S. K. Kapur, J. ( 1 ) THIS is a referrence under Section 57 of the Indian Stamp Act, 1899. The question referred for decision is as to the proper stamp duty payable on the instrument of leasedated the 27/07/1954, between P. C. Bhandari, the Lessor, and Caltex (India ). Limited, the lessee. What we have been called upon todeciede is whether the article applicable to the lease deed is article 35 (a) (iii) or 35 (c) of Schedule I to the Indian Stamp Act. The effort on thepart of the revenue is to establish a more lucrative interpretation of lawand depart from what according to the respondents had been the interpretation previously followed by the department. Briefly, the factsleading to this dsipute are that the said lease deed dated 27th of July,1954, was presented before the Sub-Registrar, New Delhi, for registration. The deed was executed on a non-judicial stamp paper of Rs 85/ -. The Sub-Registrar, however, felt that the document was not properlystamped and, therefore, impounded the same and forwarded it to thecollector of Stamps for necessary action. The Collector held that thelease deed in question was liable to stamp duty under article 35 (c) ofschedule I to the Indian Stamp Act and determined the deficiency induty at Rs. 765. 00. He also imposed a penalty of Rs. 1,53o. 00. Aggrieved by the aforesaid order the respondents filed an appeal before thechief Controlling Revenue Authority, Delhi, who took the view that thedocument had been executed for an advance in addition to the rentresreved and was liable to stamp duty under clause (c) of article 35. He, however, reduced the penalty to Rs. 100. 00 only. The Chief Controlling Revenue Authority was asked to refer the case to this Court whichrequest was declined by him. The Respondents thereupon filed awrit petition challenging the order of the Chief Controlling Revenueauthority declining to refer the case to this Court. By order, datedthe 7th of May, 1960, Grover J. dismissed the petition. The respondents filed a Letters Patent appeal which was allowed and it was heldthat the respondents were entitled to have the whole question referredto this Court under Section 57 of the Stamp Act. The Union of Indiawas accordingly directed to make this reference. It may be relevant tomention a few facts about the lease deed itself. The respondents filed a Letters Patent appeal which was allowed and it was heldthat the respondents were entitled to have the whole question referredto this Court under Section 57 of the Stamp Act. The Union of Indiawas accordingly directed to make this reference. It may be relevant tomention a few facts about the lease deed itself. The lease is for a termof five years from the date of occupation, the monthly rent beingrs. 700/ -. ( 2 ) MR. Shanker, learned counsel for the Union laid particular emphasis on clause I of the lease deed and it would be appropriate toquote the same. " Provided always and it is hereby mutually agreed asfollows:- (1) A sum of Rs. 25,500. 00 shall be paid to the lessor on the date ofoccupancy, as advanced rental for the first 36 months from the dateof occupancy at the rate above mentioned, namely Rs. 700. 00 perannum. "on the basis of this clause it has been contended that the requirementas to payment of Rs. 25,500. 00 on the date of occupancy brings the casewithin article 35 (c ). Reliance has been placed on In re Chief Controllingrevenue Authority. ( 3 ) LEARNED counsel for the respondents on the other hand contendsthat before article 35 (c) can become applicable it has to be shown thatthe lease was granted for money advanced in addition to rent reserved. He submits that the payment of Rs. 25,500. 00 was nothing but an advancerent for a period of first 36 months and consequently it was not a case ofgranting of lease for money advanced in addition to the rent reserved. He places reliance on In Reference under Stamp Act, S. 46, where it washeld that one year s rent deposited with the lessor could not be regardedas fine or premium within the meaning of article 39 (d ). In that case bya document purporting to be a rent agreement, the lessee took a shopfor five years agreeing to pay Rs. 30. 00 per annum as rent. He also agreedto deposit one year s rent with lessor which was to be credited to therent of the last year of the term. It was held that it was merely a payment of rent in advance and not a premium or fine. 30. 00 per annum as rent. He also agreedto deposit one year s rent with lessor which was to be credited to therent of the last year of the term. It was held that it was merely a payment of rent in advance and not a premium or fine. The learned counsel for the revenue seeks to distinguish this case on the ground that thewords "or for money advanced in addition to rent reserved" did not existin the section as fell for interpretation before the Madras High Court. Reverting to the Bombay decision we may straigtway point out that thesame is of no avail to the revenue. That was a case where the High Courthad to resolve between the applicability of article 35 (a) (iii) and 35 (b ). It was held that the payment by the lessee in respect of the rent wasprior to the liability for rent arising and was, therefore, nothing more thanan advance. The distinction will become clear from the following observations of Chagla, C. J. "the liability to pay rent can only arise under the lease and atstated periods or specific occasions mentioned in the lease; till thestated period or specific occasion arrives, there is no liabilty on thepart of the lessee to pay rent. Therefore, if the lessee pays an amountin respect of the rent prior to the liability arising, that payment isnothing more than an advance made by the lessee to the lessor. Hemakes an advance, and the agreement is that the lessor will satisfythe lessee s liability out of that amount when that liability arises. Butthe legal character of that payment is not rent, but moneys advancedby the lessee to the lessor. The liability only crystallises and takes onthe character of rent when the stated period or the specific occasionarrives under the lease and the lessee becomes liable to pay rent. Itcould not possibly be stated that when the lessee paid the sums ofrs. 33,000 and Rs. 22,000. 00 there was any liability upon him to payrent; the liability would only arise in terms of the lease. "in this case the instrument of demise fixes the monthly rent. The lesseeis required to pay Rs. 25,000. 00 on account of rent for thirty-six months. This liability of the lessee is, therefore, to pay rent and not advance inaddition to rent reserved. "in this case the instrument of demise fixes the monthly rent. The lesseeis required to pay Rs. 25,000. 00 on account of rent for thirty-six months. This liability of the lessee is, therefore, to pay rent and not advance inaddition to rent reserved. An amount for which there is both a liabilityand a covenant to pay as rent cannot be termed as advance. It cannotin the circumstances be said that this is a case of granting a lease formoney advanced in addition to rent reserved. The legal character ofrs. 25,500 is rent and merely because that rent is paid in advance undera covenant its character does not change. It may also be pointed outthat the Bombay High Court was concerned with article 35 (b) the language of which is entirely different and the words "in addition to rent reserved" are missing there. Under article 35 (c) the revenue has to satisfyus that the money paid is advance, that is to say it is payment prior tothe arising of liability on account of rent and that the payment is inaddition to the rent reserved. None of the two conditions are satisfiedin this case. It is not disputed that in case article 35 (c) is not applicable the document must be held to be correctly stamped. ( 4 ) IN the result our answer to the reference would be that the document of lease was properly stamped and article 35 (c) was not applicable. The Union of India will pay the costs of this reference, ( 5 ) I agree. ( 6 ) I entirely agree.