TMI Blog1963 (9) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... premium payable in respect of the said policy was ₹ 1,925 per annum. That amount was paid as premium out of the taxable income of the assessee. In the course of the assessment for the assessment year 1960-1961, the assessee claimed rebate on the said insurance premium of ₹ 1,925, grounding his claim under the provisions of section 15(1) of the Act. The Income-tax Officer rejected the claim upon the ground that under the said policy the life of the minor assessee had not been assured. The Assistant Commissioner, who agreed with the Income-tax Officer, also held that the sum for which the life had been assured did not become payable if death should occur before the assessee attained majority and, therefore, it could not be held that the sums paid by the assessee through his guardian till he attained majority, were paid to effect an insurance on the life of the assessee. The assessee took the case in appeal before the Tribunal and the Tribunal, agreeing with the conclusion of the department authorities, also rejected the claim of the assessee, observing as follows: The terms of the contract, in our opinion, indicate that covering of the risk commences only on the att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neys payable in terms of these provisions shall become payable to the proposer or his proving Executors or Administrators or other Legal Representatives..... Certain other provisions contained in the policy which are material run as follows: The Life Assured shall at any time after attaining majority and before the Deferred Date by a writing signed by him adopt this policy, agreeing to be bound by all its provisions. On such adoption, by the Life Assured, this Policy shall be deemed to be a contract between the Corpor ation and the Life Assured as the absolute owner of the Policy as from the date of such adoption, and the Proposer or his Estate shall not have any right or interest therein . Provided that if all the premiums due prior to the Deferred Date have been paid, the person entitled to the Policy moneys shall have the option to apply for and receive as on the Deferred Date the Cash Option mentioned in the Schedule in entire cancellation of this Policy. This Policy shall stand cancelled in case the Life Assured shall die before the Deferred date and in such event a sum of money equal to all the premiums paid without any deduction whatsoever shall become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the deferred date, it would be the proposer, i.e., the assessee's father, who would be entitled to receive the cash option unless the life assured adopted the contract as his own. Therefore, it is only if the life assured attains majority and adopts the policy before the deferred date that the Corporation can be said to have effected an insurance in respect of the life of the assessee under this contract and it is then only that it can be said to become liable to pay the sum insured to the assessee. If the life assured however were to expire before the deferred date, the policy would stand cancelled and, in that event, it would be the proposer and not the heirs of the life assured, who would get the sum equal to the premiums paid, again not the sum insured. Even if the life assured continues to be alive but fails and declines to adopt the policy, it is again the proposer who would be entitled to receive the cash option and not the assessee. It is thus clear that it is only when the life assured attains majority and adopts the policy that the contract is to be deemed to be his contract and it is then only that the Life Insurance Corporation can be said to accept the risk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in that case created a trust in favour of the children and whether the policies were held, not for the benefit of the testator's estate but in trust for the children. The testator in that case took out a policy of insurance on the life of each of his two infant children payable to their personal representatives on the death of either of them after their attaining the age of 21 years. If a child died before attaining 21 years, the testator had the right to recover part of the premiums paid. The policies, and all the powers exercisable thereunder, were stated throughout to be for the benefit of the children, and, on their attaining the age of 21 years, the testator's own interest in the policy moneys terminated. On a summons taken out before Farwell J. the learned judge held, on the construction of the terms of the policy of insurance, that they created a trust in favour of the children, and the policies were held not for the benefit of the testator's estate, but in trust for the children. The learned judge at page 322, however, observes that in cases concerning a policy of the kind he had before him by a father or another person on behalf of an infant it was establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wner of the policy and the proposer or his estate would not have any right or interest therein. This clause impliedly means that until such adoption takes place by the assessee after the assessee has attained majority and before the deferred date arrives, the benefit of the contract is to go to the proposer and not to the life assured, namely, the assessee. Consistently with this provision, the contract also provides that it would stand cancelled in case the life assured were to die before the deferred date and in such an event, it would be the proposer and not the estate of the life assured who would get the sum of money equal to all the premiums paid. Similarly, the policy also is to stand cancelled if the life assured upon attaining majority were to decline to adopt or fail to or neglect to adopt the policy before the deferred date and in which event, a sum of money equal to the cash option was payable, not to the life assured, but to the proposer. These provisions clearly show, unlike the case before Farwell J. that until a novatio takes place whereunder the contract is to be deemed to become the contract of the life assured after he attained majority and adopted the policy, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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