Judgment

SUBBA RAO, J. : By a registered lease deed dated March 31, 1950, the assessee-company, respondent herein, leased out two tea estates named "Panbari Tea Estate" and "Barchola Tea Estate", along with machinery and buildings owned and held by it, in Darrang, in the State of Assam, to a firm named Messrs. Hiralal Ramdas for a period of 10 years commencing from January 1, 1950. The lease was executed in consideration of a sum of Rs. 2,25,000 /- as and by way of premium and an annual rent of Rs. 54,000/- to be paid by the lessee to the lessor. The premium was made payable as follows : Rs. 45,000/ - to be paid in one lump sum at the time of the execution of the lease deed and the balance of Rs. 1,18,000/ - in 16 half yearly instalments of Rs. 11,250/ - on or before January 31 and July 31 of each year. The annual rent of Rs. 54,000/- was payable as follows : Rs. 1,000/ - per month to be paid on or before the last day of each month, making in all Rs.12,000/- per year, and the balance of Rs. 42,000 / - on or before December 31 of each year. On February 25, 1957, for the assessment year 1952-53, the Income-tax Officer made the assessment treating the instalment of Rs. 11,250/ - paid towards the premium in the relevant accounting year as a revenue receipt of the assessee. On appeal, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. On further appeal, the Income-tax Appellate Tribunal also held that the premium was really the rent payable under the lease deed and, therefore, it was chargeable to income-tax. At the instance of the assessee, the Tribunal referred the following question to the High Court under S. 66(1) of the Income-tax Act, 1922, hereinafter called the Act :

"Whether on the facts and in the circumstances of the case and upon the construction of the terms of the lease, dated 31st March 1950, the sum of Rs. 11,250 received by the assessee during the year of account is revenue or capital receipt."

The High Court held that the said sum of Rs. 11,250 received by the assessee during the year of account was a capital receipt and answered the question accordingly. On a certificate issued by the High Court, this appeal has been filed by the Revenue in the Court.

2. The short question that arises in this appeal is whether the amount described as premium in the lease deed is really rent and, therefore, a revenue receipt. Before we look at the lease deed it will be convenient to notice briefly the law pertaining to the concept of premium, which is also described as salami.

3. The distinction between premium and rent was brought out by the Judicial Committee in Kamakshya Narain Singh v. Commr. of Income-tax, B. and O., (1943) 11 ITR 513 at p. 519 thus :

"It (salami) is a single payment made for the acquisition of the right of the lessees to enjoy the benefits granted to them by the lease. That general right may properly be regarded as a capital asset, and the money paid to purchase it may properly be held to be a payment on capital account. But the royalties are on a different footing."

It is true that in that case the leases were granted for 999 years; but, though it was one of the circumstances, it was not a decisive factor in the Judicial Committee coming to the conclusion that the salami paid under the leases was a capital asset. This Court in Member for the Board of Agriculture Income-tax, Assam v. Sindhurani Chaudhurani, (1957) 32 ITR 169 defined "salami" as follows :

"The indicia of salami are (1) its single nonrecurring character and (2) payment prior to the creation of the tenancy. It is the consideration paid by the tenant for being let into possession and can be neither rent nor revenue but is a capital receipt in the hands of the landlord. " It is true that in that case the payment was paid in a single sum, but that was not a conclusive test, for salami can be paid in a single payment or by instalments. The real test is whether the said amount paid in a lump sum or in instalments is the cons