Case: M/s. Govind Impex (P) Ltd. &amp; Others Vs. Appropriate Authority, Income Tax Department

attracted. The rival submissions necessitate examination of Section 269UA(f)(i) of the Act, particularly its explanation, same reads as follows: ?269UA(f) ?transfer?,— (i) in relation to any immovable property referred to in Sub-clause (i) of Clause (d), means transfer of such property by way of sale or exchange or lease for a terms of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882) Explanation—For the purposes of this Sub-clause, a lease which provides for the extension of the term thereof by a further term or terms shall be deemed to be a lease for a term of not less than twelve years, if the aggregate of the term for which such lease is to be granted and the further term or terms for which it can be so extended is not less than twelve years; (ii) xxx xxx xxx? 6. On a plain reading of the explanation aforesaid it is evident that a lease which provides for the extension of the term thereof by a further term it shall be deemed to be a lease for a term of not less than twelve years, if the aggregate of the period for which the lease is granted and period of extension counted together makes it more than twelve years. In the present case, we are proceeding on our assumption that explanation to Section 269UA(f)(i) would be attracted only when lease provides for extension of term and in view thereof, we do not consider it expedient to examine the judgment relied on by Mr. Salve. In the case in hand, the lease was for a period of nine years and the question, therefore, is as to whether the same was extendable for a further period of nine years so as to make it for not less than twelve years. To answer this one is required to refer to the lease deed and Clauses 1 and 12 thereof which are relevant for the purpose, same read as follows: ?1. That the Lessors of the First Part have agreed to lease out to the Lessee of the Second Part the demised premises as aforesaid which are being used for commercial purposes at present namely on the lower ground floor/basement, ground floor/upper ground floor, first floor, second floor and the terrace of the building known as B-68, Greater Kailash-I, New Delhi - 110048, and clearly delineated in green outlines in the site plan annexed herewith for a period of nine years, extendable purely at the discretion and option of the Lessee of the Second Part for a further period of nine years, commencing from the date when the possession of the peremises is handed over i.e. 1.6.1991 and ending on the last date when the period of first nine years expires i.e. on 31.5.2000 at a monthly lease amount of Rs. 2,50,000/- (Rupees Two lacs and fifty thousand only) subject to the periodic revision as mentioned in later para. The said premises comprise of a total area of about 12904 sq. ft. with floor wise rentals as per the details below: xxx xxx xxx xxx xxx xxx 12. That the Lessee may at its option and discretion renew the lease for a further period of nine years after the expiry of the term of the present lease on 31st May, 2000. If the Lessee shall be desirous of such renewal it shall give a notice of such renewal to the Lessors at least three months prior to the expiry of the term in the present lease deed. The subsequent renewals of the Lease Deed shall also be got duly signed and registered. The renewals of the Lease shall be on the same terms and conditions.? 7. Mr. Salve submits that statute providing for penal prosecution has to be construed strictly. He refers to Clause 12 aforesaid and contends that it shall govern the field. Mr. Bhatt submits that it is Clause 1 of the lease deed which shall govern the issue. We do not have the slightest hesitation in accepting the broad submission of Mr. Salve that Penal statute which make an act a penal offence or impose penalty is to be strictly construed and if two views are possible, one favourable to the citizen is to be ordinarily preferred but this principle has no application in the facts of the present case. There is no serious dispute in regard to the interpretation of explanation to Section 269UA(f) of the Act and in fact, we are proceeding on an assumption that it will cover only such cases where exists provision for extension in lease deed. In our opinion, what we are required to consider is the terms and conditions of lease. The terms of lease are not to be interpreted following strict rules of construction. One term of the lease cannot be taken into consideration in isolation. Entire document in totality has to be seen to decipher the terms and conditions of lease. Here in the present case, Clause 1 in no uncertain term provides for extension of period of lease for a further period of nine years and Clause 12 thereof provides for renewal on fulfilment of certain terms and conditions. Therefore, when the document is constructed as a whole, it is apparent that it provides for the extension of the term. If that is taken into account the lease is for a period of not less than twelve years. Once it is held so the explanation to Section 269UA(f)(i) is clearly attracted. We are of the opinion that the High Court is right in observing that ?on a conjoint reading of paras 1 and 12 of the lease deed, the lessor intended the lease to last for 18 years? and further the lessor could not have refused to renew/extend the lease after first term if the lessee complied with the conditions.

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

Explanation:
0[ds]7. Mr. Salve submits that statute providing for penal prosecution has to be construed strictly. He refers to Clause 12 aforesaid and contends that it shall govern the field. Mr. Bhatt submits that it is Clause 1 of the lease deed which shall govern the issue. We do not have the slightest hesitation in accepting the broad submission of Mr. Salve that Penal statute which make an act a penal offence or impose penalty is to be strictly construed and if two views are possible, one favourable to the citizen is to be ordinarily preferred but this principle has no application in the facts of the present case. There is no serious dispute in regard to the interpretation of explanation to Section 269UA(f) of the Act and in fact, we are proceeding on an assumption that it will cover only such cases where exists provision for extension in lease deed. In our opinion, what we are required to consider is the terms and conditions of lease. The terms of lease are not to be interpreted following strict rules of construction. One term of the lease cannot be taken into consideration in isolation. Entire document in totality has to be seen to decipher the terms and conditions of lease. Here in the present case, Clause 1 in no uncertain term provides for extension of period of lease for a further period of nine years and Clause 12 thereof provides for renewal on fulfilment of certain terms and conditions. Therefore, when the document is constructed as a whole, it is apparent that it provides for the extension of the term. If that is taken into account the lease is for a period of not less than twelve years. Once it is held so the explanation to Section 269UA(f)(i) is clearly attracted. We are of the opinion that the High Court is right in observing that ?on a conjoint reading of paras 1 and 12 of the lease deed, the lessor intended the lease to last for 18 years? and further the lessor could not have refused to renew/extend the lease after first term if the lessee complied with the conditions.