THE NEPTUNE ASSURANCE CO. LTD. versus THE LIFE INSURANCE CORPORATION OF INDIA AND ANOTHER

Citation: [1963] SUPP. 1 S.C.R. 980 · Decided: 08-11-1962 · Supreme Court of India · Bench: S.K. DAS · Disposal: Dismissed

Judgment (excerpt)

1962 
NorJf111her, 8. 
980 SUPREME COURT REPORTS [1963] SUPP. 
THE NEPTUNE ASSURANCE CO. LTD. 
'II. 
THE LIFE INSURANCE CORPORATION 
OF INDIA AND ANOTHER 
(S. K. DAS, J. L. KAPUR, A. K. SARKAR and 
RAGHUBAR DAYAL, JJ.) 
[n1Jurance-Lifeln1Jurance Corporation-Vesting of rights 
in Oorpnration--All rights appertaining to life in1Jurance busi-
ness of in1Jurer-ln1Jurer getting income-tax refund-Such refund, 
when accrues-Such refund, if appertaining to life in1Jurance 
bu,iness-ln1Jurance Act, 1938 ( 4 of 1938), ss. 10, 13-!ndian 
Income-tax Act, 1922 (11of1922), ss. 16 (2), 18,48,49B-Life 
[n1Jurance Corporation Act, 1956 (31of1956), s. 7. 
The appellant company was carrying on both life and 
other kinds of insurance business. On the corning into force of 
the Life Insurance Corporation Act, 1956, by virtue of s. 7 all 
rights appertaining to the life insurance business of an insurer 
became vested in the Corporation on the appointed day, that 
is, September 1, 1956. Under the provisions of the Indian 
Income-tax Act, 1922, an assessee became entitled to a refund 
where the tax deducted from the income of his securities or 
the amount by which the dividend paid to him on his shares 
had to be increased under s. 16(2) of that Act for computation 
of his income, or both taken together, 
exceeded the 
amQunt of tax payable by him. By virtue of these provisions, 
under the orders of assessment to income-tax for the year 
1955-56 and 1956-57, the appellant became entitled to certain 
refunds, but these assessment orders were made after Septem-
ber I, 1956. The respondent Corporation claimed to be 
entitled to portions of the aforesaid refunds under the provisions 
of s. 7 of the Life Insurance Corporation Act. The question 
was (I) whether the right to refund was a right existing on 
September I, 1956, and (2) whether it appertained to the life 
insurance business of the appellant within the meaning of s. 7. 
Held : (I) that the right to the refund which a=ned 
to the appellant existed on September I, 1956. Though the 
actual assessment only particularised the amounts. of refund, it 
did not create the right, for the right came into existeqce as . 
.. 
I 
' 
1 S.C.R. SUPREME COURT REPORTS 
981 
soon as, according to the relevent Finance Act, it became ascer-
tainable that the tax deducted at source or treated as paid on 
its behalf exceeded the tax payable. 
(2) that the right to the refund was one appertaining to 
the life insurance business. The income from shares and 
securities held by the appellant as provided by the Insurance 
Act, 1938, and appertaining to the life insurance business must 
itself be treated as appertaining to that bus;ness; and when it 
was refunded as having been utilised in payment of the tax in 
excess of what was due it could not change its previous nature, 
and would still remain the income of the life insurance business. 
The right to the return of this income would, therefore, also 
be a right appertaining to the life insurance business. 
The proportion in which the refund was to be distri-
buted between the life business and the general business laid 
down. 
CIVIL APPELLATE jURTSDICTJON: Civil Appeal 
No. 386of1961. 
Appeal by special leave from the order dated 
August 3, 1959, of the Life Insurance Tribunal, 
Nagpur, in case No. 24/XII of 1959. 
Purshottam Tricumdas, F. S. Nariman, R. N. 
Modi, S. N. Andley, Rameshwar Nath and P.L. 
) 
Vohra, for the appelant. 
M. 0. Setalvad, Attorney-General for India, 
S.T. Desai, 
S. J. Banaji and 
K. L. Hati, 
for 
respondent. 
1962. November 8. 
The Judgment of the 
Court was delllivered by 
SARKAR, J.-The appellant used to carry on 
both life and other kinds of insurance business. It 
was what is called in the Life Insurance Corporation 
Act, 1956 a "composite insurer." 
The respondent Corp,oration was created by this 
Act on September 1, 1956 and under s. 7 of the Act 
the terms of which we will have to set out later, all 
1962 
Neptun1 Asmranc1 
Co. Ltd. 
v. 
L(fe InsuranCI 
Corpnration of 
India 
Sarkar, J. 
1962 
.N1ptdne Assurance 
Co. Ltd. 
v. 
Li/1 Insurance 
Corporation of 
India 
Sarkar, J. 
982 SUPREME COURT REPORTS [1963] SUPP. 
rights appertaining to the life insurance business of 
an insurer, which in the Act is called the "controlled 
business", because vested in the resppndent Corpora-
tion on the appointed day, that is, September 1, 1956. 
Under the orders of assessment to income-tax for the 
years 1955-56 and 1956-57, the appellant bec

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