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TMI Blog2012 (6) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... assignee - Decided in favor of assessee. It is noteworthy that Keyman insurance policies becomes ordinary insurance policies at the time of assignment, hence, amount received on maturity of keyman insurance policy is to be treated as exempt u/s 10(10D). - ITA No.1348 /Del/2011 - - - Dated:- 11-5-2012 - A D Jain, T S Kapoor, JJ. For Appellant: Shri Simran Mehta, AR For Respondent: Shri KK Mishra, Sr. DR ORDER Per: T S Kapoor: This is an appeal filed by the assessee against the order of Ld CIT(A)-II, New Delhi dated 28.1.2011 for assessment year 2005-06. The grounds taken by the assessee are as under:- 1. That the order passed by the CIT(A)-II is erroneous both on facts and in law. 2. That the CIT(A) erred in uphol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turity proceeds were ascertained by CIT(A). The assessee preferred an appeal before ITAT and ITAT restored back the case to the file of Assessing Officer with the following directions:- The crux of the issue revolves around treatment of status of keyman policy on assignment to keyman. The earlier letter of LIC dated 21.3.2006 as furnished by the assessee before the Tribunal in case assessment year 2003-04 stipulates regarding change in basic features of keyman policy on assignment whereas the subsequent letter issued by the LIC directly to the Assessing Officer dated 6.3.2008 provides that there is no change in the basic features of keyman policy on assignment. Taxability of amount received by the assessee on maturity of policy, which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignment. During assessment proceedings the Assessing Officer observed that in assessee s own case for assessment year 2003-04 2004-05 vide ITAT order in ITA No.3792/Del/2008 dt. 15.5.2009 the similar point was considered and was in favour of the assessee wherein it was decided that the amount received on maturity of keyman insurance policy is to be treated as exempt u/s 10(10D) of the Income Tax Act, 1961. The ITAT in its order had further directed that the difference between the premium paid by the company and surrender value prevalent at the time of assignment should be taxable. The relevant portion of ITAT order is reproduced below:- Therefore, in our considered view, it would by the assessee on maturity of the impugned policy, a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned policy, a sum equivalent to the surrender value of the policy at the time of its assignment by the company in favour of the assessee is taxable. The said amount having been received in this year is, therefore, rightly to be taxed presently. We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to bring to tax the aforesaid sum in this year. 6. Aggrieved by this, the assessee filed appeal before the Tribunal. 7. The Ld AR of the assessee produced before us the judgment of Hon'ble High Court of Delhi dated 16.2.2011 in the case in I.T.A. No.1428/Del/2008 Rajan Nanda, the assessee v. CIT wherein the matter relating to taxability of maturity value of key man insurance policy, and taxability of differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubts on the taxability of the income including bonus, etc. from such policy and also regarding the treatment of the premium ;aid whether it should be allowed as a capital expenditure or as a revenue expenditure. the Finance (No.2) Act, 1996 therefore lays down the tax treatment of the keyman insurance policy. 14.3. Clause (10D) of Section 10 of the Income Tax Act, 1961 exempts certain income from tax. The Finance (No.2) Act, 1996 mend clause (10D) of section 10 to exclude any sum received under a keyman insurance policy including the sum allocated by way of bonus of such policy for this purpose,. 14.4. The Finance (No.2) Act, 1996 also lays down that the sum received by the said organization on such policies be taxed as business profits, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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