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TMI Blog1965 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... 31, 1950, the assessee-company, respondent herein, leased out two tea estates named " Panbari Tea Estate " and " Barchola Tea Estate ", along with machinery and buildings owned and held by it, in Darrang, in the State of Assam, to a firm named Messrs. Hiralal Ramdas for a period of 10 years commencing from January 1, 1950. The lease was executed in consideration of a sum of Rs. 2,25,000 as and by way of premium and an annual rent of Rs. 54,000 to be paid by the lessee to the lessor. The premium was made payable as follows : Rs. 45,000 to be paid in one lump sum at the time of the execution of the lease deed and the balance of Rs. 1,80,000 in 16 half yearly iristalments of Rs. 11,250 on or before January 31 and July 31 of each year. The annu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed as premium in the lease deed is really rent and, therefore, a revenue receipt. Before we look at the lease deed it will be convenient to notice briefly the law pertaining to the concept of premium, which is also described as salami. The distinction between premium and rent was brought out by the Judicial Committee in Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income-tax, thus : " It (salami) is a single payment made for the acquisition of the right of the lessees to enjoy the benefits granted to them by the lease. That general right may properly be regarded as a capital asset, and the money paid to purchase it may properly be held to be a payment on capital account. But the royalties are on a different foot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case that under the said licences there was a grant of a right to a portion of the capital of the licensor in the shape of a general right to the capital asset. In view of these three decisions it is not necessary to multiply citations, Under section 105 of the Transfer of Property Act, a lease of immovable property is a transfer of a right to enjoy the property made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed in the document. Under the document, therefore, there was a transfer of substantive interest of the lessor in the estates to the lessee and a conferment of a right on the lessee to use the said estates by exploiting the same. Under clause 4 of the lease deed for the transfer of the right a premium of Rs. 2,25,000 had to be paid to the lessor and for using the estates the lessee had to pay an annual rent of Rs. 54,000. Both the premium and the rent were payable in instalments in the manner provided in the document. The parties were businessmen presumably well-versed in the working of tea estates. They must be assumed to have known the difference between the two expressions " premium " and " rent "; and they had designedly used thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dice to the rights of the lessor to damages or compensation in respect of any breach of lessee's covenants herein contained and all other rights and remedies including the right to recover the balance of the instalment unpaid premium or rent payable in that particular year." The argument is that in the case of default contemplated in this clause it shall be lawful for the lessor to re-enter and in that event in terms of clause 8 he will be entitled only to recover the balance of the instalment of unpaid premium and not the entire balance of the premium. This construction, though appears to be plausible at first sight, really ignores the main terms of the lease. The default clause is pressed into service to destroy the main term of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 665 51,521 9% 31st March, 1948 33,118 7,872 23,236 9% 31st March, 1949 31,581 7,475 24,106 6% 31st March, 1950 47,734 17,868 29,886 12% 31st March, 1951 71,888 17,726 54, 162 6% 31st March, 1952 33,213 15,527 17,686 6% 31st March, 1953 69,550 15,410 54,140 6% In the accounts of the year to 31st March, 1952, there are the following three items of expenditure: Rs. Transit charges ... 10,605 Legal expenses ... 7,518 Gratuity to managing director ... 10,000 -------------- 28,123 -------------- Before comparing the figures given for the two periods, i.e., the period before March, 1950, and the period thereafter, it is necessary to add back the said three items of expenditure totalling Rs. 28,123 to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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