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Not automatically. In Durga Das Khanna v. Commissioner of Income-Tax, Calcutta, the Supreme Court of India held that a Rs. 55,200 payment toward completing a cinema house was not advance rent on the lease terms and evidence before it. The lease separately fixed monthly rent at Rs. 2,100 and did not say the lump sum would be credited against rent or repaid. The ruling turned on that particular transaction; it does not establish that every construction-related payment under a lease is non-taxable.
What the dispute was about
Durga Das Khanna leased premises in Calcutta and was converting them into a cinema house. He then leased the cinema premises to three parties for 30 years. Under the deed, the lessees agreed to pay Rs. 55,200 toward construction, while monthly rent was separately set at Rs. 2,100 from June 1, 1946.
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Tax authorities treated the lump sum as advance rent. The Calcutta High Court upheld that treatment, and Khanna appealed to the Supreme Court. The Court decided the appeal on January 30, 1969.
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Why the Supreme Court did not treat the payment as advance rent
The deed treated the amounts separately
The lease did not describe Rs. 55,200 as rent paid in advance. It also did not provide for applying that sum to future rent or repaying it. Instead, it separately stated the monthly rent. The Court accepted that the lessees wanted a cinema house built to their requirements and had agreed to contribute a lump sum toward its completion.
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The evidence did not support spreading the sum across the lease
The lower authorities had reasoned that the payment should be spread over the 30-year term and added to rent. The Supreme Court found no cogent evidence for that approach or for assuming a rental value above the expressly agreed Rs. 2,100 per month. It allowed the appeal.
What the decision means—and what it does not
The case shows why the label “lump sum” does not answer whether a payment is rent. The relevant question is how the transaction is structured and what the contract and surrounding evidence establish. In this dispute, the separate construction payment, separately stated rent, and absence of a rent-credit or repayment provision did not support the authorities’ advance-rent characterization.
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The judgment is not a blanket exemption for construction contributions, lease premiums, or other non-recurring receipts. It resolves the tax treatment of this payment on the terms and evidence before the Court. It does not, by itself, establish the outcome for a present-day transaction or explain the effect of later statutory changes or decisions.
Case at a glance
| Point | What the judgment records |
|---|---|
| Payment in dispute | Rs. 55,200 toward completing a cinema house |
| Lease term | 30 years |
| Separately specified rent | Rs. 2,100 per month from June 1, 1946 |
| Supreme Court decision | January 30, 1969; appeal allowed |
Primary source
Read the Supreme Court judgment in Durga Das Khanna v. Commissioner of Income-Tax, Calcutta for the case record and reasoning. A case explainer from The Law Observer provides secondary corroboration.
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