Rents

The taxpayer, which had leased five properties to a related company, assigned the right to receive rents payable in respect of a period of five years and one day to a bank in consideration for a lump sum. The tenant agreed to indemnify the bank against non-payment of the assigned rents.

In finding that the lump sum was a capital receipt, Dyson L.J. noted that the period of over five years was significant, that the lump-sum received was significant and resulted in a corresponding diminution in the value of the taxpayer's reversionary interests, the payment was not one of a series of recurring payments, and that there was a transfer to the bank of the risk of non-payment of the rents. He also was influenced by the consideration that if the taxpayer had granted the bank a six-year lease at nominal rents, the premiums payable would have been capital payments; and noted that the case was fundamentally different from the pre-payment by a tenant of a lump sum representing the discounted value of future rents payable by the tenant under a lease.