Law: Income Tax Act, 1922

Section: 12

[Indian Income lox Act, 1922 (XI of 1922)].....Section 12 Income or capital-usufructuary mortgage of land-Mortgagee allowed to build shops-Land and shops to be surrendered free from encumbrances after specified year under the agreement-transaction whether usufructuary and not lease-Held yes-Rent received mortgagee, whether revenue receipt-Held no; The assessee entered into an agreement with the owner of a plot of land which was in possession of a mortgagee to discharge the mortgage debt of Rs. 1,500 and to build shops thereon at a cost of Rs. 1,000 and to hold the land and the shops as a usufructuary mortgagee for the sum of Rs, 2,500 for a period often years, at the expiry of which period he was to surrender the plot and the shops to the owner free from all cumbrances. The assessee leased out the shops and received a sum of Rs. 2,550 as rent. This rent was assessed to income tax "income from other sources". The High Court held that the transaction was not a lease but was in the nature of a self-liquidating mortgage under which the capital was to be repaid to the assessee by permitting him to enjoy the property for ten years. The rent received by the assessee was in the nature' of recoupment of capital and was not a revenue receipt assessable to income tax. Affirming the of the High Court, the Supreme Court: Held, that the transactions were not leases but usufructuary mortgages. Case distinguished: Nidha Sah v. Murlidhar (1902) I.L.R. 25 All. 115 (P.C.) Cases followed:- Ishan Chandra v. Sujan Bibi 15 Suth. W.R. 331, Tukaram Bin Mairal v. Ramchand Malukchand (1901) I.L.R. 26 Bom. 252 (F.B.) and Mahmad Muse Umarji v. Bagas Amanji Umar (1908) 1.L.R. 32 Bom. 569. Case affirmed: Abdul Hai Azimullah v. Commissioner of Income Tax (1963) 49 I.T.R. 586. JUDGMENT [The judgment of the court was delivered by GROVER J.],--These appeals are by certificate from the judgment of the Allahabad High Court, which arise out of the assessment of tax made for the assessment years 1952-53, 1953-54 and 1954-55, in an income tax reference. The facts may be shortly stated. The assessee was being assessed as an individual and derived income from property, business and other sources. In…

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