Case: Commissioner Of Income-Tax, Assam Etc Vs. The Panbari Tea Co. Ltd

the rent were payable in instalments in the manner provided in the document. The parties were businessmen presumably well-versed in the working of tea estates. They must be assumed to have known the difference between the two expressions "premium and "rent", and they had designedly used those two expressions to connote two different payments. The annual rent fixed was a considerable sum of Rs 54,000/- and the premium when spread over 10 years, would work out to Rs. 22,500/- a year. There is no reason, therefore, to assume that the parties camouflaged their real intention and fixed a part of the rent in the shape of premium. The mere fact that the premium was made payable in instalments cannot obviously be decisive of the question, for that might have been to accommodate the lessee. Nor Cl. 8 of the lease deed, on which strong reliance is placed by the learned counsel for the Revenue, is a pointer to the contrary. It reads:"(1) If any of the aforesaid instalments towards the premium or annual rent shall remain unpaid for two months after becoming payable (whether formally demanded or not) or if the Lessee shall make default in payment to the Lessor any other sum or any part thereof in due dates or in observing or performing any of the covenants, conditions or stipulations hereinbefore contained and on the part of the Lessee to be paid observed and performed or if the Lessees firm is dissolved except for reconstruction or if any of the partners of the Lessee is adjudicated insolvent then and in any such cases it shall be lawful for the Lessor immediately or at any time or times thereafter upon the demised Tea Estates and premises or any part thereof in the name of the whole to re-enter and thereupon this demise shall absolutely determine but without prejudice to the rights of the Lessor or damages or compensation in respect of any breach of lease covenants herein contained and all other rights and remedies including the right to recover the balance of the instalment of unpaid premium or rent payable in that particular year." The argument is that in the case of default contemplated in this clause it shall be lawfull for the lessor to re-enter and, in that event in terms of Cl. 8 he will be entitled only to recover the balance of the instalment of unpaid premium and not the entire balance of the premium. This construction, though appears to be plausible at first sight, really ignores the main terms of the lease. The default clause is pressed into service to destroy the main term of the lease. Under Cl. 1 of the lease deed the sum of Rs. 2,25,000,/- is the consideration by way of premium to be paid by the lessees to the lessor. Under Cl.4 thereof the said entire premium has to be paid in instalments; under Cl.8 the lessor has the option to terminate the lease and re-enter the premises in the circumstances mentioned therein without prejudice to all his rights under the document. One of his rights is to recover the premium in instalments. The fact that one of the rights saved is his right to recover the balance of the instalment of unpaid premium cannot possibly deprive him of all his other rights which are also expressly saved thereunder. The drafting of the clause is not artistic and is rather confused; but in the context of the other clauses it cannot be so construed as to override, or come into conflict with, the main terms of the lease deed. 7. Thirdly, it was contended that the income the lessor was getting under the lease after 1950, i.e., after the execution of the lease deed, viz.,. the total of the instalments of premium and rent, was not higher than the profits he was getting before the lease and that was an indication that what was rent really was split up into premium and rent for ulterior purposes. This argument is based upon the following data collected from the published accounts of the assessee-company: Year ended Profit Depreciation Net Profit Dividend (tax free) (1) (2) (3) (4) (5) Rs. Rs. Rs.31st March 1947 60,186 8,665 51,521 9% 31st March 1948 33,118 7,872 23,246 9% 31st March 1949 31,581 7,475 24,l06 6% 31st March 1950 47,734 17,868 29,886 12% 31st March 1951 71,888 17,726 54,162 6% 31st March 1952 33,213 15,527 17,686 6% 31st March 1953 69,550 15,410 54,140 6% 8. In the accounts of the year to 31st March 1952 there are the following three items of expenditure,- Transit charges ... ... Rs. 10,605 Legal Expenses ... ... Rs. 7,518 Gratuity to Managing Director ... ... Rs. 10,000 Rs. 28, 123 Before comparing the figures given for the two periods, i.e., the period before March 1950 and the period thereafter, it is necessary to add back the said three items of expenditure totalling Rs. 28,123/- to the net profit of the year ended with 31st March, 1952; if they, were added, instead of Rs. 17,686/-, the profit would be Rs. 45,809/-. A comparative study of the said figures discloses a higher return in the second period than during the earlier period. But an attempt is made to show that the figures of the later period include other items and if they are deducted the net profit would be comparable with that in the earlier period, but there is no agreed data for this attempt and it is not possible on the material placed before us to scrutinize the figure;. In the absence of the relevant material it is not possible to accept the argument built upon the said figures. 9. The result is that there is no material placed before us, either direct or circumstantial, to displace the description given in the lease deed to the said amounts as premium and to hold that they are not in fact premium but only rent. Indeed, the circumstances mentioned supra confirm the said description.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Before comparing the figures given for the two periods, i.e., the period before March 1950 and the period thereafter, it is necessary to add back the said three items of expenditure totalling Rs. 28,123/- to the net profit of the year ended with 31st March, 1952; if they, were added, instead of Rs. 17,686/-, the profit would be Rs. 45,809/-. A comparative study of the said figures discloses a higher return in the second period than during the earlier period. But an attempt is made to show that the figures of the later period include other items and if they are deducted the net profit would be comparable with that in the earlier period, but there is no agreed data for this attempt and it is not possible on the material placed before us to scrutinize the figure;. In the absence of the relevant material it is not possible to accept the argument built upon the said figures9. The result is that there is no material placed before us, either direct or circumstantial, to displace the description given in the lease deed to the said amounts as premium and to hold that they are not in fact premium but only rent. Indeed, the circumstances mentioned supra confirm the said description.