1987 (1) TMI 179 - AT - Income Tax

Summary

Issues: Inclusion of compensation received under a personal accident insurance policy in the principal value of the estate of the deceased.

Analysis:
The judgment deals with the issue of whether compensation received under a personal accident insurance policy should be included in the principal value of the estate of the deceased. The deceased, an employee, did not pay the premium for the policy; it was taken and paid for by the employer. The deceased died in a motor car accident, and a sum of Rs. 60,300 was paid to his wife as compensation. The accountable person argued that since the deceased did not have any right to the amount during his lifetime, it should not be included in the estate. The department, however, contended that the sum should be included. The tribunal considered the facts and legal precedents, including the decision of the Bombay High Court in a similar case, and concluded that the sum of Rs. 60,300 should not be included in the principal value of the deceased's estate.

The tribunal relied on previous judgments to support its decision. In the case of CED v. Kasturi Lal Jain, the Jammu and Kashmir High Court held that compensation received by heirs after the death of the deceased, where the deceased had no interest in the property during his lifetime, should not be subject to estate duty. This decision was later approved by the Supreme Court in M.CT. Muthiah v. CED. The Supreme Court emphasized that the property in such cases only arises after the death of the deceased, and therefore, cannot be deemed to pass on the death. Similarly, in other cases such as Smt. Lakshmisagar Reddy v. CED and CED v. Estate of Late R. Ramanujam, different High Courts held that compensation received under personal accident insurance policies should not be included in the principal value of the estate.

Based on the legal principles established in these cases, the tribunal held that the sum of Rs. 60,300 should not be included in the principal value of the deceased's estate. Even if it were to be included, the tribunal determined that it should be treated as a separate estate and not aggregated with the principal estate. Therefore, the tribunal allowed the appeal, ruling in favor of the accountable person.