COMMISSIONER OF INCOME TAX Vs. P K ABUBUCKER

JUDGEMENT

(1.) THE question referred to us at the instance of the Revenue is :

(2.) THE assessee is an individual and he is the managing director of Tip Top Plastic Industries Pvt. Ltd. THE assessee has substantial interest in that company. THE assessee as an individual owns a property at No. 31, Stringers St., Madras. THE company of which he is the managing director was using that premises as a godown prior to 1981 in which year the building was heavily damaged in a fire accident and, thereafter, the building had to be reconstructed. THE assessee on December 11, 1981, leased out the ground floor of the building which he had reconstructed by then up to the ground floor to the company on a monthly rental of Rs. 1,500. In that agreement it was also provided that on completion of the other floors, those floors would also be leased out to the company. That document contained a further provision that for the purpose of meeting the cost of construction of the other three floors, the company should advance a sum of Rs. 10 lakhs to the assessee which would be adjusted towards rent for the premises. After the completion of the construction of the other floors a further lease deed was entered into on May 3, 1984, by which the second, third and fourth floors of the building were rented out to the company on a monthly rental of Rs. 10,400.

(3.) WE have already referred to the facts which have been extracted from the statement of the case. It is clear therefrom that the company had agreed to pay an advance of Rs. 10 lakhs when it had taken the first floor on lease for the purpose of meeting the cost of construction of the other three floors and that the lease deed provided explicitly that the advance so paid was to be adjusted against the rent payable for the other three floors. The amount of rent payable for those floors was also set out in the further lease. The advance therefore was required to be set off against the rents payable in future years and thus adjusted. The amount of Rs. 10 lakhs paid was clearly as advance, though it was an advance which was to be set off against the rents payable in future.