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Issues Involved:
1. Taxability and valuation of annuity policies as taxable wealth. 2. Taxability and valuation of royalty income as a taxable asset/wealth. Issue 1: Taxability and Valuation of Annuity Policies The primary question was whether annuity policies constitute taxable wealth for the assessee and, if so, how they should be valued. The assessee received annuity policies instead of cash remuneration for singing in films. These policies were purchased by cine-producers from the Life Insurance Corporation (LIC) to ensure a steady income for the assessee over a fixed period. The assessee claimed exemption from wealth tax on these policies, arguing that her accounts were on a cash basis. However, based on the Supreme Court's decision in CWT v. Vysyaraju Badreenarayana Moorthy Raju [1985] 152 ITR 454, the claim was deemed untenable as annuity policies constitute a valuable asset taxable as wealth. The policies were not covered by exemptions under sections 2(e)(2), 5(1)(via), or 5(1)(vii) of the Wealth Tax Act, as they did not insure any risk on the life of the annuitant. The valuation of these policies was contested. The Wealth Tax Officer (WTO) initially adopted a discounting rate of 4% to determine the present value of future income from the annuities, arriving at a taxable value of Rs. 4,27,680. However, the first appellate authority found this rate too low and adopted a 12% discounting rate, reducing the taxable value to Rs. 2,89,696. The Tribunal noted that the assessee was neither the purchaser nor the annuitant but merely an assignee of the policies. According to Black's Law Dictionary, an "assignee" is someone to whom an assignment is made, and "assignment of income" refers to a procedure where a taxpayer attempts to avoid income recognition by assigning the property generating the income to another. If the assessee is an assignee, then the income from these policies should not be taxable in her hands. The Tribunal remanded the issue back to the first appellate authority to decide afresh after examining all the policies and determining if the assessee is indeed an assignee. Issue 2: Taxability and Valuation of Royalty Income The second issue was whether the royalty income received by the assessee, a renowned singer, constituted taxable wealth and how it should be valued. The WTO considered the royalty income as a valuable right and taxable asset, calculating the average annual royalty income over five years and capitalizing it at a 12% interest rate to determine a taxable value of Rs. 41,50,000. The first appellate authority suggested averaging the royalties over ten years and applying a discounting rate of 12%, arriving at a reduced taxable value of Rs. 24,86,000. The Tribunal referred to an example from the Law & Practice of Gift Tax & Wealth Tax by C.A. Gulanikar, which suggested using a multiple of 2.402 for capitalizing royalty income. The Tribunal directed the lower authorities to adopt this multiple and revise the valuation accordingly. Conclusion The Tribunal partially allowed the appeals, remanding the issue of annuity policies back to the first appellate authority for fresh consideration and directing a revised valuation of royalty income using a multiple of 2.402. The Revenue's appeal succeeded partially, while the assessee's appeals were deemed to have succeeded partly on merits and partly for statistical purposes.
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