1970 (9) TMI 11 - HC - Income Tax

Summary

Issues:
1. Whether the rebate claimed by the assessee for the premium paid under an insurance policy is allowable under the Indian Income-tax Act.
2. Interpretation of section 87 of the Income-tax Act, 1961 regarding deduction on life insurance premiums.
3. Determining if the insurance policy in question falls under the definition of "life insurance business" as per the Insurance Act, 1938.
4. Analyzing the nature of the insurance policy and assessing if it qualifies for a rebate under section 87(1)(a)(i) of the Act.

Analysis:
The judgment pertains to an individual assessee who claimed a rebate for the premium paid on an insurance policy taken out in 1962. The Income-tax Officer disallowed the rebate, a decision upheld by the Appellate Assistant Commissioner and the Appellate Tribunal. The Tribunal referred the question of law to the High Court to determine the eligibility of the rebate under the Income-tax Act, 1961. The insurance policy in question was a pure endowment assurance without profits, with the sum assured payable on the survival of the assessee until maturity. The key issue was whether this policy falls under the provisions of section 87 of the Act, which allows deductions on life insurance premiums.

The court examined the definition of "life insurance business" as per the Insurance Act, 1938, which includes contracts where payment is assured on the happening of a contingency dependent on human life. The court emphasized that the payment of the sum assured in this case was contingent on the survival of the assessee until maturity, thus falling within the ambit of life insurance business. Despite the Tribunal's assertion that there was no risk under the policy, the court noted that the assessee did bear a risk as the sum assured was payable only upon survival until maturity, with a reduced amount payable in case of death before maturity.

Referring to precedents such as Gould v. Curtis and Chandulal Harjiwandas v. Commissioner of Income-tax, the court highlighted the broader concept of life insurance and endowment insurance, emphasizing that the essence of such contracts lies in the contingency of life duration rather than death. The court also considered the conditions laid out in the insurance policy and the booklet issued by the Life Insurance Corporation, concluding that the policy satisfied the requirements for a rebate under section 87(1)(a)(i) of the Act.

In conclusion, the court ruled in favor of the assessee, stating that all conditions for claiming the rebate were met, and the assessee was entitled to the rebate on the premium paid. The court answered the question referred in the affirmative, directing the Commissioner of Income-tax to pay costs to the assessee.