In this departmental appeal, order of Commissioner (Appeals) is challenged with reference to deletion of three amounts. matter is considered seriatim below. 2. IAC found that assessee had debited income and expenditure account with sum of Rs. 64,649 being interest paid to two parties- Prasad Productions and Shree Laxmi Pictures. assessee claimed allowance of interest under section 80V of Income-tax Act, 1961 ('the Act'). IAC disallowed claim, inter alia, for reason that provisions of section 80V were introduced after 1-4-1976. Commissioner (Appeals) allowed claim restricting it to Rs. 48,487. 3. learned counsel for department has pointed out that even accepting that borrowings could be regarded for payment of tax, it was not borrowed during year of account. money was borrowed earlier and continued to be utilised by assessee. dates of loans were 3-12-1971 and 4-12-71. It was for assessee to establish that it was same money which it borrowed that it paid towards tax. Apart, therefore, from claim being not relevant for year under appeal, according to learned, counsel, borrowing cannot also be related to payment of tax. For assessee, it is pointed out that accounts clearly indicated two borrowings of Rs. 50,000 each on 3-12-1971 and 4-12-1971. On 13-12-1971, sum of Rs. 74,778 was paid into Reserve Bank of India towards income-tax. accounts clearly indicated that this amount could not have been paid but for borrowals. It is clear, therefore, that borrowed money was utilised only for tax payment. interest on this amount was paid during this year and claim is made because assessee is following cash system of accounting. 4. As correctly pointed out by Commissioner (Appeals), no limitation can be read into statutory provisions to effect that borrowings must be made during previous year or even after 1-4-1976. In fact, if stipulation were to be made that interest can be allowed only on amounts borrowed during previous year, provisions themselves might become otiose since interest is generally calculated or paid only after year or term. Apart from what Commissioner (Appeals) has mentioned in his order, above circumstances also would compel us to support his order on this point. 5. IAC found that during year of account, assessee had entered into agreements with certain producers. consideration for professional services rendered by him was in form of deferred annuities. Of four agreements entered into, one relating to Vijay Suresh Combine was through life insurance policy whereas agreements with three other parties, Megha Movies for picture Kinnara', A. R. Productions for picture 'Karmayogi' and Modern Films for 'Priyatama' were not through LIC. assessee was to get annuity instalments in respect of latter three agreements of Rs. 16,000, Rs. 32,000 and Rs. 32,000 respectively with 10, 15 and 15 instalments, respectively. amount paid by producer in respect of these agreements came to Rs. 95,000, Rs. 1,98,000 and Rs. 2 lakhs, respectively. assessee did not declare aforesaid payments as his professional receipts on ground that payments represented purchase price of annuity policies. There was no receipt for year of account. IAC found that whereas agreement with Vijay Suresh Combine involving single premium on LIC policy in name of assessee, came within norms of Board's instructions relating to such payments and was thus not taxable, other three payments clearly represented taxable income. These other producers had entered into agreement with private limited company-Balaji film finance & Distribution Co. (P.) Ltd. for carrying on guarantee business. This private company was to act as guarantor for due performance by producers in respect of annuity payments to be made to assessee. producers were stated to have deposited certain amounts with private limited company instead of taking out single premium annuity policy from LIC. agreement indicated that three producers were to deposit specified amount with guarantor. If instalments payable by producer to artist was paid, guarantor was to repay producer proportionate part of deposit along with interest. If he did not pay any instalment, guarantor had to pay amount to assessee. IAC also found that Balaji Film Finance & Distribution Co. (P.) Ltd. was constituted by three shareholders: assessee's brother-in-law and two of his uncles. It had only equity capital of Rs. 7,500. company had invested total amount of Rs. 4,93,000 for purchase of lease rights in some theatres in Bombay, etc. Some loans had also been advanced to concerns in which assessee's family and relatives were interested. From these and other facts peculiar to situations, IAC came to conclusion that these amounts should be treated as clear realisation of income by assessee himself. producers had already made due payment to assessee by arrangement which for all practical purposes resulted in constructive receipt to assessee from his profession. IAC, therefore, added sum of Rs. 4,93,000 as income of assessee. On appeal, Commissioner (Appeals) held that there was nothing to indicate that Balaji Film Finance & Distribution Co. (P.) Ltd. represented benami to assessee. This party actually stood as guarantor for certain purposes of its own. Commissioner (Appeals) held that no part of this amount should be considered as assessee's income of year. 6. learned counsel for department has pointed out that this was clear case of assessee passing on his income to benamidar. Admittedly, conditions laid down in Board's circular or principles followed therein do not apply to this case. When producers paid money to Balaji Film Finance & Distribution Co. (P.) Ltd. It amounted to virtual receipt by assessee of income. assessee is in commanding position in film field. producers, therefore, while making agreements for payments are forced to abide by directions of artist. It is in this context, one has to examine agreement, producers and assessee have with Balaji Film Finance & Distribution Co. (P.) Ltd. company is perhaps solely put up for this guarantee activity. shareholders of company have no money, no background and no other experience in film business or any other business. T h e guarantor apparently is found in manner of investment company since it had taken on lease theatres, etc. Its capital was only Rs. 7,500. According to learned counsel, all these clearly indicate that assessee was prime motive force behind guarantor company. amounts received under agreement by guarantor were real receipts of assessee from producers. 7. For assessee, it is pointed out that there was nothing to show that Balaji Film Finance & Distribution Co. (P.) Ltd. was in any under control of, Balaji Film Finance & Distribution Co. (P.) Ltd. was in any under control of, much less benami of assessee. agreements with producers clearly contemplated payment of remuneration to assessee for his professional services on instalment basis and that too at future date. Producers had depending on their financial position, entered into such agreement, whereby while carrying on work in present, they are obliged to make payment only in future partly out of recovery from exploitation of films and partly from future receipts. There was nothing unusual in such agreement. Merely because future payment of annuity arrangement was not put through LIC but in other forms it would not alter position either in law or as matter of fact. All facts relating to Balaji Film Finance & Distribution Co. (P.) Ltd. have been disclosed to ITO in full. ITO assessing that concern has not even hinted at any benami transactions or made protective assessments in that party's case. Merely because some of relatives of assessee are shareholders of that company, assessee cannot be regard as person carrying on business done by them. 8. issues before us are: (1) Whether there is anything irregular in payment made by producers on deferred annuity basis? (2) Whether Balaji Film Finance & Distribution Co. (P.) Ltd. are benamies of assessee? and (3) Whether payment made by producers to Balaji Film Finance & Distribution Co. (P.) Ltd. can be regarded as payment to assessee? On first issue, we can see nothing against assessee. producer may make payment on spot in cash or at stipulated periods including on future date. latter payment he can make either in lump sum or in instalments. Thus, it would be incorrect to say that there was anything wrong in Megha Movies remunerating assessee by making payments of Rs. 16,000 each on 10 instalment dates in future. 9. As regards charge of Balaji Film Finance & Distribution Co. (P.) Ltd. being benami of assessee, only evidence based which this inference is made that shareholders of company are relatives of assessee; that its capital is Rs. 7,500 only and that it does not have any background of film or other business. When IAC treats receipts of this company as receipts of assessee, he in fact holds this company to be benamidar of assessee. criteria for deciding whether person is benamidar or another have been judicially well laid down. It must necessarily be shown that money proceeds from person apparently with view to benefit another person but instead of doing so, really benefits himself. There is no such situation here. All that Balaji Film Finance & Distribution Co. (P.) Ltd. has done is to guarantee payment to assessee by producers. This function of this company is akin to what any bank or other investment company does. It is true that as guarantor or otherwise, company has taken amounts from producers. From Megha Movies, company has taken amount of Rs. 95,000 as deposit which it has invested in activities like leasing out certain theatres. In first place, it is not clear whether sum of Rs. 95,000 taken would be equivalent to present value of 10 annuities on specified dates of Rs. 16,000 each. Under agreement with producer, assessee is entitled to payment only on specified dates. He is entitled, however, to ask for guarantee for payment. If this guarantee is given not by any institution like LIC but private company there is nothing wrong in that. In case of life insurance policy which is subject-matter of Board's circular, etc., producer after payment of single premium washes his hand off affair and he is now where in picture. In present case, producer is very much in picture until last instalment is paid to assessee. It is only on his failure to make payments that guarantor has to pay to assessee. fact that guarantor returns proportionate part of money to producer for amounts paid by producer to assessee, does not alter position that this is mere guarantee contract. IAC has referred to point that if Balaji Film Finance & Distribution Co. (P.) Ltd. were to fail, assessee would have no remedy. In our view, this does not support case of benami. learned counsel for department was asked by us to produce even minimum of evidence to support its case of benami. Nothing other than reference to relationship is put up in this connection. We see nothing whereby assessee could have control or has any control over Balaji Film Finance & Distribution Co. (P.) Ltd. On evidence, therefore, it cannot be held that this company is benamidar of assessee. Naturally, amount received by it and merely as guarantor cannot be treated as income of assessee. We, therefore, uphold decision of Commissioner (Appeals) on this point. 10. assessee claimed sum of Rs. 6,33,979 as loss in distribution of film 'Jay Vijay'. facts of case are that assessee was artist in abovementioned film. distributor S. R. Bros. entered into agreement with producer Prasad Productions for distribution of film in territory of C. P. & Berar and C. I. Krishna Film Enterprises, family concern of assessee had entered into agreement with S. R. Bros. on 50 per cent partnership in distribution of said film. film was released on 11-11-1977 in Bombay and in other territories but since it did not click producer withdrew all prints. It was reshot with substantial changes and was re-released on 22-8-1978 in Bombay circuit. assessee entered into agreement on 15-11-1978 with S. R. Bros. for purchase of outright lease and exclusive rights of picture for C. P. & Berar territory for consideration of Rs. 7,65,000. Up to 31-3-1979, assessee realised amount of Rs. 1,75,724 out of which expenses to extent of Rs. 44,707 had to be incurred on account of publicity and commission. net loss of Rs. 6,33,979 was thus worked out. In fact, this loss was computed only because entire cost was claimed as deduction on basis of rule 9B of Income-tax Rules, 1962. IAC held that claim was not genuine, assessee was not distributor and, therefore, provisions of rule 9B would not apply to him. Secondly, he felt that assessee entered into this deal anticipating loss to wipe off his profit. 11. On appeal, Commissioner (Appeals) held that transaction was genuine and deleted addition. This is challenged in departmental appeal. 12. learned counsel for department has urged that assessee is not distributor. In fact, picture was known to be flop and even so he purchased picture. This was thus case of purchase of loss to set off his high income for year. For assessee, it is pointed out that this is normal transaction. Since assessee had interest in success of picture and there was nothing to show that after remake and re-release it would result in loss he ventured into distribution as such to secure his dues including professional fees. In subsequent year, in respect of same and other pictures even department has treated assessee as distributor. There has been income from this source for subsequent year also. There was no connection between assessee and any of other parties and there was no motive at all for assessee, therefore, to purchase loss at benefit to outsiders. 13. On consideration of facts, we see no reason to differ from decision of Commissioner (Appeals) on this point. After initial failure of picture it was re-released after substantial alterations and in respect of other areas, it would appear picture was sold out. assessee took out distribution rights for one particular area, namely, C. P. & Berar. loss has to be computed for year because of application of rule 9B where entire cost is claimed as deduction for picture released for exhibition for more than 90 days in year. As matter of fact, for assessment year 1980-81, this picture has fetched receipts of Rs. 2,67,318. entire distribution mechanism of this picture after assessee took over his claim to have been directed by assessee in his area. No evidence is available to show that this is bogus claim or inaccurate. As stated above, assessee directed distribution in area for subsequent year also netting high figure of receipts of nearly Rs. 3 lakhs. In face of these and other facts mentioned by Commissioner (Appeals), assessee's transaction has to be treated as normal business incident. As against his loss, in fact, assessee has taken credit for his professional fees from picture also. subsequent years result were also not bad. In fact, even in year 1983-84, receipts of Rs. 1,25,384 were received from picture. Commissioner (Appeals)'s order on this point is upheld. 14. departmental appeal is dismissed. Per Shri Y. R. Meena, Judicial Member - I have carefully gone through order passed by my learned brother. I agree with view taken by my learned brother regarding interest of Rs. 48,487 and loss of Rs. 6,33,979. However, unfortunately, I am unable to agree with view taken by him regarding deletion of addition of Rs. 4,93,000 made by IAC (Assessment) as unaccounted professional fees. 2. assessee is film artist. He entered into agreement with certain producers for professional service rendered by him. Out of four agreements entered into, one relating to Vijay Suresh Combine was through life insurance policy whereas agreements with three other parties, namely, M e g h Movies for picture 'Kinara', A. R. Productions for picture 'Karmayogi' and Modern Films for 'Priyatama' were not through LIC. copy of agreement is placed at page 18 of assessee's compilation. This tripartite agreement is between assessee, producers and Balaji Film Finance & Distribution Co. (P.) Ltd. said Balaji Film Finance & Distribution Co. (P.) Ltd. i s constituted by three shareholder, namely, assessee's brother-in-law and t w o of his uncles, having only equity capital of Rs. 7,500. Under agreement, producers have deposited Rs. 95,000, Rs. 1,98,000 and Rs. 2 lakhs, respectively, with guarantor, Balaji Film Finance & Distribution Co. (P.) Ltd. Under tripartite agreement, this company has given guarantee that producer shall pay Rs. 16,000, Rs. 32,000 and Rs. 32,000, respectively, in 10,15 and 15 instalments. In case of default by producers, Balaji Film Finance & Distribution Co. (P.) Ltd. had to pay stipulated instalments to assessee. In its turn, this Balaji Film Finance & Distribution Co. (P.) Ltd. has not taken any annuity policy for assessee but has invested amount in taking out some lease in cinema theatres in Bombay and further part of that deposit was advanced as loan to relatives of assessee. At time of assessment, ITO has taken said agreement as bogus for following reasons: "(i) assessee for past many years get remuneration through media of annuity policies so that it can be easily inferred that he is fully aware of rules and regulations, practice and procedures relating to its exemption from taxation. (ii) important feature of Board's exemption policy is that concerned annuity policy embodies that neither was surrender value thereof nor were annuities payable thereunder commutable. Thus, underlying idea is that lump sum payment made by producer must lie in coffers of Government. (iii) Balaji Film Finance & Distribution Co. (P.) Ltd. has not taken out any annuity policy for deferred payment to assessee for which purpose alone producer provided necessary funds. producers made over full payment in accordance with terms of contract with assessee and, therefore, one wonders at three clauses of guarantee agreement reproduced above. Thus, operative clauses seem to vitiate whole arrangement as also claim made by assessee for exemption in terms of Board's instruction. (iv) assessee's guarantors received lump sum payments from producers and as shown above funds have been used away in various investments and advances for purpose of making income. And this is surely against spirit of Board's instruction relied upon by assessee for exemption of sum in question. (v) Balaji Film Finance & Distribution Co. (P.) Ltd. seems to be floated solely for purpose of standing guarantors for assessee alone as it has not secured nor endeavoured either to secure or transact any guarantee business or some such business for any other producer or artist. (vi) What will happen if Balaji Film Finance & Distribution Co. (P.) Ltd. goes into voluntary liquidation for any reason - good or bad or artificial? And then how will assessee gets his dues especially so when guarantors have used away monies received from producers. assessee is not in position to explain as to how he benefits or secures himself in better way new arrangement vis-a-vis guarantee scheme." According to IAC, producers have made due payment to assessee by arrangement as fixed up by assessee and that for all purposes, such receipts would only be assessee's receipts from professions. He, therefore, added amount of Rs. 4,93,000 to income of assessee for year under consideration. 3. Being aggrieved, assessee carried matter in appeal to Commissioner (Appeals). According to him, it cannot be held that Balaji Film Finance & Distribution Co. (P.) Ltd. is bogus or dummy or benamidar of assessee. Considering agreement in question as genuine, he deleted addition so made by assessing authority. 4. In appeal by revenue before Tribunal, on behalf of assessee-respondent, it was argued by Shri D. M. Harish that agreement in question is similar to annuity policy being issued by LIC. According to him, since payments made by producers to Balaji Film Finance & Distribution Co. (P.) Ltd. were under such agreement, same cannot be treated as income of assessee. He also explained as to how said deposits to Balaji Film Finance & Distribution Co. (P.) Ltd. were invested. 5. I agree with Shri Harish that there was agreement between three parties, producers, assessee and Balaji Film Finance & Distribution Co. (P.) Ltd. Under agreements, producers were supposed to deposit some amount with Balaji Film Finance & Distribution Co. (P.) Ltd. for work assigned to assessee in their respective films. But, at same time, one cannot ignore legal principles that mere agreement is not enough to decide rights. Sometime in view of facts and circumstances related to particular issue, it has to be seen as to what is real intention of parties or whether there is any collusion to avoid tax. In this case, it is claimed that producers have made deposits with Balaji Film Finance & Distribution Co. (P.) Ltd. shareholders of this company, as mentioned earlier, are closely related with assessee. It means, when payment which is due to assessee for his performance in respective films is made by producers to Balaji Film Finance & Distribution Co. (P.) Ltd., it is payment in effect made to assessee's brother-in-law and uncles. Admittedly, this Balaji film Finance & Distribution Co. (P.) Ltd. has no other business except its entering into agreements with producers to take guarantee for payments to be made by producers to assessee. It was argument of Shri Harish that as film artist has very short period, for earning in film line, so for future safety he entered into these agreements. question was put by Bench as to why instead of LIC assessee Rs. 7,500 as capital with it, and how amount (deposits) would be more safe with this company which has no other business activities except agreement in question. To this, Shri Harish replied that as share-holders of said company are close relatives of assessee, money was safe. This explanation is not satisfactory. In fact, money would be fore safe to assessee when it could be taken straightaway by assessee from producers. So far as guarantee given by said company, I do not understand as to why said company has given guarantee for payments to be made by various producers to assessee, in normal course company should give some guarantee for assessee for performance and not give guarantee for producers for payment. When agreements are with close relatives and which is likely to result in evasion of tax, same have to be considered with due care, especially with regard to intentions of parties. In my view, mere formality of entering into agreement is not enough to accept same. question may arise that assessing authority has not brought any material on record to disbelieve genuineness of agreement. However, in case like this, it cannot be expected that parties will come to assessing authority and inform that they would enter into bogus agreements. Therefore, point left to assessing authority is to find out ultimate intention behind such agreement taking into consideration relationship of parties, effect of agreement and ultimate result of agreement and purpose behind agreement. In present case, in case producers failed to pay instalments as agreed to, I do not think that assessee would file suit in Court of law against his brother-in-law and uncle who have hardly gained out of their agreement. In latest decision of Hon'ble Supreme Court in case of McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148, their Lordships have considered difference between concept of tax evasion and tax avoidance on basis of agreement. After considering whole issue, their Lordships have observed: "... English case at some length, only to show that in very country of its birth, principle of Westminster has given decent burial and in that very country, where phrase 'tax avoidance' had originated, judicial attitude towards tax avoidance has changed and smile, cynical or even affectionate though it might have been at one time, has now frozen into deep frown. courts are now concerning themselves not merely with genuineness of transaction, but with intended effect of it on fiscal purpose. No one can now get away with tax avoidance project with mere statement that there is nothing illegal about it." (p. 158) Their Lordship have further observed: "We think that time has come for us to depart from Westminster principle as emphatically as British Courts have done and to dissociate ourselves from observations of shah J. and similar observation made elsewhere. evil consequences of tax avoidance are manifold. First, there is substantial loss of much needed public revenue, particularly in welfare state like ours. Next, there is serious disturbance caused to economy of country by piling up of mountains of black money, directly causing inflation. Then there is 'the large hidden loss' to community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of best brains in country being involved in perpectual war waged between tax-avoider and his expert team of advisers, lawyers and accounts on one side and tax- gatherer and his perhaps not no skillful advisers on other side. Then again there is 'sense of injustice and inequality which tax avoidance arouses in breasts of those who are unwilling or unable to profit by it'. Last, but not least is ethics (to be precise, lack of it) of transferring burden of tax liability to shoulders of guideless, good citizens from those of 'artful dodgers' ....." (p. 160) And finally, their Lordships have observed: "It is neither fair nor desirable to expect Legislature to intervene and take care of every device and scheme to avoid taxation. It is up to Courts to take stock to determine nature of new and sophisticated legal devices to avoid tax and consider whether situation created by devices could be related to existing legisation with aid of 'emerging' techniques of interpretation as was done in Ramsay, Burma oil and Dawson, to expose devices for what they and to refuse to give judicial benediction." (p. 161) Hon'ble Mr. Justice Misra observed: "Tax planning may be legitimate provided it is within framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain belief that it is honourable to avoid payment of tax by resorting to dubious methods. It is obligation of every citizen to pay taxes honestly without resorting to subterfuges." (p. 171) Considering observations of their Lordship on issue in afore- said case and facts of case on hand, as discussed above, I am of opinion that intention behind agreement in question is to evade tax. Mere agreement with close relatives is not enough to accept that amount in question (Rs. 4,93,000) is not income of assessee. In fact, as point out by Hon'ble Supreme Court in aforesaid case, 'intended effect' of agreement is to be taken note of. As pointed out earlier, Balaji Film Finance & Distribution Co. (P.) Ltd. has not entered into such agreements with any one else and this is only solitary instance. In circumstance, when shareholders of said company are close relatives of assessee, amounts paid by producers of that company are nothing but income of assessee and agreement is just device payment of tax in hands of assessee. 6. agreement, copy of which is at pages 18 to 23 of assessee's compilation, says that producer will have to pay to assessee sum of Rs. 16,000 in each year commencing from 1984 to 1993. Clause 2(b) of agreement says that producer shall deposit sum of Rs. 95,000 with guarantor as and by way of security for due performance by producers. In clause 2(b) it is said that: "(b) If any instalment payable by producers to artists under clause 7/8 of said letter of Engagement becomes due and payable and if producers pay said amount or instalment to artists on due data then and in such event guarantors shall pay or refund to producers out of said deposit of Rs. 95,000 (Rupees Ninety-five thousand only) amount equal to 10 per cent of such deposit together With interest on such amount representing 10 per cent as aforesaid, at rate of 2 per cent annum." total payment supposed to be made by producers to assessee is Rs. 1,50,000. Assuming that producer refuses to pay after completion of Rs. 95,000 then why guarantor should suffer. In normal course of cases of agreement, either guarantor should be interested in producer, and take risk, pay off debt for producer but in this case this is not situation. Guarantor firm's partners are related to assessee. Hence, question arises as to why guarantor should pay for producer when guarantor is not related to producer. It is not understood as to why guarantor, Balaji Film Finance & Distribution Co. (P.) Ltd should suffer when it is not going to get anything out of this agreement except risk as aforesaid or negligible benefit as against risk. This clearly reveals that it is nothing but device to evade tax. Similar agreements are entered into with A. R. Productions and Modern Films. Therefore, considering contents of agreement, effect of agreement and relations of parties as also ultimate intention of parties, it is very much clear that it is for evading tax. 7. In view of aforesaid discussion, I hold that Commissioner (Appeals) was not justified in deleting addition of Rs. 4,93,000 made by IAC as unaccounted income of assessee for assessment year under consideration. Accordingly, order of Commissioner (Appeals) on point is reversed and that of IAC is restored. 8. In result, appeal by revenue is allowed in part. REFERENCE UNDER SECTION 255 (4) OF INCOME-TAX ACT, 1961 "Whether, on facts and in circumstances of case, Commissioner (Appeals) was justified in deleting addition of Rs. 4,93,000 made by assessing authority as unaccounted income of assessee from profession for year under consideration?" THIRD MEMBER ORDER Per Shri A. Krishnamurthy, Vice President - point for my consideration as Third Member in this reference under section 255(4) of Act is: "Whether, on facts and in circumstances of case, Commissioner (Appeals) was justified in deleting addition of Rs. 4,93,000 made by assessing authority as unaccounted income of assessee from profession for year under consideration?" 2. short facts giving rise to dispute on this point are as under: assessee is well known film artist. He entered into agreement with certain producers for rendering professional services. Under agreement assessee was to get in each case annuity of sum specified in agreement spread over number of years. Our of four such agreements, it was noticed that provision for payment of annuity under agreement with Vijay Suresh Combine, Madras, was secured through policy with LIC, but in regard to other three agreements, payment of annuities by producers were guaranteed by company, Balaji Film Finance & Distribution Co. (P.) Ltd. In case of Megha Movies, Bombay, producer agreed to pay assessee for his services in film 'Kinara' annuity of Rs. 16,000 for 10 years and paid Rs. 95,000 to Balaji Film Finance & Distribution Co. (P.) Ltd. as deposit in consideration of said company standing as guarantors for due performance by producer of obligation of paying annuity to assessee. Similarly, producer A. R. Production, Bombay, agreed to pay annuity of Rs. 32,000 for 15 years in respect of services of assessee in film 'Karmayogi' and paid to Balaji Film Finance & Distribution Co. (P.) Ltd., sum of Rs. 1,98,000 for their agreeing to stand as guarantors for due performance by producer of obligation of paying to assessee annuity agreed to by producer. producer Modern Films also similarly paid Balaji Film Finance & Distribution Co. (P.) Ltd. sum of Rs. 2 lakhs for their agreeing to stand as guarantors for due performance by producer of obligation and agreement with assessee to pay annuity of Rs. 32,000 per year for 15 years for service in film 'Priyatama'. 3. IAC, who passed order of assessment in this case, did not accept assessee's claim that in regard to remuneration agreed to be paid by three producers Megha Movies, A. R. Productions and Modern Films, nothing more than amount of annuity due in relevant year is chargeable to income-tax, and payment made by producers to Balaji Film Finance & Distribution Co. (P.) Ltd. for their guaranteeing due performance of producers' obligation under contract of service with assessee cannot be treated as remuneration paid to him for services rendered. According to IAC, assessee can claim exemption of producers payment on basis of Board's Instruction No. 1310 dated 26-2-1980 only where policy is purchased with LIC for payment of annuity incorporating and certain conditions and certain features as set out by him in his order are present. As in case of three features as set out by him in his order are present. As in case of three producers no policies whatsoever were taken to secure annuity payments on stipulated dates, and certain payments have been made by producers to private limited company as deposit for guaranteeing their due performance of annuity payments. exemption contemplated by Board's circular would not apply. In these circumstances, IAC treated aggregate of Rs. 4,93,000, payments made by three producers to Balaji Film Finance & Distribution Co. (P.) Ltd. as unaccounted receipts from profession of assessee for relevant year and included it in total income. 4. In appeal Commissioner (Appeals) deleted addition and, therefore, aggrieved by his order department had come up in appeal. 5. learned Senior Vice President (Accountant Member) had upheld order of Commissioner (Appeals) and according to learned Judicial Member Commissioner (Appeals) was not justified in deleting addition made by IAC as unaccounted income of assessee for assessment year under consideration. learned Senior Vice President found that issues that arose for consideration are: 1. whether there is anything irregular in payments made by producers on deferred annuity basis; 2. whether payments made to Balaji Film Finance & Distribution Co. (P.) Ltd. can be regarded as payment to assessee; and 3. whether Balaji Film Finance & Distribution Co. (P.) Ltd. are benami of assessee. He held that it is open to producer to make payment in cash or at stipulated period including future date and payment can be in one lump sum or in instalments. He also held that there is no evidence to support any finding that Balaji Film Finance & Distribution Co. (P.) Ltd. was benamidar of assessee so that payments made to that company can be regarded as payment made to assessee himself. On other hand, learned Judicial Member held that mere formality of entering into agreement will not decide issue and that one has to find out ultimate intention behind purpose of agreements taking into consideration relation between parties and effect of agreements. He held that in facts of this case intention behind agreements was to evade tax and having regard to principles stated in Supreme Court decision in case of McDowell & Co. Ltd. (supra) agreement was just device to avoid payment of tax in hands of assessee. He, therefore, held that deletion of Rs. 4,93,000 made by Commissioner (Appeals) which was added by IAC as unaccounted income of assessee, was not justified. It is in these circumstances point of difference has been referred under section 255(4) to me as Third Member. 6. At hearing before me, learned departmental representative kly relied on order of IAC (Assessment). Particularly he referred to conditions of Board's circular for claiming exemption in respect of amounts paid under annuity on basis of policy taken out with LIC set out in order of IAC. He kly relied also on order of learned Judicial Member and contended that entire thing is device adopted by assessee for purpose of avoiding tax, in view of principles stated by Supreme Court in its decision in McDowell & Co. Ltd.'s case (supra). He laid particular stress on observations of Supreme Court at p. 160. He also referred to Supreme Court decision in case of Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1986] 157 ITR 77 and head-notes at page 78. He further submitted that in any view of matter receipt by Balaji Film Finance & Distribution Co. (P.) Ltd. of all payments made to them by three producers must be regarded as receipts by assessee and amount of such payment should be added to his income. He further pointed out that though assessee's contention has been accepted by Commissioner (Appeals) for this year, decision of Commissioner (Appeals) for subsequent year 1981-82 has gone against assessee. 7. learned counsel for assessee took as through relevant agreements in this connection. Taking for instance agreement for agreements in this connection. Taking for instance agreement for producer Megha Movies dated 25-8-1973 appointing assessee as leading male artist in picture 'Kinara', it is pointed out that consideration for services rendered by assessee was payment made up of initial payment of R s . 25,000 during production of picture and annual payment of Rs. 16,000 each in years 1984 to 1993 aggregating only to Rs. 1,85,000. It is further pointed out that under this agreement amounts stipulated to be paid shall accrue or become due to assessee only on due dates in years specified and time for payment for each instalment shall be essence of contract. It is further undertaken by producer in this appointment letter that as and by way of security for due payment of remuneration stipulated they undertook to provide or procure guarantee of nationalised bank, recognised insurance company or any other institutions or limited company acceptable to assessee in such form as he may require. It is further stipulated that under said guarantee assessee shall have right to receive amount on due dates and guarantee should be irrevocable. It is submitted that this is normal and genuine contract and stipulation for annual payments is necessitated by fact that film artist's active life is limited and there should be provision for continued income during his lifetime. It is also further stated that there is absolutely no relationship between produced and artist. 8. Similarly, in case of other producer A. R. Productions, total amount payable for assessee's services in film 'Karmayogi' is Rs. 5,55,000 made up of initial payment during production of picture of Rs. 75,000 and annual payment of Rs. 32,000 commencing from year 1989 and ending with 2003. 9. Similarly, in case of A. R. Productions also there is undertaking to provide guarantee of nationalised bank, insurance company or in any other manner acceptable to assessee in such form as assessee may require. It was stated that part of remuneration was to be paid during production according to custom of trade and balance in instalments. It was further stated that there is no question of applying principle of decision of Supreme Court in case of McDowell & Co. Ltd. (supra), because agreements between producers and assessee are genuine agreements f o r mutual benefit and it cannot be regarded as any device. It was further submitted that there is nothing wrong in guarantee agreement also, because even banks provide guarantees on margin money to be paid to bank and simply because in this case it is not bank but private limited company that is no reason why agreement cannot be regarded as genuine but device. learned counsel took us through tripartite agreement entered into by producer Megha Movies, assessee and Balaji Film Finance & Distribution Co. (P.) Ltd. dated 3-11-1977 and pointed out that producer had paid guarantor company only sum of Rs. 95,000 by way of deposit against guarantee of payment of 10 instalments of Rs. 16,000. It is further pointed out that under clause of this agreement clause 2(b) if any instalments payable by producers to artists becomes due and payable on due date and if producers pay said amount of instalments to artist on due date then in such event guarantors shall pay or refund to producers out of said deposit of Rs. 95,000 amount equal to 10 per cent thereof together with interest on such amount representing 10 per cent as aforesaid at rate of 2 per cent per annum. He, therefore, contended that agreement was bona fide commercial agreement and there is nothing to show that it was device. He then pointed out that even assuming that payment made by producers by way of deposit to Balaji Film Finance & Distribution Co. (P.) Ltd. must be regarded as payment made to assessee on ground that company is benami, amount that could be so included in year in only Rs. 75,000 out of Rs. 4,93,000 and in any case, therefore, amount of addition even if it is to be sustained cannot exceed Rs. 75,000. It is pointed out that assessee's system of accounting is case and, therefore, unless assessee received amount, no addition can be made. 10. learned counsel for assessee also submitted that Balaji Film Finance & Distribution Co. (P.) Ltd. could not be regarded as benami of assessee only because one of its directors and shareholders is brother-in- law of assessee. It is pointed out that said director Shri Romesh G. Sippy is man with his own resources and business activities. In this connection, he drew our attention to details of concerns and immovable properties in which Shri Romesh G. Sippy has interest or investments set out on page 93 of one of paper books filed on behalf of assessee in this appeal. It is further pointed out that there has been no examination of Shri Sippy in this connection with view to examine him whether he was benamidar of assessee, nor has assessee been given opportunity to disabuse departmental authorities of any suspicion harboured by them in this connection. Apart from fact that one of directors of Balaji Film Finance & Distribution Co. (P.) Ltd., i.e., brother-in-law, who, it was pointed out, had substantial resources of his own, there is no other material to justify finding that Balaji Film Finance & Distribution Co. (P.) Ltd. itself was benamidar of assessee. It is submitted that principles of McDowell & Co. Ltd.'s case (supra) decision cannot be held to be applicable to facts in this case and that decision cannot be used as handle to harass taxpayers. Our attention was also drawn to fact that Balaji Film Finance & Distribution Co. (P.) Ltd. was itself engaged in other profitable investments or activities such as taking leases of theatres in partnership with Rajshree group. Copies of assessment orders of said Balaji Film Finance & Distribution Co. (P.) Ltd. for assessment year 1979-80 and other years, which have been furnished, are relied upon. 11. learned departmental representative referred to agreements and pointed out that aspects relating to agreement and how they have been used as media have been considered and discussed elaborately in order of Judicial Member. It was further submitted that it is not department's claim that transactions are bogus but that entire thing is device adopted by assessee for avoidance of tax, which has been deprecated in decision of Supreme Court in McDowell & Co. Ltd.'s case (supra). 12. On consideration of relevant facts and submissions of parties, I agree with learned Vice President (Accountant Member) that Commissioner (Appeals) was justified in deleting addition of Rs. 4,93,000 made by assessing authority as unaccounted income of assessee from profession for year under consideration. In my view learned Vice President has rightly posed issues which arose for consideration, viz., (i) whether there is anything irregular in payments agreed to be made by whether there is anything irregular in payments agreed to be made by producers on deferred annuity basis; (ii) whether payments made to Balaji Film Finance & Distribution Co. (P.) Ltd., can be regarded as payments to assessee; and (iii) whether Balaji Film Finance & Distribution Co. (P.) Ltd. are benamidars of assessee. It is entirely matter left to parties to decide how one of them will remunerate other for latter's service to be rendered to former and certainly parties are entitled to enter into agreement mutually beneficial to them. claim on behalf of assessee that in order to ensure steady and continued income over period of his life, as active life of artist is limited, cannot be brushed aside as unreasonable or as excuse because there is considerable truth in it. If, therefore, artist agrees to take remuneration for his services by way of annuities becoming due on stipulated dates or years, there is nothing wrong or suspicious in such agreement. agreement also works out to advantage of producer, for, he has not to part with immediately entire remuneration agreed for services rendered by artist. agreement in present case is perfectly legitimate one and there is nothing illegal or opposed to public policy in it. That being case and matter being entirely one for parties to decide to their mutual advantage, it is not open to income-tax authorities to rewrite agreement which they would like from point of view of tax. Similarly, in regard to agreement between producer and artist for payment of annuities agreed to be made, how obligation of producer should be ensured or secured is matter between parties and if artist agrees to guarantee given by private party or limited company or any institution not necessarily life insurance company, I fail to see how it is open to Income-tax Department to dictate that it should be done through life insurance policy and not otherwise. After all, assessee as artist is vitally interested in getting annuities agreed to be paid and if he is satisfied with guarantee by person other than LIC under policy, I cannot see how Income-tax Department can say that it should be done through life insurance policy with LIC. I, therefore, agree with learned Vice President that there is nothing irregular in payments agreed to be made by producers on deferred annuity basis. 13. As regards question whether payment made to Balaji Film Finance & Distribution Co. (P.) Ltd., should be regarded as payment made to assessee, here also I fail to see how payment made to Balaji Film Finance & Distribution Co. (P.) Ltd. can be regarded as payment made to assessee. evidence and material brought on record clearly show that payment received by Balaji Film Finance & Distribution Co. (P.) Ltd. has not been held by it for and on behalf of assessee but only as consideration for guaranteeing annual payments agreed to be made by producer and fact that whenever instalment is paid part of it is returned back to producer shows that payment is held by it, if at all temporarily, to be returned to producer as and when annual payments are made. facts highlighted by counsel for assessee concerning relationship of one of directors of assessee and such person's own resources and business activity clearly support assessee's claim that said Balaji Film Finance & Distribution Co. (P.) Ltd. has ultimately been passed on to assessee. assessing officer has gone by surmises and suspicions without any concrete material brought on record. Much store has been set by Supreme Court decision in McDowell & Co. Ltd.'s case (supra). I do not see how observations in McDowell & Co. Ltd.' case (supra) can be called in aid to support claim of department. principle concerning tax avoidance, as I understand from decision of McDowell & Co. Ltd.' case (supra) and decisions referred to therein is that person cannot be allowed to avoid legitimate levy of tax which is due by merely adopting device to conceal true character of transaction and substance of matter. But it does not mean that person cannot arrange to have regular income from year to year instead of windfall in one or two years. It is not doubt true that if entire remuneration had been paid to assessee and it is accepted by him in year in which services are rendered, higher rate of tax will be levied on such larger amount of income with consequent increase in tax liability and if by some means or method he avoids such tax although in enjoyment of entire income, then undoubtedly principle of McDowell & Co. Ltd.'s case (supra) would come into play. But whereby arrangement assessee secures for himself steady and regular income from year to year instead of lump sum payment and agrees to pay legitimate tax on actual income due and received by him from year to year, what he avoids is not tax but larger amount of income accruing or arising to him in one or two years. 14. Before concluding, it is also found, as pointed out by assessee's learned counsel, that payment made by producers by way of deposit with Balaji Film Finance & Distribution Co. (P.) Ltd. in concerned year is only Rs. 75,000 out of Rs. 4,93,000. In any case, therefore, even if any amount is liable to be included in respect of payments made to Balaji Film Finance & Distribution Co. (P.) Ltd., it cannot exceed Rs. 75,000. 15. Another aspect that may be considered in this connection is that though circular of Board is concerned with annuity secured by insurance policy, question was examined in consultation Ministry of Law and legal advice secured by it was that where film artist follows cash system of accounting for professional income and is paid remuneration wholly or partly through annuity policy or policies as per agreement, he can be taxed only on particular amount of annuity as is paid in year. features stated in circular are substantially present in case of assessee except that annuity contemplated therein is through annuity policies of LIC, but I do not think that makes any distinction in principle. In circumstances, I agree with learned Vice President (Accountant Member) and hold that addition of Rs. 4,93,000 made by assessing authority as unaccounted income of assessee from profession for year under consideration is not justified and, should, accordingly, be deleted. 16. case will not go to Bench which heard appeal for disposal under section 255(4). *** INSPECTING ASSISTANT COMMISSIONER (ASST.) v. JEETENDRA KAPOOR