1966 (10) TMI 48 - SC - Income Tax

Whether rebate under section 15(1) of the Income-tax Act, 1922, is admissible on the premia payable as per annexure A during the minority of the assessee ? Held that - The object of enacting section 15(1) of the Act is the encouragement of thrift and the section should hence be interpreted in such a manner as not to nullify that object. Having examined all the clauses of the contract of insurance in this case, we are satisfied that it is in substance a contract of insurance on the life of the assessee and, therefore, rebate under section 15(1) of the Act is admissible on the premium payable as per annexure A of the statement of the case during the minority of the assessee. For these reasons We hold that this appeal must be allowed with costs of this court and of the High Court. Appeal allowed

Summary

Issues:
Interpretation of section 15(1) of the Income-tax Act, 1922 regarding rebate on insurance premium paid during minority.

Analysis:
The case involved an appeal regarding the admissibility of rebate on an insurance premium paid during the minority of the assessee under section 15(1) of the Income-tax Act, 1922. The policy in question was a "Children's Deferred Endowment Assurance" issued by the Life Insurance Corporation of India, with the father of the appellant as the proposer and the life assured being the assessee. The High Court of Gujarat held that the contract of insurance was between the father and the insurance corporation, and the assessee would only benefit upon adopting the policy upon attaining majority. The High Court concluded that the real contracting parties were the father and the corporation, and the contract would become the assessee's only under certain conditions. The policy contained provisions stating that the sum assured would be payable upon maturity if the life assured was alive, or upon prior death if occurring after a deferred date. It also outlined conditions for adoption of the policy by the life assured. The Supreme Court analyzed the contract as a whole and determined that it was essentially a life insurance contract on the life of the assessee, meeting the requirements of section 15(1) of the Act. The Court emphasized that the main intention of the contract was life insurance, with other clauses being ancillary. Referring to legal definitions and precedents, the Court concluded that the contract qualified as life insurance under the Act. The Court highlighted the objective of encouraging thrift in interpreting the provision. Consequently, the appeal was allowed, and the rebate on the premium paid during the minority of the assessee was deemed admissible.