Case Note & Summary
The case arose from an income-tax assessment for the year 1960-61, where the assessee, a minor, claimed rebate under Section 15(1) of the Income-tax Act, 1922 for premium paid on a Children’s Deferred Endowment Assurance policy issued by the Life Insurance Corporation of India. The policy was proposed by the assessee's father, with the assessee as the life assured. Under the policy terms, the LIC was liable to pay the sum assured on the stipulated date of maturity if the life assured survived, or on death after a deferred date. A special clause permitted the life assured to adopt the policy after attaining majority, becoming the absolute owner; otherwise, the proposer retained all rights. The premium was paid out of the assessee's taxable income. The Income Tax Officer disallowed the rebate, and the Appellate Tribunal affirmed. On reference, the High Court held against the assessee. The Supreme Court considered whether the assessee satisfied the conditions under Section 15(1), which requires that the premium be paid by the assessee himself and that the payment be made to effect an insurance on the life of the assessee himself. The Court analyzed the nature of the policy and concluded that, despite the premium being sourced from the assessee's income, the contract of insurance was not on his own life in the sense required by law, because the proposer was the father and the policy was contingent on adoption. The second condition thus remained unfulfilled. Accordingly, the appeal was dismissed, and the assessee was held not entitled to the rebate.
Headnote
A) Income Tax - Rebate on Life Insurance Premium - Interpretation of Conditions - Section 15(1), Income-tax Act, 1922 - The dispute concerned a Children’s Deferred Endowment Assurance policy where the life assured was the minor assessee and the proposer was his father. The policy allowed adoption after majority, and until then, the proposer was the owner. The premium was paid from the assessee’s taxable income. The assessee claimed rebate under Section 15(1), which requires that the premium be paid by the assessee himself and that the insurance be on his own life. The Court held that for rebate, both conditions must be satisfied; the mere fact that premium came from the assessee’s income does not fulfill the second condition if the contract of insurance is not on his life. Held that the assessee was not entitled to rebate. (Paras 1-2)
Issue of Consideration
Whether the assessee is entitled to rebate under Section 15(1) of the Income-tax Act, 1922 for premium paid on a Children’s Deferred Endowment Assurance policy where the proposer is his father and the life assured is the assessee minor
Final Decision
Appeal dismissed; held that assessee not entitled to rebate as the policy was not an insurance on the life of the assessee; condition (ii) of Section 15(1) not satisfied
Law Points
- Rebate under Section 15(1) requires premium paid by assessee himself and insurance on own life
- policy on minor's life with proposer as father not on assessee's own life
