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2024 (2) TMI 1194 - AT - Income TaxKey man insurance policy - Taxability of the sums received on maturity of life insurance policy - Assessee claimed it as exempt income - AO did not accept the contention of the assessee and treated the sum as taxable u/s 28(vi) of the Act, treating the proceeds under Keyman Insurance policy - Assessee submitted that it was contended before the AO that the maturity proceeds were received in AY 2016-17. The insurance policy was under Keyman Insurance policy taken by M/s. Pratap Parikh Associates, a proprietorship concern in which the assessee was a Keyman. The proprietorship concern was dissolved and the assessee purchased the Keyman Insurance policy from M/s. Pratap Parikh Associates on 22.11.2008 after paying a surrender value. Thus, the assessee rightly claimed the amount as exempt u/s 10(10D) of the Act as a character of policy had changed wayback in the year 2008. HELD THAT:- We find some merit in the contention of the assessee that if the policy is transferred before its maturity then it would lose its character. As decided in Rajan Nanda [2011 (12) TMI 392 - DELHI HIGH COURT] as held that we have to bear in mind that law permits such an assignment even LIC accepted the assignment and the same is permissible. There is no prohibition as to the assignment or conversion under the Act. Once there is an assignment, it leads to conversion and the character of policy changes. The insurance company has itself clarified that on assignment, it does not remain a keyman policy and gets converted into an ordinary policy. In these circumstances, it is not open to the Revenue to still allege that the policy in question is keyman policy and when it matures, the advantage drawn therefrom is taxable. One has to keep in mind on maturity, it does not the company but who is an individual getting the matured value of the insurance. No doubt, the parties here, viz., the company as well as the individual taken huge benefit of these provisions, but it cannot be treated as the case of tax evasion. It is a case of arranging the affairs in such a manner as to avail the state exemption as provided in Section 10(10D) of the Act. Law is clear. Benefit inured owing to the combined effect of a prudent investment and statutory exemption provided under Section 10(10D) of the Act, the section does not envisage of any bifurcation in the amount received on maturity on any basis whatsoever. Nothing can be read in Section 10(10D) of the Act, which is not specifically provided because any attempt in that behalf as contended by Revenue would be tantamount to legislation and not interpretation. We are of the considered view that the authorities below were not justified in denying the benefit of exemption to the assessee. We hold accordingly. The AO is directed to delete the addition. Appeal of assessee allowed.
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