The distinction is important to understand as a lease entails far more rights to the tenant than a license to a licensee in light of Rent Control Legislations, to avert the same – more and more landlords and inclined to execute leave and license agreements than lease deeds.
Associated Hotels India v. R.N.Kapoor (1952 SC) remains the locus classicus on this –
1. Where a right of exclusive of possession is given – it raises a strong inference of transaction being a lease, however exclusive possession is not the conclusive test.
2.The terms of agreement, though not decisive, are of importance. The party’s nomenclature is not conclusive, however the terms, if any against subletting, assigning, are important.
3. Monetary Payments – How termed ?
4. Existence of special relationship between the parties may point – at the transaction being a license rather than a lease.
5. Degree of Formality surrounding the transaction, and the capacity of the grantor to grant a tenancy.