THE HON'BLE SRI JUSTICE V.V.S. RAO AND THE HON'BLE SRI JUSTICE B.N. RAO NALLA REFERENCE CASE No.277 OF 1996 ORDER: (Per Hon’ble Sri Justice V.V.S. Rao) The Income Tax Appellate Tribunal, Hyderabad Bench ‘B’, Hyderabad, referred the following question under Section 27(1) of the Wealth Tax Act, 1957 (the Act) for opinion of this Court. “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the value of the right or interest of the assessee in the Annuity Policies under consideration in these cases for the purpose of section 5(1)(vi) of the W.T. Act is equivalent to the discounted value of the total future annuities i.e. annuities due and payable on dates beyond the relevant valuation dates?” The brief background of the case is as follows. The petitioner/assessee is a cine artist. The producers of movies, who engage the assessee services, purchased life insurance deferred annuity policies for the assessment years 1975-76, 1977-78 to 1981-82. The assessee did not show the installments payable by Life Insurance Corporation of India under these policies. According to him, he had no right, title or claims much less an enforceable right to these amounts as on the valuation date relevant to the respective assessment years. The assessing oﬃcer rejected the claim. The appellate Tribunal, however, relying on the decision of the Supreme Court in C.W.T. v. Yuvraj Amrinder Singh [1] remanded the matter to the assessing oﬃcer. After remand, the assessing oﬃcer, applied Section 5(1)(vi) of the Act and allowed exemption to the extent of 1/10th of the cross- annuities receivable in future, treating the annuity policies as LIC policies while rejecting the contention of the assessee not to subject the deferred annuities to wealth-tax. The Appellate Commissioner partly allowed the appeals to the extent of agreeing with the assessee to take discounted value of the amount duly giving discount of 11% per annum. On further appeal by the assessee, the Income Tax Appellate Tribunal followed its earlier decision in WTA Nos.42 to 44 of 1991 dated 24-11-1993 (the case of Sri N.T. Rama Rao) and dismissed the appeals for the assessment years 1976-77 and partly allowed the other appeals pertaining to other assessment years by applying the discount factor of 15% instead of 11%. Aggrieved, the assessee sought this reference of two questions, but the Tribunal referred the question as noticed hereinabove. During the course of the arguments, the counsel for the revenue and the counsel for the assessee brought to the notice of this Court, the decision of this Court in C.W.T. v. N.T. Rama Rao (Decd.)[2], wherein it was held. The Commissioner found that in this case the premium was paid in a lump sum at a time and as such the amount of the value of interest or right in policy which is exempt, is only one tenth of the total value of the policy but not the total value of the policy as such. The Wealth-tax Oﬃcer has granted exemption in respect of the entire value of the policy which, in the opinion of the Commissioner, is not in accordance with law. The view taken by the Commissioner that after the insertion of clause in section 2(e)(2)(ii) of the Act and insertion of the proviso under clause (vi) of section 5(1) with eﬀect from April 1, 1975, the exemption in respect of annuities will be available only to the extent explained in the proviso to section 5(1)(vi) of the Act irrespective of the date on which the policies are taken or annuity contracts are entered into, is correct. The decision of the Commissioner that the proviso to section 5(1)(vi) of the Act would come into play and at the best the assessee would be entitled to only one tenth of the total value of the policies but not to the full extent of the policies for the reason that the annuity policies were for less than ten years, in our considered opinion, is absolutely correct. The order of this Court in N.T. Rama Rao v Commissioner of Income-Tax (R.C. No.97 of 1995 dated 17.03.2006) is also brought to our notice. In the said case, this Court considered the same question as is referred for our consideration in this case and answered the reference in favour of the revenue and against the assessee. Accordingly, the reference is answered in favour of the revenue and against the assessee. The Reference Case shall stand disposed of accordingly. ________________ (V.V.S. RAO, J) _____________________ (B.N. RAO NALLA, J) November 29, 2011. PV [1] (1985) 156 IT R 525 [2] (2003) 261 IT R 611