2016 (9) TMI 1294 - HC - Income Tax

Amount received on maturity of Keyman Insurance Policy - non taxability and is exempt under Section 1O(10D) - reference to the Circular No.762 dated 18/02/1998 issued by CBDT wherein it was clarified that such amount is taxable in the hands of recipient - Held that - The issue arising stands concluded against the Revenue for the reasons mentioned by the Delhi High Court in Rajan Nanda (2011 (12) TMI 392 - DELHI HIGH COURT). It is also accepted by the Revenue that the amendment in Explanation I to Section 10(10D) of the Act has specifically come into force only from 1st April 2014 and it would not govern / apply to amounts received under the assigned Keyman Insurance Policy prior to Assessment Year 2014-15. No substantial question of law. Tribunal is justified in holding that amount received by the assessee on maturity of Keyman Insurance Policy is not taxable and is exempt under Section 1O(10D) - Decided in favour of assessee

Summary

Issues:
Challenge to Tribunal's order on tax exemption for Keyman Insurance Policy amount under Section 10(10D) of the Income Tax Act, 1961.

Analysis:
1. The appeal challenges the order passed by the Income Tax Appellate Tribunal (the Tribunal) concerning the tax treatment of an amount received on maturity of a Keyman Insurance Policy for Assessment Year 2010-11.
2. The appellant raised a question of law regarding the taxability of the amount received by the assessee, arguing that it should be taxable under Section 10(10D) of the Income Tax Act, citing a circular issued by the CBDT.
3. The respondent received ?76 lakhs on maturity of the Keyman Insurance Policy and claimed exemption under Section 10(10D) of the Act. However, the Assessing Officer taxed the amount under Section 17(3)(ii) as profits in lieu of salary.
4. The Commissioner of Income Tax (Appeals) allowed the respondent's appeal, following a decision of the Delhi High Court in a similar case, where it was held that such amounts are exempt under Section 10(10D). The decision was based on a circular permitting the conversion of a Keyman Insurance Policy into a normal policy.
5. The Revenue's appeal before the Tribunal was dismissed, as the issue was already decided by the Delhi High Court in a similar case. The Tribunal noted that the amendment to Explanation I of Section 10(10D) would only be effective from 1st April, 2014, and not applicable to the subject assessment year.
6. Since the amendment did not apply to the relevant period, the Tribunal upheld the exemption for the amount received on the Keyman Insurance Policy.
7. The Revenue accepted that the issue was concluded based on the Delhi High Court's decision and acknowledged that the amendment to Explanation I of Section 10(10D) would not apply to amounts received before Assessment Year 2014-15.
8. Consequently, the proposed question of law was deemed insubstantial, leading to the dismissal of the appeal without any costs being awarded.