1989 (4) TMI 53 - HC - Income Tax

Summary

Issues:
1. Whether the value of insurance policies is includible in the principal value of the deceased's estate.
2. Whether the moneys payable on the insurance policies became the property of the nominees on the death of the deceased.

Detailed Analysis:
The case involved a dispute regarding the computation of the net principal value of the estate of a deceased individual who had taken three insurance policies. The deceased had nominated his sons and wife as beneficiaries of the insurance policies. The Assistant Controller of Estate Duty included 1/4 interest of the deceased in the insurance policies in the computation of the estate value. The Controller of Estate Duty (Appeals) upheld the contention that the value of the policy money belonged to the nominees based on a decision of the Madras High Court. The Revenue appealed to the Tribunal, which dismissed the appeal, leading to the reference to the High Court.

The High Court analyzed the distinction between assignment and nomination of a policy under section 39 of the Insurance Act. It was established that nomination does not involve a transfer of rights under the policy, unlike an assignment. The court referred to previous judgments to support this distinction. The court agreed with the observations that the nominee merely gets the right to collect the insurance money and does not become the owner of the money. The court disagreed with a previous decision that suggested the value of the policy becomes the property of the nominee.

The High Court concluded that the observations in the previous decision did not correctly interpret the law regarding nomination of insurance policies. The court held that the amount payable on the policies did not become the property of the nominees upon the death of the deceased. Therefore, the sum representing the value of the insurance policies was deemed includible in the principal value of the deceased's estate. The reference was answered in favor of the Revenue, and each party was directed to bear their own costs.