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TMI Blog2014 (1) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.5016/Del/2012. 3. As per the orders under reference, the facts are that the issue in this case arose for the first time in Assessment Year 200304, for which year, the Assessing Officer made addition of maturity proceeds regarding Keyman Insurance, received by the assessee from LIC. The Keyman Insurance policies were taken out by the employer of the assessee in the name of the assessee. However, after making some payment on account of premiums, these policies were assigned to the assessee, who paid the subsequent premiums till the maturity of the policies. After the assignment of such policies to the assessee, the LIC of India treated the policies as ordinary insurance policies. After Assessment Year 200304, similar additions were r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, were, later, assigned to the assessee and thereupon their character underwent a change from that of Keyman Insurance policies to ordinary individual insurance policies. 8. The matter, it is seen, has elaborately been dealt with by the Hon'ble jurisdictional High Court in the assessee's own case for Assessment Years 200304 and 200405 (supra). The Ld. CIT (A) has extensively quoted therefrom as follows: " The scheme of the Act by introducing Keyman insurance policy, clearly provides that such an amount can be taxed either as business profits or surrender value of the policy endorsed in favour of the employee (Keyman) or the sum received by him at the time of retirement and in all these cases, it would be profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch policy for this purpose. 14.4 The Finance (No.2) Act, 1996, also lays down that the sums received by the said organization on such policies be taxed as business profits; the surrender value of the policy, endorsed in favour of the employee (Keyman); or the sum received by him at the time of retirement be taken as "profits in lieu of salary" for tax purposes; and in case other persons having no employer employee relationship the surrender value of the policy or the sum received under the policy be taken as income from other sources and taxed accordingly. The premium paid on ITA No.400 of 2008, etc., the Keyman Insurance Policy is allowed as business expenditure. 14.5 The amendments take effect from the 1st day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson on the life of whom the insurance policy is taken out and second he person who takes out such policy. The premium is borne by the second person. Where such a dual role comes to an end, the very essence of the Keyman Insurance Policy is lost. This is the reason why the LIC of India confirmed that after assignment of a Keyman Insurance Policy in the name of the individual and the premiums thereafter being paid by such individual, the hitherto Keyman Insurance Policy becomes an ordinary policy. In this case, on the date of maturity, the policy in question is rightly to be accepted as an ordinary insurance policy." 51. The Tribunal while giving requisite relief, brought to tax the amount of surrender value at the time of assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issible. There is no prohibition as to the assignment or conversion under the Act. Once there is an assignment, it leads to conversion and the character of policy changes. The insurance company has itself clarified that on assignment, it does not remain a keyman policy and gets converted into an ordinary policy. In these circumstances, it is not open to the Revenue to still allege that the policy in question is keyman policy and when it matures, the advantage drawn therefrom is taxable. One has to keep in mind that on maturity, it is not the company but the individual who is getting the matured value of the insurance. 54. No doubt, the parties here, viz., the company as well as the individual taken huge benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the assessee to the effect that once there is assignment of the employer in favour of the individual, the character of the insurance policy changes and it gets converted into an ordinary policy; that such assignment is duly permitted by law; that even the LIC accepted the assignment, itself clarifying that on assignment, the policy no longer remains a Keyman Policy and gets converted into an ordinary policy; that as such, it is not open to the Department to still allege that the policy is a Keyman Policy and when it matures, the advantage drawn therefrom is taxable; that on maturity of the policy, it is not the employer, but the individual, who is getting the maturity value of the insurance; that no doubt, the employer as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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