Interpretation of clause in lease deed in lieu of (new tax)
Querist :
Anonymous
(Querist) 19 January 2012
This query is : Resolved
Dear Sir,
We have enter into the commercial lease agreement with our landlord and their is new levy "Property TAX" which came up by Municipality retrospectively from 2008. Our landlord is insisting that as per clause "reproduced below", we as LESSEE are liable for any new levy or tax. But our contention is that it has to be equally shared as its mentioned in clause. Can you please comment on the interpretation of the clause on how this new tax will be shared between LESSEE and LESSOR, or it will be borne solely by LESSEE.
"The rent is exclusive of all the taxes. In addition to the rent payable for the Demised Premises as stipulated in this Lease Deed, THE LESSEE shall also be liable to bear and pay on its sole account the entire part of any and all levies, duties, taxes on Demised Premises, land and building, charges, rates, cesses, fees,wealth-tax, penalties thereof etc. imposed/demanded by the Central or the State Government / any local body and/or other authorities and all increases and/or fresh impositions thereof as applicable and attributable to the said Plot / said Building / Demised Premises on and from 31st October 2006 as per the following schedule:
Tax Imposed :: Liabilities of the Parties
1. Up to 15% of Rent :: To be fully Paid by THE LESSEE
2. Above 15% of Rent Paid :: THE LESSOR and THE LESSEE to be equally share the amount of Tax
THE LESSEE shall also be liable to fulfill any and all procedural requirements as may be prescribed by the Central or the State Government/any local body/all other authorities in connection with the subject matter hereof."
ajay sethi
(Expert) 19 January 2012
you would be liable to pay . rent is exclusive of taxes. . clause mentions you shall be liable to pay taxes levied by any local body
Querist :
Anonymous
(Querist) 19 January 2012
Don't you think the table below has any implications of Sharing at all:
Tax Imposed :: Liabilities of the Parties
1. Up to 15% of Rent :: To be fully Paid by THE LESSEE
2. Above 15% of Rent Paid :: THE LESSOR and THE LESSEE to be equally share the amount of Tax
ajay sethi
(Expert) 19 January 2012
if the taxes are more than 15%
of rent it would need to be borne equally . you did not in your query mention that taxes were more than 15%^of rentals .
the agreement ought to have mentioned that property taxes would be borne and paid by lessor . since the agreement merely mentions percentage of rent it results in controversories
Querist :
Anonymous
(Querist) 19 January 2012
Dear Sir,
Here Property TAX is 5 % and Fire Tax is 1 %.
(1) Is "15% of Rent Paid" mentioned in the clause referred to taxes imposed by Government/Statutory body or
(2) Is "15% of Rent Paid" is Tax Imposed on Rend Paid? Which implies:
Rend Paid = X
15% of X = Paid by Lessee
>15% (Remaining 85%) of X = Equally Divided between LESSEE and LESSOR
Appreciate if you can please comment if Interpretation (1) is correct or (2) is correct with reasons.
TABLE is AS BELOW
-------------------------------------------
Tax Imposed :: Liabilities of the Parties
Up to 15% of Rent Paid :: To be fully Paid by THE LESSEE
Above 15% of Rent Paid:: THE LESSOR and THE LESSEE to be equally share the amount of Tax
Raj Kumar Makkad
(Expert) 19 January 2012
Your second interpretation is absolutely correct in the given facts.
Querist :
Anonymous
(Querist) 19 January 2012
Dear Sir,
One clarification:
I meant
"15% of TAX Imposed on RENT" = PAID by LESSEE
>15% (remaining 85%) of TAX Imposed on Rent = Paid equally between lessee and lessor
So tax imposed in our case is 5% of RENT PAID + 1 % of RENT PAID
What our contention is:
Rent Paid = X
Tax Paid on Rent = 5% of X
Fire Tax = 1% of X
Liabilities are shared as follows:
"15% of TAX Imposed on RENT" = PAID by LESSEE
>15% (remaining 85%) of TAX Imposed on Rent = Paid equally between lessee and lessor
Let me know if our interpretation is correct or not, with reasons.
