TMI Blog1999 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1975-76, relevant to the previous year ending with March 31, 1975. An income of Rs. 25,80,800 had been returned in the assessment year 1975-76 from sale of the Telugu version. In 1976-77, the assessee had shown an income of Rs. 45,000 from the sale of the Malayalam version and for the assessment year 1977-78 an income of Rs. 45,000 was shown from the sale of the Tamil version. The Commissioner of Income-tax came to the conclusion that the assessee who had followed the mercantile system in respect of similar transaction for the previous years, had switched over to the cash system in respect of the Tamil and Malayalam dubbing rights alone. He also found that such method of accounting was not permissible and accordingly included the income from the agreements relating to dubbing rights of Tamil and Malayalam entered into in the year 1975-76. Accordingly, the Commissioner of Income-tax set aside the assessment order under section 263 of the Act and included a sum of Rs. 1,05,000 arising out of the agreements relating to the Tamil and Malayalam dubbing rights during the abovesaid assessment year and completed the assessment. Aggrieved by the abovesaid order of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and that the income accrued by virtue of the abovesaid contract cannot be treated as income during the assessment year 1975-76. On the other hand, the Revenue resisted the claim made by the assessee on, the ground that the income had accrued in the previous year and, therefore, the assessee is liable to be assessed during the assessment year 1975-76. We have considered the rival submissions made by the assessee as well as the Revenue. The fact remains that the assessee had leased out the dubbing rights of its abovesaid picture for Tamil and Malayalam to Jay Films and Cine Link Service by agreements dated May 25, 1974, and August 27, 1974, respectively. It is equally not in dispute that the assessee had shown an income of Rs. 25,80,000 in the return presented by the assessee for the relevant assessment year regarding the stile of Telugu version of the abovesaid picture. A perusal of the agreement dated August 27, 1974, by Sri Lakshminarayana Films, represented by its partner, Sri N. S. Moorthi, with Jay Films, represented by its managing partner, Sri A. T. Abraham, would disclose that Jay Films had agreed to pay royalty of Rs. 45,000 for acquiring Malayalam dubbing rights of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket, but the act stipulated for exhausts the consideration, so that any subsequent promise, without further consideration, is merely a nudum pactum. In an executed consideration the liability is outstanding on one side only; it is a present as opposed to a future consideration. In an executory consideration the liability is outstanding on both sides. It is in-fact a promise for a promise, one promise is bought by the other. The contract is concluded as soon as the promises are exchanged. In mercantile contracts this is by the most common variety. In otherwords, a contract becomes binding on the exchange of valid promises, one being the consideration for the other. It is clear, therefore, that there is nothing to prevent. one of the parties from carrying out his promise at once, i.e., performing his part of the contract whereas the other party who provides the consideration for the act of or detriment to the first may not carry out his part of the bargain simultaneously with the first party." If the principles laid down in the case cited above are taken into consideration in the light of the facts discussed above, so far as the dubbing rights of the abovesaid picture in Malayalam, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em on March 31 of every year. On December 1, 1943, S company assigned to A their office as managing agents and all their rights and benefits under the managing agency agreement and the consideration received by them was transferred by them to the capital reserve account. The accounts of the managing agency commission payable to the managing agents for the calendar year 1943 were made up in 1944 and paid to A in 1944. The question was whether in the assessment year 1944-45 A was liable to pay tax on the accrual basis on the whole of the commission or whether the tax was payable by A and the S company on proper apportionment being made between them of the amount received by A. In the circumstances stated supra, it was held by the apex court that the managing agency commission was not liable to apportionment between the S company and A in the proportion of the services rendered as managing agents by each one of them but A was liable to pay tax on the whole commission. It is evident from the case cited above that the commission payable for the service rendered in the calendar year 1943, was paid in the year 1944 and the same was held to be assessable during the assessment year 1944-45. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement. The above clause clearly gives an indication that if the delivery contract is fulfilled in the manner indicated in clause 1 of the agreement, the assessee had the right to receive the money and there was no right to receive the money on the date of execution of the agreement. Though the payment depends upon the delivery of Tamil prints in Tamil Nadu or the release of the said Tamil dubbing version in Ceylon and other overseas countries, the agreement also stipulates that the payment should be made on or before a particular date whichever is earlier. Let us visualise the case of the assessee delivering the Tamil prints and on that date, the right in favour of the assessee to receive the payment would accrue and before delivery of the Tamil prints, if he seeks the right for payment of money in a court of law, he would have no claim. Similarly, if he enforces his right for payment before. March 31, 1977, without delivery of prints, he would be non-suited. Therefore, the agreement contemplates the performance on the part of the assessee and unless the assessee performs its part of the obligation stipulated in the agreement, the assessee had no right to receive the am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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