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TMI Blog2014 (4) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) has erred in law and circumstances of the case by completely ignoring the clarification from Birla Sun life Insurance that after the assignment of keyman policy, the policy is covered under individual status and looses the identity of keyman insurance policy, copy of which was submitted to the Ld. AO. 4) The Ld. CIT(A) has erred in law and circumstances of the case by questioning the nil surrender value of the policy at the time of assignment of the policy in favour of the appellant, when the same was certified by the insurance company, copy of which was submitted to the Ld. AO. 5) The Ld. CIT(A) has erred in law and circumstances of the case by completely ignoring the principle of the decision of the Hon'ble Delhi High Court in case of Commissioner of Income Tax vs. Rajan Nanda [(2012)249CfR(Del)141, [2012]18TAXMAN98(Delhi)J. 6) The Ld. CIT(A)/Ld. AO have erred in law and on the facts and circumstances of the case by imposing interest under See 234A and Sec 234B of the Act." 3. Briefly stated the facts giving rise to this appeal are that the assessee is a partner at M/s Luthra & Luthra Law Offices and has remuneration from this Firm and also professional income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that on maturity, it is not the company but an individual getting the matured value of the insurance policy. 5. The counsel of the assessee has further drawn our attention towards decision of ITAT Delhi Bench 'F' in the case of Commissioner of Income Tax vs Rajan Nanda (2013) 37 Taxman.com 335 wherein the decision of Hon'ble High Court of Delhi in the case of Rajan Nanda for AY 2003-04 and 2004-05 (supra) has been followed by observing and holding as under:- "7. We have heard the parties and have perused the material on record. Section 10 (10D) (b) of the IT Act provides that in computing the total income of a previous year of any person, any sum received under a Life Insurance Policy other than any sum received under a Keyman Insurance Policy shall not be included. The Department contends that the maturity amounts received by the assessee are those pertaining to a Keyman Insurance Policy, whereas the assessee maintains that these maturity amounts are concerning ordinary insurance policies. The insurance policies, though having initially been taken as Keyman Insurance policies by the employer of the assessee, were, later, assigned to the assessee and thereupon their character ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of October, 1996." 48. It also follows from the aforesaid that it was only the surrender value of the policy at the time of assignment or the sum received by an individual at the time of retirement, which is taxable. 49. Insofar as assignment is concerned, at that time surrender value was paid by the Director and therefore, nothing could be taxed. Therefore, from any angle, matter is to be looked into, this component cannot be taxed at the bands of the Director assesses as mentioned. Re: Whether the maturity value of the insurance policy received by the assessee is taxable: 50. The Tribunal has taken the view that the Keyman insurance policy was taken in a particular year and assigned in the next year and both these events had ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urance policy changes and it gets converted into an ordinary policy. Contracting parties also change inasmuch as after the assignment which is accepted by the insurance, the contract is now between the insurance company and the individual and not the company/employer which initially took the policy. Such company/employer no more remains the contracting parties. We have to bear in mind that law permits such an assignment. Even LIC accepted the assignment and the same is permissible. There is no prohibition as to the assignment or conversion under the Act. Once there is an assignment, it leads co 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 when as the individual taken huge benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a manner as to avail the state exemption as provided in Section 10 (10D) of the Act; that benefit inured owing to the combined effect of a prudent investment and the statutory exemption provided u/s 10 (10D) of the Act does not call for any bifurcation in the amount received on maturity on any basis whatsoever; and that nothing can be read into Section 10 (10D) of the Act, if it is not specifically provided therein, since any such attempt would tantamount to legislation and not interpretation. It is on the basis of the above enunciation of law by the Hon'ble High Court in the assessee's own case, that the Ld. CIT(A) has held and, in our considered opinion, rightly so, that after assignment of the policy in favour of the assessee, it changes its character from that of a Keyman Insurance Policy to that of an ordinary policy and that once it has become an ordinary policy, the proceeds received thereunder would not be subject to tax in view of Section 10 (10D) of the Act due to which nothing is taxable out of the maturity value received from the insurance policy." 6. In view of above decisions of Hon'ble High Court of Delhi in the case of Rajan Nanda (supra) and decision of ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived thereunder would not be subject to tax in view of section 10/10(D) of the Act. Accordingly, nothing is taxable out of the maturity value of the policy received from the insurance company by the assessee employee. The present case of the assessee is also squarely covered by the above decision of Hon'ble High Court of Delhi in the case of Commissioner of Income Tax vs Rajan Nanda (supra) and by the decision of ITAT Delhi Bench 'F' in the case of DCIT vs Rajan Nanda (supra). 8. At this juncture, it is relevant to mention that by Finance Act 2013, an amendment to Explanation 1 to Section 10(10D) of the Act has been inserted w.e.f. 1.4.2014 i.e. with prospective effect but this has no effect on the present case which is related to AY 2008-09. Thus, we hold that the authorities below took an unjustified approach and at the cost of repetition, we are of the firm opinion that the case of the assessee is covered on all four corners in favour of the assessee by the decision of Hon'ble High Court of Delhi in the case of Commissioner of Income Tax vs Rajan Nanda (supra) and the decision of ITAT Delhi Bench "F" in the case of DCIT vs Rajan Nanda (supra) and we respectfully follow the sa ..... 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