1. A lump sum payment received by the assessee for assigning his right to realise royalties & rents for a term of years is taxable income. 2. The assessee is not liable to be assessed for the value of high denomination notes which were encashed, in the absence of any material to justify the assessment.

Ramaswami, J.

1. These references are made by the Income tax Appellate Tribunal under Section 66, Income-tax Act.

2. The assessee Raja Nilkantha Narain Singh of Nowagarh is proprietor of a big zamindari within the ambit of which coal fields are situated. The predecessor of the assessee had leased out the coal fields on long terms basis to three different parties. The average annual income of royalty & rents from these lessees was about Rs. 50, 000 a year. The accounting year is 1352 Bengal Sambat which ends with the corresponding English date of 14-41946. In the accounting year the assessee had executed three documents termed "indenture of lease" in favour of Bengal Discount Co. Ltd. conveying his right to collect royalties & rents from these three lessees. In lieu of this the assessee was paid, an immediate amount of RS. 1,00,000, Rs. 40,000 & Rs. 60,000 for the three "indenture of lease". The annual rent reserved was Rs. 10, Rs. 5 & Rs. 5. In the first case the term of the lease was 11 years, in second case 10 years & in third case 15 years. It was stipulated that after the expiry of the period the right of the assessee wilt be revived in each case & the assessee would be entitled to collect from the original lessees the amount of royalties & rent as before.

3. The amount of Rs. 2,00,000 which the assessee received from the Bengal Discount Co. was taxed by the Income-tax officer assessable income. On appeal the Appellate" Assistant Commissioner maintained the order of the Income-tax Officer. In second appeal the Appellate Tribunal held that the sum of Rs. 2,00,000 was advance receipt of royalty & was therefore assessable to income-tax.

4. Another question was also debated before Appellate Tribunal, viz, whether the sum of Rs. 84,000 in possession of the assessee on account of the encashment of high-denomination notes. On the same date the assessee encashed notes to the extent of Rs. 95,000. The Income-tax officer assessed the whole amount as the income of the assessee from undisclosed sources. On appeal the Appellate Assistant Commissioner was satisfied that notes to the extent of Rs. 11,000 were included in the amount of Rs. 2 lakhs which the Bengal Discount Co. had pail to the assessee. He therefore reduced the taxable amount to RS. 84,000. It was argued before the appellate Tribunal that this amount too ought not to be taxed as it was saving of the assessee from the amount he had withdrawn for his personal expense. The Appellate Tribunal held that the explanation was not acceptable & the amount of Rs. 84,000 ought to be assessed to income tax.

5. The following questions have been formulated by the Appellate Tribunal for the determination of the. High Court.

"(1) Whether on the facts & in the circumstances of this case. the Tribunal was right in holding that the sum of Rs. 2 lakhs received from Bengal Discount Co. Ltd. was taxable income, & (2) whether there is any material to justify the assessment of Rs. 84,000 representing the value of high denomination notes which were encashed on 21-1-1946?"

6. As regards the first question it was argued by the learned Advocate-General on behalf of the assessee that the documents executed in favour of the Bengal Discount Co., were "indentures of leases" in which the outright payment of Rs. 2 lakhs has been shown as salami & the annual rent reserved has been fixed at a small amount. Learned counsel maintained that salami was a capital receipt & was not liable to income-tax Commissioner of Income-tax V/s. Visheshwar Singh 18 Pat. 805 & contended that the premium or salami represented whole or part o£ the price for the lease executed in favour of the Bengal Discount Go. and so was a capital receipt & ought not to be taxed. Learned Counsel also referred to Shiva Pd. Singh V/s. Emperor, 4 Pat. 73 in which the question was whether a sum of money received by the assessee by way of salami or premium for granting a mining lease, was taxable. It was held by Sir- Dawson-Miller that the s