium is a capital or a revenue receipt
cannot be decided as a pure question of law.
Its decision necessarily de-
pends upon the facts and circumstances of each case.
It would not how-
ever be wrong to
say that
prima fac:ie
premium or salami is
not
income and it would be for the income-tax authorities to show that facts
exist which would make it a revenue receipt.
{467 B]
According to the terms of the lease, in the present case, the payment
of rent was to commence not from the date of the lease which was Febru-
ary 23, 1946 but with effect from June I, 1946.
The lessees entered into
possession after the cinema house had been completed which was subse-
quent to the date of the lease.
These facts coupled with the payment of
;t. lump sum which was of a non-recurring nature showed that "the etmoun.t
in question had all the char<.icteristics of a capital payment and was not
revenue.
[467 C-D]
Jienriks." v. G1u}lvfi /fo1d Ltd., 24 T.C.
453,
Commissioner of
Income-tax, Bihar & Orissa v. Visweshwar,
[1939] 7 I.T.R. 536 and
A
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F
G
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DURGA DAS v. c.1:r. (Grover, J.)
463
A
Member for the Board of Agricultural Income-tax v. Sindhurani Chaudhu-
rani & Ors., [1957] 32 l.T.R. 169, applied.
CIVIL APPELLATE JURISDICTION :
Civil Appeal No. 873 of
1966.
Appeal by special leave from the judgment and order dated
8
March 26, 1 \165 of the Calcutta High Court in I. T. Ref. No. 107
of 1960.
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Sukumar Mitra and D. N. Mukherjee, for the appellant.
Niren De, Attorney-General, S. C. Manchanda and R. N.
Sac ht hey, for the respondent.
The Judgment of the Court was delivered by
Grover, J,
This is an appeal by special leave from the judg-
ment of the Calcutta High Court in an Income tax Reference in
which the question that had to be answered by the High Court
was "whether on the facts and circumstance of the case the sum
oi Rs. 55,200/- was a revenue receipt being rent received in
advance thus liable to be taxed ?"
On July 19, 1945, the assessee took on lease premises No. 157
Upper Circular Road, Calcutta for a term of 99 years on a month-
ly rental of Rs. 750/-. It was stipulated inter-alia that the lessee
could assign the lease with the consent of the lessor.
He could
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