Law:

Section:

Section 4 of the Income-tax Act, 1961 – Income – Chargeable as - Assessment year 1960-61 – Whether by its nature premium or salami being a non-recurring payment made by tenant to landlord at inception of grant of lease can be regarded as a receipt of capital nature in hands of landlord - Held, yes – Whether though every payment by way of a salami or a premium need not necessarily be held to be of a capital nature or on capital account, but since prima facie that is nature of such payment it is for department to establish that such payment was in nature of revenue or income -Held, yes – Whether where no facts had been established or brought on record by department to show that payment which was received by assessee by way of a premium for obtaining monthly tenancy was in nature of revenue or income. Tribunal was right in coming to conclusion that said receipt was capital receipt - Held, yes FACTS The assessee's main source of income was property that he had constructed. A part of the cost of the construction was claimed to have been received as pagdi or salami from his tenants. For these amounts, no receipts were issued by him to the tenants but some of the tenants who were examined confirmed that they had given to the assessee such amounts which according to them were by way of loans. The ITO made addition of the said amount holding that it represented the assessee's income from undisclosed sources and that, at any rate, it was in the nature of composite rents received in advance. The AAC, confirmed the addition. On second appeal, the Tribunal recorded a finding that the payments that were made by the tenants were pagdi or salami payments made by them for getting accepted as tenants by the assessed and held that such payments could not be treated as income in the hands of the assessee. On reference: HELD By its nature the salami being a non-recurring payment made by a tenant to the landlord at the inception of the grant of the lease has always been regarded as a receipt of a capital nature in the hands of the landlord. The finding that had been recorded by the Tribunal was that this payment was made to the assessee by the tenants for getting them accepted as…

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