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TMI Blog1987 (4) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... e first policy and a sum of Rs. 77,370 in respect of the second policy. The Assistant Controller of Estate Duty invoked the provisions of section 14 of the Estate Duty Act, 1953, on the basis that the policies had been wholly kept up by the deceased for the benefit of the donees under the trust. In the alternative, he found that the provisions of section 15 of the said Act would be attracted. He held that the sums received under the two policies passed on the death of the deceased. The accountable person carried the matter in appeal. The Appellate Controller of Estate Duty upheld the findings of the Assistant Controller of Estate Duty. The accountable person filed a further appeal to the Income-tax Appellate Tribunal. The Tribunal came to the conclusion that since premia under the two policies had ceased to be payable in 1957/59, they could not have been said to have been wholly kept up by the deceased and that, accordingly, the provisions of section 14 were not attracted to the sums received thereunder. The Tribunal also concluded that the provisions of section 15 were not attracted. Arising out of the judgment of the Tribunal, the following question is referred for our consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy if he paid the premiums himself out of his own money and thus prevented the policy from lapsing. Mr. Dhanuka, learned counsel for the Revenue, drew our attention to the judgment of the House of Lords in Lord Advocate v. Inzievar Estates Ltd. [1938] AC 402; 2 All ER 424 (HL). The House of Lords was considering a case where one Sligo had effected a policy of insurance on his life in 1910. In 1925, having by then paid fourteen premiums, he executed gratuitous assignment of the policy in favour of Inzievar Estates. After the assignment, Sligo paid the next four premiums, and Inzievar Estates paid the remaining seven till the date of the death of Sligo. The money under the policy was paid to Inzievar Estates. The House of Lords held that the policy money was liable to estate duty to the extent of the proportion which the number of premiums paid by the donor after the assignment bore to the total number of premiums paid during that period, namely, on four-elevenths of the policy money. Lord Macmillan noted that when the provision spoke of keeping up a policy for the benefit of donee, it referred to the period after the donee had come into existence, that is to say, the period a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of the Inzievar Estates Ltd. [1938] AC 402 ; 2 All ER 424 (HL) showed quite clearly that the use of the present tense merely resulted in this, that in ascertaining whether a particular policy had been wholly or partially kept up, the period of time which it was relevant to look to was the period after the date of the assignment of the policy. Lord Romer went on to observe that it was abundantly plain that the language of the provision which dealt with policies which had been partially kept up by the deceased for the benefit of the donee, namely, " is partially kept up, "included " or has been. " That was quite manifest if one looked at the language, but at all events it had been so decided by the House of Lords in the case of Inzievar Estates Ltd. [1938] AC 402 ; 2 All ER 424. He thought that when it was so obvious that the word " is " in relation to partially paid premiums included the past, then the same conception had to be applied to cases where the policy " is wholly kept up ". Lord Evershed M. R. said that it was to him no less shocking than it had been to the learned single judge that in such a case, duty should be exigible as upon a passing on the death of the assur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently, under a whole-life assurance policy, the only contingency under which money was payable was the death of the assured and, hence, the section would apply to such money. Mr. Dastur, learned counsel for the assessee, emphasised that section 14 of the Estate Duty Act. 1953, used the word " is ". In his submission, the provisions of section 14 were, therefore, applicable only to a running current life insurance policy and not to a policy that had become paid-up. Section 14 was applicable, he said; only when the policy had to be kept up by the payment of premiums and a paid-up policy did not have to be kept up by the payment of premiums. Mr. Dastur pointed out that the House of Lords did not in the case of Inzievar Estates Ltd. [1938] AC 402; 2 All ER 424, interpret the word " is ". Mr. Dastur said that the Court of Appeal had decided Hodge's case [1958] 1 Ch 239 ; [1959] 37 ITR (ED) 1 (CA) by following the House of Lords' decision in Inzievar Estates Ltd. He submitted that this court was under no obligation to follow the House of Lords or the Court of Appeal. The consequence of the interpretation that had shocked the Court of Appeal would, Mr. Dastur urged, be averted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The past payments of premium keep the policy valid and of such a policy, it can be said that it " is kept up " by the assured when he has paid some or all the premiums. Romer L.J. in Hodge's case [1958] 1 Ch 239 ; [1959] 37 ITR (ED) (CA) gave a reason for the construction which the Court of Appeal placed on the provision similar to section 14 of the Estate Duty Act, 1953, which is unanswerable. He said that in so far as it dealt with policies which had been partially kept up by the deceased for the benefit of the donee, the phrase " is partially kept up " necessarily included the concept " has been ". When it was so obvious, he said, that the word " is " in relation to partially paid premiums, included the past, then the same meaning had to be applied to cases where the policy " is wholly kept up ". Mr. Dastur, in the context of what is stated in the last paragraph, submitted that the words " in proportion to the premiums paid by him " in section 14 of the Estate Duty Act, 1953, referred to the share of the assured in the payment of each premium; they did not mean that some premium payments could be made by the assured and some by the donee. There is no justification for readin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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