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Issues involved: Determination of whether an amount of Rs. 54,000 received by the assessee from tenants was a capital receipt or income.
Summary: The High Court of Bombay considered a reference made by the Tribunal under section 66(1) of the Indian Income-tax Act, 1922, regarding the nature of an amount of Rs. 54,000 received by the assessee from tenants. The Income-tax Officer initially treated this amount as income from undisclosed sources or composite rent received in advance. However, the Tribunal found that the payments were pagdi or salami payments made by tenants to be accepted as tenants, not advance rent. The Tribunal concluded that these payments were of a capital nature and directed their deletion from the assessment. The Commissioner of Income-tax challenged this decision, arguing that the payments should be considered income due to the regular business practice of the assessee. The court referred to previous legal precedents regarding salami payments and premiums, emphasizing that such payments are typically considered capital receipts. It noted that the department failed to establish that the Rs. 54,000 received by the assessee was income rather than a capital receipt. The court ultimately determined that the amount in question was a capital receipt and not income, ruling in favor of the assessee. In conclusion, the court answered the question in the affirmative, stating that the amount of Rs. 54,000 received by the assessee from tenants as a premium for granting monthly tenancies should be regarded as a capital receipt. The department was directed to pay the costs of the reference to the assessee.
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