SABYASACHI MUKHARJI, J.

( 1 ) IN this reference under Section 256 (1) of the I. T. Act, 1961, the following question has been referred to this court :"whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the payment of Rs. 4,50,000 was in the nature of capital expenditure ?"

( 2 ) IN order to appreciate the question we have to refer to the facts as found by the Tribunal. The assessee-company required some more space on account of the growing needs of its business. The assessee company, therefore, started negotiations in respect of premises No. 240e, Acharya Jagadish Chandra Bose Road, Calcutta. The premises were, however, at that time occupied by M/s. Gasper and Co. and in order to obtain vacant possession of the premises, the assessee paid a sum of Rs. 4,50,000 to M/s. Gasper and Company. Thereafter, the assessee claimed the payment of that sum as a revenue expenditure. The ITO disallowed the claim of the assessee on the ground that it was in the nature of capital expenditure. The ITO was of the opinion that the payment to M/s. Gasper and Company was for acquiring a benefit of an enduring nature.

( 3 ) THE assessee preferred an appeal before the AAC. The AAC held that the payment made to M/s. Gasper and Co. was in the nature of a premium for the acquisition of vacant premises and that its right to enjoy vacant possession of the property could properly be regarded as a capital asset. The AAC, therefore, held that the money paid to purchase it or acquire it must be held to be capital expenditure.

( 4 ) THERE was a further appeal before the Tribunal. The Tribunal held that M/s. Gasper and Co. was a tenant occupying the premises No. 240e, Acharya Jagadish Chandra Bose Road, Calcutta, The assessee took the premises on lease and paid a sum of Rs. 4,50,000 to M/s. Gasper and Co. to get the vacant possession. According to the Tribunal, it was well settled that the rights of tenancy were valuable rights which the tenant possessed under Section 108, Sub-section (c), of the Transfer of Property Act. The lessee was entitled to hold the property without interruption if he pays the rent. A lease is not a mere contract but is a transfer of interest in property and created a right in rem. According to the Tribunal in order to part with the valuable rights which M/s. Gasper and Co. had, the assessee paid a sum of Rs. 4,50,000. By paying the sum of Rs. 4,50,000 the assessee, according to the Tribunal, obtained vacant possession of the premises which was in the nature of an enduring benefit. The Tribunal further held that, unless that right was obtained, the assessee could not have obtained possession of the premises. In the premises, according to the Tribunal, the payment of Rs. 4,50,000 was in the nature of capital expenditure. The Tribunal was of the opinion that it was immaterial whether the amount was paid to the tenant or to the landlord. The Tribunal discussed the authorities cited before it some of which we will also have occasion to note.

( 5 ) IN the premises, the Tribunal has referred the question as indicated before Under Section 256 (1) of the I. T. Act, 1961.

( 6 ) BEFORE we discuss the matter further, it may be useful to refer to several decisions to which our attention was drawn. Reliance was placed on the decision in the case of Raja Bahadur Kamakshya Narain Singh of Ramgarh v. CIT [1943] 11 ITR 513 (PC ). Our attention was drawn to the observations of the Judicial Committee appearing at page 519 of the report. Their Lordships were dealing with the question, under what circumstances payments by the lessors made under the leases may be classed and the Judicial Committee noted that these may be classified as three categories : (i) the salami or premium, (ii) the minium royalty, (iii) the royalties per ton. According to the Judicial Committee, the salami had been rightly treated as a capital receipt. It was a single payment made for the acquisition of the right of the lessees to e

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