COMMISSIONER OF INCOME TAX Vs. PURNENDU MULLICK

JUDGEMENT

(1.) Purnendu Mullick, the assessee, was assessed to income-tax in the assessment year 1964-65, the relevant previous year being 1370 B.S. In the relevant assessment year the assessee had executed a deed of lease on the 11th December, 1963, in respect of premises Nos. 14 and 15, Old Court House Street, Calcutta, in favour of one Octavious Steel Co. Ltd. In consideration of the said lease the assessee had received a lump sum of Rs. 50,000. The valuer's report submitted by the assessee recorded that the total area of the premises leased out was 9,825 sq. ft. Under Clause 2 of the deed the rent of the premises was fixed at Rs. 1,500 per month for the first two years and, thereafter, at an increased rate of Rs. 100 per month after every nine years till the expiry of the lease, i.e., after 99 years.

(2.) The ITO rejected the assessee's claim that the said sum of Rs. 50,000 received as premium or salami constituted capital receipt and was not taxable as income.

(3.) The ITO found that the property was situated in a predominantly business area where the market rent was quite high varying between 75 p. to Re. 1 per square foot. The stipulated rent was lower than the prevailing market rent. The ITO also noted that the lump sum payment was in consideration of location of the premises and, therefore, constituted the difference between market rent and the actual rent payable. He held that the said sum of Rs. 50,000 was rent paid in advance and, therefore, taxable. The sum was added to the income of the assessee.