S.K. Desai, J.
1. This reference has been made by the Income-tax Appellate Tribunal, Bombay Bench 'A', under section 66(1) of the Indian Income-tax Act, 1922.
2. The assessee is a Hindu undivided family deriving income from property assessable under section 9 of the Act. We are concerned with the assessment year 1958-59, the previous year being the year ended on 31st March, 1958. For that year, the Income-tax Officer had determined the property income at Rs. 12,320. It appears that, thereafter, the Commissioner exercising his powers under section 33B of the Act cancelled the said assessment and directed fresh assessment to be made. In order to understand the basis for this order and the fresh assessment a few facts may be stated :
The Hindu undivided family of the assessee held a piece of land forming part of an estate known as 'Shanti Kunj', situate at 87, Naigam Cross Road, Dadar, Bombay. The said open plot was divided into six smaller portions and these were let out to six different persons under six different indentures of lease. It is the admitted position that these six leases contained identical terms and only one of them between the assessee family and one Dr. Kamat was produced before the Tribunal and has been annexed by it as annexure 'A' to the statement of the case.
3. In the statement of the case the Tribunal has set out the relevant portions of the recital and clauses 1, 6, 9 and 10 which are material; these read as follows :
'Whereas the lessors have set apart vacant pieces of land in the said property for letting out on lease for construction of shops to diverse lessees....
NOW KNOW YE AND THESE PRESENTS WITNESS that in consideration of the sum of Rs. 2,000 (rupees two thousand) paid at or before the execution of these presents by the lessee to the lessons-receipt whereof the lessors do hereby admit and acknowledge and exonerate the lessee from the payment thereof for rent in advance for the period of this lease - the lessors do hereby demise unto the lessee the plot of land....
(1) The lessee shall construct at his own expense a shop on the said plot.... Such construction shall be of the value of Rs. 4,000 (four thousand) at least... The lessee shall not have to pay any rent for the said plot during the continuance of the lease....
(6) The lessee shall keep the structure duly insured....
(9) Upon the expiry of the period of six years, the lessee shall hand over the possession of the demised plot of land together with the structure or structures erected thereon together with electric and other fittings to the lessors.... and the lessee shall not under any circumstances remove or pull down the structure erected on the plot. It is hereby also agreed and declared that on the expiry of the period of the lease the structure together with the fittings attached thereto shall belong to the lessors.
(10) If at the end of the period of six years the lessee elects to continue the lease, it is hereby agreed and understood that the lessee shall be a monthly tenant of the lessors and shall thereupon pay to the lessors Rs. 70 per month by way of rent for the shop in his occupation'.
4. Pursuant to the directions of the Commissioner, the Income-tax Officer made fresh assessment and determined the property income of the assessee family by adding to the earlier figure of Rs. 12,320 the sum of Rs. 62,740 describing it as 'income received (in kind) by the assessee on April 1, 1957, as a result of getting possession of the six shops as discussed above'.
5. The above addition of Rs. 62,740 was challenged before the Appellate Assistant Commissioner on several grounds, one of them being that the receipt was of a capital nature. The Appellate Assistant Commissioner rejected the contention of the assessee, but reduced the amount from Rs. 62,740 to Rs. 30,000. The assessee, thereafter, brought the matter in appeal to the Income-tax Appellate Tribunal and raised two contentions, viz., (1) whether what was received was a capital receipt as against revenue receipt, and (2) assuming there was revenue receipt, whether it was in the year of account ending on 31st March, 1958. On both the questions the Tribunal held against the assessee, and dismissed its appeal, confirming the order of the Appellate Assistant Commissioner. Thereafter, the following two questions have been submitted for our consideration :
'(1) Whether the sum of Rs. 30,000 has been properly brought to tax as rent in kind for the lease period for which the plots were leased out
(2) If the answer to the above question is in the affirmative, whether the sum of Rs. 30,000 is properly included in the computation of total income of the year ended March 31, 1958 ?'
6. Mr. V. P. Mehta has submitted that the first question referred to us by the Tribunal is concluded by a decision of this court in Commissioner of Income-tax v. Elphinstone Dye Works (P.) Ltd., where it was held that the notional amount received by the structure ceasing to be of the ownership of the lessee and becoming of the ownership of the lessor was exempt from inclusion in the total income as being a capital receipt.
7. In that case the assessee carrying on the business of dye works leased out a plot of land to a weaving mills company at a rent of Rs. 100 per month for a terms of five years, with an option to continue for another five years, under an agreement that the mills should construct on the land a building for a weaving mill, spending upon such building the minimum sum of Rs. 50,000. It was provided that on the determination of the tenancy the mills should yield up the building and the demised land to the assessee-company. The mills constructed a building at a cost of Rs. 1,30,000. At the end of ten years the assessee-company received back the building and made a credit entry in its capital account for Rs. 70,000, being the cost of construction less depreciation. It was held by the Division Bench that the amount was exempt from inclusion in the total income as being a capital receipt. It was observed that, prima facie, the assessee-company's business was to carry on dye works and not to deal in immovable property. It was considered whether the sum of Rs. 77,870 could be treated as deferred rent. It was observed in that case that there was no evidence on record to prove that the rent of Rs. 100 per month agreed to be paid was reduced rent and that in fact a much larger rent represented by the value of the above building divided by 120 months of lease could have been charged by the assessee-company when it granted the lease.
8. In the case before us a sum of Rs. 2,000 was payable by the lessee at or before the execution of the lease, which would work out at about Rs. 27 per month over the six year period. This was when there was no structure constructed, which structure was thereafter to be constructed by the lessee. It is also the agreed position that after April 1, 1957 (from which date the structure passed to the ownership of the assessee family) the lessee continued to occupy the structure, paying the rent of Rs. 70 per month. In these circumstances it cannot be said that the original amount of rent was a reduced rent or that a much larger rent could have been charged. Accordingly, it will not be possible to hold that the value of the structure which passed to the ownership of the assessee-family on April 1, 1957, in accordance with clause 9 of the lease represented deferred rent.
9. There is also no evidence or finding to show that the business of the assessee was to deal with any immovable property. In my opinion, the decision in Elphinstone Dye Works' case is directly applicable to the facts in the reference before us, and in accordance with that decision the revenue would not be entitled to treat this amount as revenue receipt liable to be included in the total income of the assessee.
10. I agree and have nothing to add.
BY THE COURT
11. The first question is answered in the negative and in favour of the assessee. In view of the answer to the first question as above, the second question does not arise.
12. The Commissioner will pay the costs of this reference to the assessee.