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TMI Blog2024 (2) TMI 1194X X X X Extracts X X X X X X X X Extracts X X X X ..... would lose its character. As decided in Rajan Nanda [ 2011 (12) TMI 392 - DELHI HIGH COURT] as held that 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 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 on maturity, it does not the company but who is an individual getting the matured value of the insurance. No doubt, the parties here, viz., the company as well as the individual taken huge benefit of these provisions, but it cannot be treated as the case of tax evasion. It is a case of arranging the affairs in such a manner as to avail the state exemption as provided in Section 10(10D) of the Act. Law is clear. Benefit inured owing to the combined effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived under a 'Keyman Insurance Policy' assigned before 1st April, 2014 not taxable. That the amendment in the definition of 'Keyman Insurance Policy' is prospective in nature and the same would not be applicable to the taxpayer since the assignment of 'Keyman Insurance Policy' in favour of keyman was made on November, 2008 which was much before the effective date of amendment i.e. 1st April, 2014. 1.4. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the assignee paid Surrender Value of Rs. 45,55,344/- to the Firm who ultimately paid tax on Surrender Value. That the remaining three premium amounting to Rs. 50,59,440/-also paid by the assignee. Total amount paid by the assignee was Rs. 96,14,784/- no tax benefit was claimed by the assignee on such policy. That tax was already paid by the assesse on this amount. 1.5. That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate that, once Circular No. 762 issued by CBDT clearly provided that, in case of employer-employee relationship, only surrender value is taxable in the hands of employee and that too at time of assignment of policy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr.CIT, Indore [2020] 114 taxmann.com 183 (Indore-Trib.), decided the issue in favour of the assessee. He drew our attention to the decision of Tribunal in the case of Smt. Harleen Kaur Bhatia vs Pr.CIT (supra). He further placed reliance on the judgement of Hon ble Delhi High Court in the case of CIT vs Rajan Nanda [2012] 18 taxmann.com 98 (Delhi). 7. To buttress the contention that once insurance policy is assigned by the employer to employee, the insurance policy get converted into an ordinary policy. In that case, the value received by employee would not be subjected to tax in view of section 10(10D) of the Act. He further submitted that the amendment in law has been duly considered by the Co-ordinate Bench of the Tribunal and the decision of Hon ble Bombay High Court in the case of CIT, Central-III, Mumbai vs Prashant J.Agarwal [2016] 75 taxmann.com 54 (Bombay). Therefore, he submitted that the issue in question is covered in favour of the assessee. 8. On the other hand, Ld. Sr. DR for the Revenue opposed these submissions and supported the orders of the authorities below. 9. We have heard Ld. Authorized Representatives of the parties and perused the material availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, it changes its character from Keyman insurance also to an ordinary policy. It is because of the reason that if it remains Keyman insurance policy, then the maturity value received is subjected to tax as per Section 10(10D) of the Act. On the other hand, if it had become ordinary policy, the premium received under this policy, in view of the aforesaid Section 10(10D) itself, the same would not be subjected to tax. 53. Once there is no assignment of company/employer in favour of the individual, the character of the insurance 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 to conversion and the character of policy changes. The insuran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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