Decided on January 29,1982



A. Krishnamurthy, Judicial Member - (1.) THE main dispute arising in the appeal of the assessee also arises in the case of the interveners in their separate appeals on more or less identical facts and circumstances. THE separate appeals of the inferveners will be disposed of by regular Benches in conformity with the decision of the Special Bench on this point. As the facts are identical, we shall take up the facts in the assessee's case for the relevant year.
(2.) The assessee is a professional film artiste and remuneration was due to him from several film producers and, under almost identical contracts with them, the remuneration was stipulated to be payable in several annual instalments to start from specified years. The amounts involved in this appeal, in respect of which the inclusion is made in the assessment, fell all along after the valuation date, which is 31-3-1975, material for the year 1975-76. In respect of the remuneration stipulated to be paid under the agreements, the producers concerned undertook to give the assessee certain guarantee acceptable to him for the payment of the amounts stipulated on the various dates. To illustrate the nature of the agreement and the remuneration payable thereunder, we shall take up the terms of the agreement with the producer, Sagar Art (International) Films (P.) Ltd. entered into by the assessee. Sagar Art (International) Films (P.) Ltd. engaged the assessee for playing the leading role in a picture entitled "Lulkar". According to the contract of employment, the assessee was entitled in consideration of his services rendered or required to be rendered, as stated in the letter of the producer dated 15-9-1970, the remuneration payable as under : JUDGEMENT_10249_TLIT0_19820.htm The further stipulation contained in the letter is that the aforesaid amounts shall accrue and become due to the assessee only on the (latex specified above and the time for the payment of each amount shall be the essence of the arrangement and as a security to him for the due payment of the remuneration as above by the producer, the producer undertook to give him such guarantee either through any Scheduled Bank, recognised Insurance or other Government agencies acceptable to the assessee. In pursuance of the above arrangement, the producer took out annuity policies from the Life Insurance Corporation of India (LIC) to secure payment to the assessee in the stipulated years of the amounts agreed, as stated above. Under the terms of the policy, it was declared and agreed that the policy cannot be surrendered nor can the annuity payable thereunder be computed for a lump sum and no loan also will be granted on security of the policy. Under the policy, the producer Sagar Art (International) Films (P.) Ltd., is the proposer and the first instalment is due for payment on 1-9-1995 and similar instalments are to be paid as on 1st of September every year for a period of 20 years.
(3.) THE assessee maintains accounts in respect of his professional earnings on cash basis, i.e., under cash system of accounting. In the assessment for the year 1975-76, the WTO, inter alia, included a sum of Rs. 3 lakhs as outstanding remuneration not received by the assessee and another sum of Rs. 28,07,700 as the present value of future annuities secured in respect of the remuneration due to the assessee from various producers secured by way of annuity policies. In the appeal preferred by the assessee, the Commissioner (Appeals) in regard to the inclusion of Rs. 3 lakhs held, that in view of the fact that the financial position of Movie Mughals from whom the amount was due and considered outstanding as a debt, was positively bad, evaluation of this debt is called for. Following similar orders in other cases he directed the WTO to take the valuation of the debt at nil provided the assessee wrote a letter to the producer concerned saying that in view of the precarious financial position, and for commercial consideration, the assessee is not filing a suit for recovery, but otherwise the entire sum of Rs. 3 lakhs should be included.;

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