SUBBIAH NADAR M Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE three questions that were referred to us for decision under Section 66(1) of the Indian Income-tax Act by the Income-tax Appellate Tribunal are :-

(2.) THE three questions may be considered under two groups as questions Nos. (1) and (2) are closely connected and raise the same questions of law. THE third question will be dealt with separately.

(3.) MR. P. Somasundaram, the learned advocate for the assessee, relied on two decisions in support of his contention. The first is the decision in Race Course Betting Control Board v. Wild. The Race Course Betting Control Board obtained a licence from the owner of certain buildings erected on the Manchester Race Course under a deed whereby the Board bound itself to pay 12 1/2% of the cost of construction of the buildings annually and the deed also contained a declaration that this annual sum was payable not only in respect of the enjoyment and exercise of the right of user but also by way of repayment by yearly installments of the capital value of the cost of construction. The question that came up for consideration was whether such an annual payment was a revenue payment either in whole or in part or was capital payment. Notwithstanding the express declaration contained in the deed, it was held by Macnaghten, J., that it was a revenue payment and not capital payment and therefore deductible from the income. But for the complication introduced by the declaration in the deed, one would have thought that the question would not present any difficulty in the matter. As the payment of 12 1/2 per cent. of the cost price was really rent, though rent was fixed at a certain proportion of the cost price, it was fixing it in a different manner. Macnaghten, J., considered that the form in the deed should not be given any preference to substance and that looked at from that point of view there can be no doubt that the payment was a revenue payment. At page 490 the learned Judge observed :-