Computation of total income of film artist paid through annuity policy. - Income Tax - 1310/CBDT

INSTRUCTION NO. 1310/CBDT Dated: February 26, 1980 he Board have been considering for some time past the question whether a film artist who adopts cash system of accounting for his professional income and who gets remuneration from a film producer in the form of an annuity, should be taxed on the entire amount paid by the producer for purchasing the annuity policy in the year of purchase or on the annuity instalment(s) paid under the annuity policy during a particular year. 2. In the cases of the film artists which the Board had on occasion to consider over a period, the following features were noticed: (i) The artists were maintaining their accounts on cash system. (ii) The agreement in regard to the payment of remuneration by the producer provided for the payment of remuneration either wholly or partly through annuity policies which ensured annual payment of annuity of a stipulated amount for a certain number of years; (iii) The annuitants were either the producers or the artists; (iv) In case where the producers were the annuitants, either the policies were later irrevocably and absolutely assigned in favour of the artist of or absolute and irrevocable power of attorney to collect the annuity amount as and when due was given to him. (v) According to the terms of these annuity policies neither was the surrender value thereof nor were the annuities payable thereunder commutable; and (vi) The annuity and/or interest of whatsoever nature in the policy were not assignable in favour of any other person by the artist either during or after the deferment period. 3. This question was examined in consultation with the Ministry of Law. The Board have been advised that in case of a film artist who follows the cash system of accounting for professional income and who is paid remuneration either wholly or partly through an annuity policy (policies) as per the agreement/contract, only the particular amount of the annuity instalment(s) as is paid in a year is to be included in the total income of the said year provided the annuity policy incorporates all the features mentioned in para 2 above. If all the features referred to in para 2 above are not present in a case, then the benefit of including the annuity instalment(s) in the year in which the same falls due and payable is not to be extended. The entire amount paid by the producer for the purchase of the policy would then, have to be included in the year of the purchase of the policy. 4. In view of this, it is necessary that each case should be examined carefully with reference to the terms and conditions of each annuity policy to ascertain whether the case possesses all the features referred to in para 2 above before a decision is taken to include the annuity instalment(s) becoming due and payable in a year in the computation of the income from the profession of the film artist in the year. 5. It may, however, be noted that the benefit of these instructions is not intended to be available to the assessees other than the film artists. If such cases come to the notice of the Commissioners, the same may be reported to the Board. 6. All assessments including assessments re-opened on the basis of the Audit objections should be examined in the light of these instructions and appropriate action be taken. These instructions may kindly be brought to the notice of all the officers working in your charge.