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TMI Blog1991 (4) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... nnuity policies of Rs. 1,00,000 each with the Life Insurance Corporation for the benefit of the assessee. The annuities were payable in 10 annual instalments after a deferred period of 10 years and the premium was also to be paid in 10 annual instalments during that deferment period. The first instalment of Rs. 10,000 each paid during the previous year had been included by the assessee in his total income. The Commissioner noted further that the liability to pay the remaining 9 instalments of premium payable to the LIC had been taken over by a firm called Leo Enterprises in which the assessee's wife along with five close relatives were partners and the said firm had received a sum of Rs. 7.2 lakhs from the producers as consideration for tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and having fulfilled the conditions prescribed under the instructions of the CBDT, the Commissioner was bound to uphold the assessment which was in conformity with those instructions. It was submitted that in the circumstances the order of the Commissioner made under section 263 should be cancelled. 4. On the other hand, it was contended on behalf of the revenue that the producers having paid the balances of premia due to the LIC on the policies to a firm in which the assessee's wife was a partner, the assessee must have been taken to have constructively received the same. It was also submitted that the instructions of the CBDT allowing the taxation of the annuities at the time of receipt instead of the premium paid for the purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abh Bachhan in ITA No. 537/Bom/78-79 dated 3-11-1979 holding the same view on the basis of a circular of the CBDT and the report of the Public Accounts Committee in April 1978 indicating that the Department has accepted that view. Thus it is now an accepted position in the case of an assessee being a professional artist maintaining accounts on cash basis and having the benefit of an annuity policy, only the annuities could be assessed as and when they are received and not the premium paid for that policy. In the present case, another significant fact is that these were not single premium policies. In the previous year only one instalment of the 10 annual instalments had been paid. Therefore, even factually there is no case for treating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the question whether the introduction of the guarantor would any way lead to the inference that the premium paid is to be treated as the income of the assessee. On this aspect, we have as an illustration, the agreement dated 1-10-1983 between M/s. Geetha Creative Arts and the assessee staling that the remuneration for the services rendered will be paid by taking out an annuity policy. Clause 6(b) further provides that as and by way of security for the due payment of the remuneration, a guarantee from a bank or other acceptable institution would be provided before the release of the picture. Clause 8 contains a condition that until such a guarantee is furnished, the picture will not be released. On 28-5-1984 Geetha Creative Arts took ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements. Nor is it the case of the revenue that the assessee had received any part of the amount paid to the financing company. Since the assessee was following the cash system and he has in fact not received any amount from the financing company out of the amount paid by the producers to the financing company, there is no question of treating the amount received from the financing company as that received by the assessee. 10. The revenue emphasised the fact that Leo Enterprises consisted of the assessee's wife and close relatives as partners. But this fact is of no significance unless the revenue is able to establish that Leo Enterprises was benami for the assessee. That again depends upon proof of the amount having reached the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxpayer who has adopted the method which attracts tax is to be treated as though he had chosen the method which does not, or vice versa." As recently as in 1989 it was held in the case of Overseas Containers (Finance) Ltd. v. Stoker (Inspector of Taxes) [1991] 188 ITR 383 (CA) that if a transaction has been undertaken for a commercial purpose, then the presence of a collateral purpose to obtain a tax advantage would not denature it. In the present case it is clear that the transaction was for the dominant purpose of guaranteeing the payment of premia to the LIC so that the continuity of the policy in favour of the assessee would be secured. Such a transaction would not in any way make the amount received by the guarantor, income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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