LexCHANDULAL HARJIVANDAS, JAMNAGAR versus COMMISSIONER OF INCOME-TAX, GUJARAT.
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CHANDULAL HARJIVANDAS, JAMNAGAR
v.
COMMISSIONER OF INCOME-TAX, GUJARAT.
October 14, 1966
(J.C. SHAH AND V. RAMASWAMI, JJ.)
Income-tax Act (11 of 1922), s. 15(1)-Children's Deferred Endow-
ment Assurance-Assured a minor-Proposer of insuranc.e his father-
Payment of premium out of taxable incorn, of assured-If entitled to
rebate of income-tax.
The father of the assessee was the proposer, in 1959, of a policy called
Children's Deferred Endowment Assurance, the life assured being that of
the assessee, who was a minor. Under the contract of insurance, the Life
Insurance Corporation of India Was liable to pay the sum assured (a) on
the stipulated date of maturity, if the life assured was alive on that date,
or (b) if the life assured were to die before that date, provided that the
death occurred on or after the deferred date specified in the policy. A s~
cial clause of the policy provided that at any time after attaming majonty
and before the deferred date, the life assured may adopt the policy and on
such adoption, the policy was to be a contract between the Corporation
and the life assured as the absolute owner of the policy from the date of
such adoption. In the absence of such adoption it was the proposer who
would be entitled to the amounts payable by the Corporation, and not the
assessee. Further, if the assessee were to die before the deferred date the
policy would stand cancelled and it was the proposer and not the heirs of
the assessee who would get back the premiums paid. The premium pay-
able in respect of the policy was, however, paid out of the taxable income
of the assessee. In the course of the assessment for the assessment year
1960-61 the assessee claimed rebate on the premium paid under the provi-
sions of s. 15 ( 1) of the Income-tax, 1922. The Department, the Appel-
late Tribunal and the High Court, on reference, held against the assessee.
In appeal to this Court,
HELD : In order to get exemption from payment of tax two conditions
have to be satisfied under the section, namely, (i) the premium must have
been paid by th~ assessee himself; and (ii) the payment must have been
made to effect an insurance on the life of the assessee himself. The con-
tract of insurance in the present case, between the assessee's father and the
Corporation must be read as a whole and so read, in· spite of the cl~uses
referred to, it was in substance a contract of life. insurance with regard to
the life of the assessee. As the premium was paid by the assessee out of
his taxable income, rebate under s. 15(1) was admissible on the premium
paid. [924 E, HJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 684 of
1965.
Appeal from the judgment and order dated September 9. 1963
H
of the Gujarat High Court in Income-tax Reference No. 20 of
1962.
I. N. Shroff. for the appellant.
Ml 7SupCI/66-1 l
922
SUPREME COURT REPORTS
{1967] 1 S C.R.
S. T. Desai, Gopal Singh and R. N. Sachthcy, for the respon-
dent.
The J udgmcnt of the Court was dclil'ered by
Ramaswami, J. This appeal is brought, by certificate, from
the judgment of the High· Court of Gujarat dated September 9, 1963
in Income-tax Reference No. 20 of 1962.
On June 23, 1959, a policy called "Ch:ldren's Deferred Endow-
ment Assurance·· for a sum of Rs. 50,000/- was issued by the Life
Insurance Corporation of India. The proposer was Harjivandas
Kotecha, the father of the appellant (hereinafter called the 'asscsscc')
and the life assured was that of the assesscc.
The premium
payable in respect of the policy was Rs. 1,925/ per annum.
That
amount was paid as premium out of the taxable income of the
assessee. In the course of the assessment for the assessment year
1960-61, the asscssce claimed rebate on the insurance premium of
Rs. 1,925/ under the provisions of s. 15(1 J of the Income-tax Act,
!922 {hereinafter called the 'Act'). The Income-tax Officer rejected
the claim on the ground that under the said policy the life of the
minor assessec had not been assured. The Appellate Assistant
Commissioner agreed with the Income-tax Officer and held that the
claim of the assessee was rightly rejected. The assesscc took the
matter in further appeal before the appellate Tribunal but the
appeal was dismissed. At the instance of the assessee the appellate
Tribunal stated a case to the High Court on the following question
of law :
"Whether rebate under s. 15(1) of the Income-tax Act,
1922 is admissibExcerpt shown. Read the full judgment & AI analysis in Lexace.