Law:

Section:

JUDGMENT Pathak, CJ.—The following question of law has been referred to the High Court for decision by the Income-tax Appellate Tribunal, Gauhati Bench, under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as "the Act": "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the lease rent of Rs. 10,000 received by the assessee, Haroocharai Tea Co., Jorhat, from M/s. Gatoonga Tea Estate for Samaguri Tea Estate was assessable at 40% in view of rule 8 of the Income-tax Rules, 1962?" The dispute relates to the lease rent received by the assessee from another partnership firm. The assessee is a partnership firm called M/s. Haroocharai Tea Company. It purchased a tea estate known as Samaguri Tea Estate from Moabund Tea Co. Ltd. on January 24, 1963. For this purchase it had taken a loan from the Assam Financial Corporation by mortgaging the same tea estate. The partners of this firm and the partners of another firm called Gatoonga Tea Estate are the same. The two firms with common partners entered into an agreement according to which Gatoonga Tea Estate should manage Samaguri Tea Estate. This agreement was effective from January 1, 1963, though the agreement was drawn up on February 5, 1963. The lease was for a period of 10 years and the important clauses in the lease agreement to be noticed are clause 5 and clause 8, which are as under: "5. Messrs. Gatoonga Tea Company will during the subsistence of this agreement cultivate tea and manage the said Samaguri Tea Estate in proper manner according to the best system of the tea plantation in the district and shall properly manufacture all teas of the said Samaguri Tea Estate from their factory at Gatoonga Tea Estate and will be entitled to sell the same in their own name and they will keep proper account of all teas manufactured from the produce of the said Samaguri Tea Estate. All excise and other duties payable in respect of the said manufactured tea of Samaguri Tea Estate shall be borne and paid by the said Gatoonga Tea Company. 8. In consideration of their services as aforesaid, the said Messrs. Gatoonga Tea Company is entitled to retain all sale…

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