BRIJLAL GUPTA J. - This is a reference under section 66(1) of the Income-tax Act. The question referred to this court for opinion is :
'Whether, on the facts and in the circumstances of this case, the lump sum nazranas received by the assessee represented revenue receipts chargeable to income-tax ?'
The reference arises out of the assessees assessment for three assessment years, namely, 1948-49, 1949-50 and 1950-51. During these three years the assessee, as the holder of an impartible estate comprising of 33 villages, parcelled out certain pieces of land and leased out those parcels in perpetuity on certain terms and conditions. The lease was executed in a standard form which is appended as an annexure to the statement of the case. The form of lease contains the recital that lease was granted to the lessee for building purposes in perpetuity on payment of a certain fixed sum of money called nazrana or salami. It was a lump sum, not depending upon the area of the leased land. It was realized first and then the lease was granted or executed. It was nothing but premium exacted as the consideration for the granting of the lease. In addition to the payment of the premium, the lessee was liable for payment of an annual rent, certain fixed sums of monies on the occasion of marriage or death in the grantors family or on the occasion of a girls marriage in the family of the grantee. The lessee was also liable for payment of certain percentage of sale or mortgage consideration in case of sale or mortgage or if a gift was made of the demised property.
In the statement of the case the Tribunal has observed that the Income-tax Officer gave no reasons for treating the premium as revenue receipts. The Appellate Assistant Commissioner of Income-tax affirmed the view of the Income-tax Officer on the ground that under the grant only some and not all the rights possessed by the lessor were granted to the lessee in consideration for the premium and certain annual and other payments on specified occasions. When the matter reached the Tribunal in appeal it observed that the mere fact that only some of the rights, and not all, were transferred by the grant was not material. Even if only some of the rights had been parted with the consideration for parting with those rights partook of the nature of sale consideration and as such amounted to a capital receipt and not to income or revenue receipt.
Upon the facts stated above it seems to be clear that the receipts were capital receipts and not revenue receipts. The earliest case on the point appears to be a decision of the Patna High Court, Commissioner of Income-tax v. Visweshwar Singh. The leading judgment in the case was delivered by Fazl Ali J., who drew a distinction between two classes of receipts : (1) as consideration for the enjoyment of the property leased out, which is rent, and (2) as consideration for the granting of the lease or the parting with the right of enjoyment of the property, which is nazrana or salami or premium, and pointed out that this distinction was clearly recognised in section 105 of the Transfer of Property Act, which defines both 'premium' and 'rent'. He also referred to the decision of the Privy Council in Shaw Wallace and Co.s case and observed that a 'premium' was a sum of money paid once and for all whereas 'rent' was payment which was rendered periodically. The lease with which the Patna High Court had to deal was also a bemiade lease, in other words, a lease in perpetuity, the premium was a sum of Rs. 1,800 and the annual rent was Rs. 100 per bigha. It was held that the receipt of Rs. 1,800 as premium was a capital receipt and not a revenue receipt.
The next case is Province of Bihar v. Maharaja Pratap Udai Nath in which a Full Bench of the same High Court laid down :
'Salami could not be regarded as income as a matter of law. It may in certain cases be regarded as a payment of rent in advance and in such cases it could rightly be regarded as income. Where, however, salami could not be regarded as payment of rent in advance it could not be regarded as income and would, therefore, not be taxable. Prima facie, salami is not income and it is for the income-tax authorities to show that there do exist facts which would make the salami income.'
None of the facts of the case before us indicate that the lump sum payments were payments in lieu of rent or advance and consolidated payment of rent for the whole period of the lease. The orders of the Tribunal and the departmental officers do not indicate if any rent was to be paid by the lessees but the form of the lease shows that the premium was in addition to rent which was to be fixed on the basis of the area.
Next, the case of Sarju Bai v. Commissioner of Income-tax may be referred to. In this case it was emphasised that a question of this kind, namely, whether a certain receipt in certain circumstances was a capital receipt or income was a question of fact. The Full Bench of the Patna High Court in the case referred to above also emphasised that it is a question depending upon the facts brought on the record by the income-tax authorities. Here, the Tribunal has not found any facts which would displace the ordinary presumption which arises in law that a lump sum payment for the grant of a lease-right in perpetuity to build upon the property amounts to a capital receipt and not to a revenue or income receipt. If there was anything in the contract of lease to show that the payment was being made in lump sum by way of capitalisation of the rental income of the property, it might have been possible to treat the payment as a revenue or income payment, but there is no such material here.
The last case on the point is Board of Agricultural Income-tax v. Sindhurani. The head-note of this case runs as follows :
'Where salami is in the form of a lump sum non-recurring payment made by a prospective tenant to the landlord as a consideration for the settlement of agricultural land and parting with certain rights of the landlord in the land in favour of the prospective tenant, and is paid anterior to the constitution of relationship of landlord and tenant, it is not rent within the meaning of the word used in the definition of agricultural income in section 2(1)(a) of the Assam Agricultural Income-tax Act, 1939. It has all the characteristics of a capital payment and it is not revenue. It is, therefore, not agricultural income within the meaning of that Act.'
The principle laid down by the Supreme Court is that if the payment is made first and the relationship of landlord and tenant comes into existence subsequently and the payment is for parting with certain rights possessed by the landlord the payment amounts to a capital payment and not a revenue payment. This exactly is the case before us.
We, therefore, answer the question in the negative.
Let the reference be returned to the Income-tax Appellate Tribunal, Delhi, with the above answer. The assessee shall be entitled to the costs of this reference assessed at Rs. 200.
Question answered in the negative.