Nomination under life insurance does not transfer ownership of policy proceeds; the money remains part of the estate for duty purposes.

A nomination under Section 39 of the Insurance Act, 1938 confers only a right to receive policy money and does not transfer beneficial ownership in the insurance proceeds. On the insured's death, the amount payable to the nominated wife and sons therefore remained part of the deceased's estate and was includible in the principal value of the estate for estate duty purposes. The Madhya Pradesh High Court rejected the contrary view that nomination itself makes the nominee owner of the policy money, and held that the proceeds do not cease to form part of the estate merely because they are payable to nominees.

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Issues: Whether the amount payable under life insurance policies nominated in favour of the deceased's wife and sons became their property on the death of the insured, and whether such amount was excluded from the principal value of the estate for estate duty purposes.

Analysis: Section 39 of the Insurance Act, 1938 creates a distinction between assignment and nomination. A nomination merely authorises payment by the insurer to the nominee upon the death of the policy-holder; it does not transfer the policy rights or beneficial ownership in the policy money. The amount received by the nominee remains part of the deceased's estate and is liable to be taken into account for estate duty. The contrary view that nomination itself makes the nominee the owner of the policy proceeds was held to be incorrect.

Conclusion: The amount payable under the policies did not become the property of the nominees on the death of the insured and remained includible in the principal value of the estate. The finding is against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered by holding that nomination under a life insurance policy does not divest the deceased's estate of the policy proceeds for purposes of estate duty.

Ratio Decidendi: A nomination under Section 39 of the Insurance Act, 1938 confers only a right to receive the policy money and does not effect a transfer of ownership; therefore, the policy proceeds remain part of the deceased's estate for estate duty assessment.

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