Paid-up life insurance policy falls within estate duty deeming provision where prior premiums kept it alive for the beneficiary.

Section 14(1) of the Estate Duty Act, 1953 applies to money received under a life insurance policy where the policy has been kept up by the deceased for the benefit of an assignee or donee. The phrase "is kept up" was construed to mean a policy maintained valid by payment of premiums, including a policy that has become paid up through earlier premium payments. Accordingly, a paid-up policy does not fall outside the provision merely because no further premiums were payable at death, if prior premiums paid by the assured had kept the policy alive for the beneficiary's benefit.

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Issues: Whether the sums received under the two life insurance policies were attracted by section 14(1) of the Estate Duty Act, 1953, on the footing that the policies were wholly kept up by the deceased for the benefit of the assignees.

Analysis: Section 14(1) deems money received under a policy of insurance to pass on the death of the assured where the policy is wholly kept up by him for the benefit of a donee, or in part in proportion to the premiums paid by him. The expression "is kept up" was construed as referring to a policy that has been and is maintained valid by payment of premiums, including a policy that has become paid up by past premium payments. A paid-up policy does not fall outside the provision merely because no further premiums are payable at the date of death, if the premiums already paid by the assured have kept the policy alive for the donee's benefit.

Conclusion: The provision was held to apply to the amount received under the two policies, and the reference was answered against the assessee and in favour of the Revenue.

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