Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2020 (12) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (12) TMI 232 - HC - Income TaxExemption u/s 10(10D) - addition of the surrender value of the assigned keyman insurance policy as income of the appellant - Whether Tribunal is correct in law in not taking notice of the amendment introduced by the Finance Act, 2013, to include the assigned policies also within the ambit of keyman insurance policy for the purpose of taxation with effect from 01.04.2014 which clearly go to prove that the surrender value of the assigned keyman insurance policy was not taxable up to 31.03.2014? - HELD THAT:- In the present facts, the Keyman Insurance Policy was taken out by the Company and was assigned in favour of the Managing Director on 31.03.2006. To the extent of surrender value accrued as on 31.03.2006, namely ₹ 58,74,752/-, was offered for taxation as "perquisite" in the hands of the Assessee. The character of Insurance Policies does not change after assignment. The Assessee himself has never paid any premium on the said Keyman Insurance Policy from his own resources. Therefore, even if the assignment is endorsed by the Insurance Company as on 31.03.2006, the character of the Policy does not convert into an ordinary Life Insurance Policy in the hands of the Assessee. The Keyman Insurance Policy is a Life Insurance Policy taken by the employer company in favour of its employee Managing Director. Its character continues to be the same. In RAJAN NANDA AND NARESH KUMAR TREHAN [2011 (12) TMI 392 - DELHI HIGH COURT] clearly expresses that the character of the Insurance Policy gets converted into an ordinary policy. Because Section 10(10D) of the Act does not make any such distinction, it cannot be said to be a case of tax evasion, but rather a case of tax planning, even if huge benefit of these provisions are taken by both company as well as individual. It is this caveat, along with the pronouncement of Delhi High Court, led to the insertion of aforesaid Explanation 1 to Section 10(10D) of the Act and therefore, after such amendment, which in our opinion applies retrospectively to all the previous years, including the Assessment Year 2007-08 in the present case - the reliance placed by the learned counsel for the Assessee of Delhi High Court decision is misplaced and cannot enure to the benefit of the Assessee. On the basis of Section 10(10D) of the Act, with its Explanation 1, the clear position of law which emerges is that the character of the Keyman Insurance Policy does not get converted into ordinary Life Insurance Policy despite its assignment and therefore, any benefit accruing to the employee upon its surrender or encashment will be taxable in the hands of the Employee as "perquisite". Appeal filed by the Assessee, therefore, deserves to be dismissed
|