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TMI Blog1988 (9) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has placed on our file photostat copy of a 'Policy' issued by the Life Insurance Corporation of India as also assessee's Advocate's letter dated 19-10-1984 addressed to M/s. Music India Ltd. and the reply thereof which is dated 16-11-1985. 3. As regards the first issue, the narration in the Assessment Order reads as under: "4. Annuity Policies :-- In lieu of her professional remuneration, the assessee had received Annuity Policies. These polices were taken out by the Cine-producers in lieu of the remuneration which was to be paid by them to the assessee who had sung songs for their films. Instead of cash down payment for the services rendered by the assessee, they purchased annuity policies from the L.I.C. in the name of the assessee so as to ensure a steady income to the assessee for a fixed number of years in future. The assessee has shown the value of these policies at Rs. 1,20,000 in Note (1) to her statement of total wealth attached to her return. But she claims exemption from W.T. on that amount on the ground that her accounts are on cash basis. However, in view of the Supreme Court's decision in the case of CWT v. Vysyaraju Badreenarayana Moorthy Raju [1985] 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icies under any of the provisions of the W.T. Act and their value as to be taxed. 4(iii) The question therefore that now remains as to how is the value of these policies to be determined. The assessee has no right in the capital sum paid for taking out the policy, but has interest in getting a fixed annual income for a fixed number of years. It is seen from the particulars given by the assessee that the assessee has two set of policies as under :-- (1) giving fixed income of Rs. 22,000 per year for the 12 years next to valuation date 31-3-1982. (2) giving fixed income of Rs. 22,000 p. a. for the 16 years next to valuation date 31-3-82. Hence, what the assessee has interest in is the future income. According to me, the value of that income to be received after a definite number of years as on today will represent the value of the assessee's interest. Rs. 20,000 to be received after 12 years will not be worth that amount today. That value will have to be discounted. Considering the drop in the real worth of the money every year, I am of the view that discounting the above given yearly instalments of Rs. 22,000 @ 4% per year will give the near correct today's worth of that fut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1982-83. The assessee gets a relief of Rs. 1,37,984. This position is for assessment year 1982-83. the W.T.O. is directed to adopt the corresponding years purchase at a discounting rate of 12% for the other two assessment years 1983-84 and 1984-85 also. The years purchase figure may be worked out for the period for which the payments are due on the valuation dates per Table II referred to earlier." 4. Qua issue No. 2 the reasoning in the Assessment Order reads as under : "5. Assessee's right to get royalties : The assessee is a world famous singer of India. Hardly any place will be there in India, where her enchanting voice has not reached and is not being heard. Her admirers will have to be counted in lakhs. There is therefore almost an ever-lasting demand for playing of record of songs sung by her. Her's is perhaps the only example where the law of diminishing returns in economics has been badly suffered. The assessee is entitled to receive royalty on the records of her songs sold in a year. By virtue of her excellence in the field, this income is more or less of assured nature. To go on having this income year after year is definitely a valuable right in possession of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the issues involved, these stand reproduced hereunder : (1) "Life Insurance Corporation of India. Maharashta Maharashta INSURANCE INSURANCE (Stamp Re.1) Stamp 20 REFUGEE MAHARASHTRA REFUGEE Stamp. [ESTABLISHED BY THE LIFE INSURANCE CORPORATION ACT, 1956] Whereas the LIFE INSURANCE CORPORATION OF INDIA (hereinafter called "the Corporation") has received a Proposal and Declaration for the purpose of an immediate Annuity which Proposal and Declaration with the statements contained therein, the Purchaser named in the Schedule hereto has agreed shall be and are hereby declared to the basis of this Annuity Contract and has received the Purchase Price for an Annuity of the amount and on the terms stated in the said Schedule. Now this Policy witnesseth that in consideration of the premises the Corporation will pay at its Divisional Office specified below the Annuity as specified in the said Schedule to the person or persons to whom the same is therein expressed to be payable upon proof to the satisfaction of the Corporation being furnished in respect of each instalment that the instalment in question has become payable in terms of the said Schedule and of the title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------------------------------------------------------------ Special Provisions -------------------------------------------------------------------------------------------------------------------------------------------------- In Witness whereof these presents have been stamped and signed on behalf of the Corporation at the abovementioned Divisional Office. Date 17 Nov. 1971. Sd/ M/s. Pooja Movies P. Divisional Manager. As per our Agreement with Miss. Lata Mangeshkar, 101 Prabhu Kunj, Pedder Road, Bombay-26, we have to pay her at the rate of Rs.145 (Rupees one hundred forty five only) per year for a period of twenty years during the month of November each year commencing from November, 1972. In pursuance to the said Agreement, we do hereby assign absolutely and irrevocably, as beneficial owner, the Policy of Assurance No. 17689889 granted to us by the Life Insurance Corporation of India, wherein we are the Annuitant, to the said Miss Lata Mangeshkar, her heirs, executors, administrators or assigns and declare that all the rights, title and interest accrued or accruing thereunder shall become payable to her, her hei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CE BUILDING, SIR PHEROZSHAH MEHTA ROAD, FORT, BOMBAY-400 001 VKD:D:85. November 16,1985. REGISTERED A.D. Mr. H.S. Khurana, Advocate, 24/30, 1st Marine Street, Dhobi Talao, BOMBAY-400 002. Dear Sir : Kindly refer to your letter of 6th November with regard to the royalties due to your client, Kum. Lata Mangeshkar. We are fully aware that delay has taken place in paying royalties to your client and are anxious to do so at the earliest opportunity. Your client is fully aware of the grave financial crisis existing in the Company and has personally told the undersigned that she fully appreciates the reasons of delay. Please be advised that at present it will not be possible for us to pay the total royalties due to your client and we shall endeavour to do so at the earliest possible opportunity, when funds become available. The statements will be sent along with the cheques. Thanking you, Yours faithfully, THE GRAMOPHONE CO. OF INDIA LTD. Sd/- V.K. DUBEY, VICE PRESIDENT : ARTISTES REPERTORE DIVISION." 6. From the above 'Policy', it is clear that the assessee is neither Purchaser nor Annuitant. She is pure and simple 'Assignee'. In Black's Law Dict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubtful every year and it is on the decrease also. Here also we can do no better but to extract an 'Example' from page 2.183 from Law Practice of Gift Tax Wealth Tax (1984) Edition by the eminent writer and author Shri C.A. Gulanikar. It reads as under : "A famous playback singer has royalty income on discs of Rs. 16,000 per annum. The life of disc is generally 2 to 4 years. Value the right in 1968. The royalty would be tapering with hunch, say, for second year of release, if it is a hit. The income may, therefore, be averaged out. First it is necessary to bifurcate the income on the basis of release. Release 1st year 2nd year 3rd year 4th year Average Rs. Rs. Rs. Rs. Rs. 1976 12,000 18,000 10,000 7,000 11,750 1977 8,000 12,000 12,000 5,000 9,250 1978 18,000 22,000 20,000 16,000 19,000 1979 22,000 27,000 24,000 20,000 23,250 The hit songs have longer life than anticipated. The estimated income may be taken at Rs.15,000 though the average income is Rs.13,330. Taking the expected life of three years and rate for capitalisation at 12 per cent, the years purchase is Rs. 2,402. The capitalised value is Rs. 15,000, 2.402 or Rs. 36,030." 8. The above would be the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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