SUBBULAKSHMI M S Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference under section 66(1) of the Indian Income -tax Act, the Income -tax Appellate Tribunal has referred the following questions for our decision 1. Whether the trust deed dated 9th May, 1946, is covered by the provisions of section 16(1)(c) of the Act and the income received from Messrs. Narayanan & Co. was not includible in that of the assessee ?

(2.) WHETHER the document dated 9th May, 1946, in respect of the royalties from the Gramophone Co., Ltd., is covered by the provisions of section 16(1)(c) and the income received therefrom was not includible in that of the assessee ? The questions however as drawn up do not bring out the actual controversy between the assessee and the department as will be seen from our discussion of the points involved in assessment The assessee, Srimathi M. S. Subbulakshmi, is a musician and cinema actress in South India. This reference is concerned with the assessment of this assessee for four years from assessment years 1946 -47 to 1949 -50. She acted the title role in a motion picture called "Meera". This film was produced by a concern by name Chandra Prabha Cinetone of which her husband Sri Sadasivam was the sole proprietor. On 11th September, 1943, an agreement was concluded between the assessee and her husband, the latter as the proprietor of Chandra Prabha Cinetone, under the terms of which the assessee agreed to play the part of the title role in that film. This agreement is appended to the statement of the case and marked annexure A. Under clause 4 thereof Chandra Prabha Cinetone (who was termed "the producer") reserved the right to grant to any gramophone company records of the songs of the assessee recorded in the film but this was to be without prejudice to the royalty rights of the assessee in these songs. It was expressly provided that the assessee's royalty shall belong exclusively to her and she was entitled to stipulate her own terms with the gramophone company separately for the payment to her of such royalties. For her services by way of acting etc., her remuneration was provided by clause (5) of the agreement whereunder she was allotted the distribution and exploitation rights of the picture in the districts of Madura, Ramnad, Pudukottah State and Tirunelveli "with all the revenue accruing therefrom but limited to a period of 10 years from the date of the first release of the said film." The value of this right was estimated at Rupees one lakh and fifty thousand and this amount was to be in the form set out above. The production of the picture was then proceeded with and the film itself was released on 3rd November, 1945. Before this date however the assessee entered into an agreement with a firm of distributors by name Narayanan & Co. This agreement forms annexure B to the statement of the case by the Tribunal. The main terms of this agreement were three in number. First, the distributor was given the right to exploit the picture for a period of four years from the date of the first release in the territories assigned to the assessee. It will be seen that the effect of this was that the assessee had carved out of the ten year term which she had obtained under the agreement dated 11th September, 1943, a four year term in favour of the distributor. (2) During this period the distributor was to exploit the picture in these territories retaining for himself a distribution commission at 12 1/2 per cent. on the picture share realisations and was to pay over the rest to the assessee. The distributor also guaranteed the assessee that the picture realisations would amount at least to Rupees two lakhs, and (3) he made an immediate advance to the assessee of a sum of Rs. 75, 000, the distributor being entitled of course to adjust this advance from and out of the amount payable to the assessee when the realisations started comingOn the same date as this agreement the assessee's husband as the proprietor of Chandra Prabha Cinetone also entered into a distribution agreement with Messrs. Narayannan & Co., the terms of which were nearly similar, but the advance which he received was Rs. 1, 25, 000. Though this agreement by Sri Sadasivam has been referred to by the Tribunal and by the tax authorities, in our opinion it has really no relevance to the questions arising for decision in the assessee's assessment proceedings

(3.) THERE were other provisions among which the only ones that need mention are clauses 17 and 19, the former providing that "the properties of the trust shall vest in the trustees for the time being in office" and