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TMI Blog1988 (9) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation of India as also assessee's Advocate's letter dt. 19th Oct., 1984 addressed to M/s Music India Ltd., and the reply thereof which is dt. 16th Nov., 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 policies 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 LIC 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 WT 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 vs. Vyasraju Badrimurtiraj (1985) 45 CTR (SC) 217 : (1985) 152 ITR 454(SC),this claim of the assessee is not tenable. The annuity polici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value has 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 31st March, 1982. (2) giving fixed income of Rs. 22,000 p.a. for the 16 years next to valuation date 31st March, 1982. 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 cent per year will give the near correct today's worth of that future income. As stated above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef of Rs. 1,37,984. This position is for asst. yr. 1982-83. The WTO is directed to adopt the corresponding years purchase at a discounting rate of 12 per cent for these other two asst. yrs. 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 by her. Here is perhaps the only example where the law of diminishing returns in economics has been badly snubbed. 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 assessee. Whatever is valuable will form the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es involved, these stand reproduced hereunder: (1) "Life Insurance Corporation of India. Maharashtra Maharashtra 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 be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 irrecoverably, 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 heirs, executors, administrators or assigns and declare the receipt or receipts of the said Miss. Lata Mangeshkar her heirs, executors, administrators or assigns shall be sufficient discharge to the Corporation for the same. Further the benefits assured under this Policy cannot be assigned or liquidated in any manner whatsoever by the assignee Miss Lata Mangeshkar. No surrender value is payable, nor can the annuity instalments payable thereunder be commuted for a lumpsum. No loan can be granted on the security of this Policy and further this also will not be a subject matter of any other deal whatsoever. Dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 REPROGRAMMER 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 Dictionary, Special Deluxe Fifth Edition at pages 108 and 109 'Assign', 'Assignee' and 'Assignor' as also 'Assignment of income' have been defined as under: "Assign": To transfer, make over, or set over to another. To appoint, allot, select, or designate for a particular purpose, or duly. To point at, or point out; to set forth, or specify; to mark out or designate; to particularise, as to assign errors on a writ of error; to assign breaches of a covenant. See also Assignment." "Assignee": A person to whom an assignment is made; grantee. Under UCC assignee is subject to all defenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 x 2,402 or Rs. 36,030." 8. The above would be the best and most comparable example for valuing the royalty and we adopt the same in the case of this assessee also. The multiple to be adopted as such has to be 2.402 and the valuation shall be worked out in tune with the above quoted work-out/example. 9. The orders of learned lower authorities shall stand modified since the work-out has to be in accordance with the above quo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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