1986 (11) TMI 35 - HC - Income Tax

Summary

Issues:
1. Inclusion of insurance money in the estate left by the deceased.
2. Treatment of insurance money as a separate estate under section 34(3) of the Estate Duty Act.

Analysis:
1. The case involved the question of whether the insurance money received by the widow of the deceased should be included in the principal value of the estate left by the deceased. The deceased had an accident-cum-life insurance policy, and the widow received Rs. 1 lakh as insurance money after his death. The accountable person argued that this amount should not be included in the estate as it did not exist during the deceased's lifetime. The Appellate Tribunal held that the amount was liable to be included as it passed on to the widow and other representatives, and was dutiable under the Estate Duty Act.

2. The accountable person also contended that the insurance money should be treated as a separate estate under section 34(3) of the Estate Duty Act. However, the Tribunal rejected this argument, stating that the deceased had a right to property under the policy, which could have been disposed of by will, and therefore, it passed on his death under the Act. The Tribunal held that the deceased's beneficial interest in the insurance money passed to the accountable person and others, making it part of the estate.

3. The Supreme Court's decision in a similar case emphasized that the insurance amount only became property upon the happening of the contingency, i.e., the death of the insured in an accident. The Court held that the deceased was not competent to dispose of the insurance money, and it did not pass on his death. The Court distinguished between accident insurance policies and life insurance policies, stating that the former could not be construed as movable property under the Estate Duty Act.

4. Ultimately, the High Court answered the first question in favor of the accountable person, stating that the insurance money should not be included in the estate. However, the second question regarding the treatment of the insurance money as a separate estate was answered in favor of the Revenue, affirming that the sum received under the policy was an estate separate from the deceased's other assets and could not be aggregated with them. The accountable person was awarded costs for the reference.