HOTEL DIPLOMAT Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) 1. Though two Income Tax references have been registered in this matter, there is only one reference pertaining to the assessment year 1963 -64.

(2.) THE reference arises out of the assessment proceedings for the assessment year 1963 -64, of M/s. Hotel Diplomat, New Delhi, a firm consisting of four partners, Madan Lamba, Jagdish Lamba, Harish Lamba and Kailash Lamba sharing the profits of the firm equally. The four partners were also the co -owners of a building situate at Sardar Patel Road, New Delhi.

(3.) BY a lease deed dated November 30, 1962, the co -owners purported to lease the above building to the firm. This lease deed was said to record the terms and conditions of the tenancy which had commenced on November 25, 1962, in pursuance of which the firm had been in possession of the premises as a tenant of the co -owners on a monthly rent of Rs. 10,000. Among other things the lease deed permitted the firm to use the aforesaid house leased to it for the purposes of running the business of a hotel which it had already started in the premises on November 25, 1962. The lease does not mention anything about the period of the lease but as a supplemental agreement dated March 30, 1963, added a clause to the lease deed whereby the tenants had to give at least six months' notice to the landlords in the event of their deciding to determine the lease and in case of default on their part in giving such notice, they should reimburse the landlords by payment of the rent for the said period of six months as liquidated damages. Under the lease deed, the Lessers were to maintain the premises in good condition and also to carry out the annual repairs and painting of the premises. The lessee could not make any structural additions or alterations in the tenanted premises without the consent of the Lessers and the municipal authorities and, in case the Lessers agreed to any additions or alterations, they should be carried out at the expense of the lessee and shall be left to become the property of the Lessers on the termination of the lease.