COMMISSIONER OF INCOME TAX Vs. SANDESH LIMITED

JUDGEMENT

(1.) BY a deed of lease dated March 10, 1945, the assessee company took over a plot of land admeasuring 4,059 square yards on lease for a period of ninety nine years at an annual rent of Rs. 12,685 per year, and built thereupon its press where it carried on its business as printers and publishers of a daily newspaper called "Sandesh". The deed of lease gave option to both the parties, the lessor to sell the said land at a price of Rs. 4,09,959 at the rate of Rs. 101 per square yard, and the lessee to purchase it at the said price, both parties agreeing to exercise their respective option during a period of five years commencing from January 1, 1948, and ending on December 31, 1953, after giving six months' notice. The deed of lease is in Gujarati and, as translated, cl. (4) thereof runs as follows :

(2.) ON or about March 23, 1946, the assessee company executed a sub lease in respect of 1,728 square yards out of the said land at the annual rent of Rs. 6,048 which sub lease contained a similar option to sell and purchase the aforesaid 1,728 square yards at the price of Rs. 1,74,528. The said sub lease was in favor of one N. C. Bodiwala, one of the directors of the assessee company. Thus, as against the price of Rs. 4,09,959, the assessee company was entitled to exercise its option against the said Bodiwala, and on such exercise of the option, Bodiwala was liable to purchase 1,728 square yards at the price of Rs. 1,74,528 and the assessee company thus would be liable to pay Rs. 4,09,959 less Rs. 1,74,528 to the lessor for the balance of the land. The lessor exercised his option and thereupon the assessee company became liable to purchase the leased land at the aforesaid price on and from March 1, 1951, that being the date when the six month's notice presumably expired. When called upon to purchase the land, the assessee company made default in consequence of which the lessor filed a suit on December 31, 1952, against the assessee company, being Suit No. 244 of 1952, in the Court of the Joint Civil Judge, Senior Division, Ahmedabad, to recover the aforesaid purchase price together with interest thereupon at the rate of six per cent. per annum from March 1, 1951.

(3.) THE assessee then debited from out of the amount of Rs. 26,191, Rs. 8,910 being interest