Life insurance ex gratia payment remained part of the estate for duty purposes because it was traceable to the policy

A payment received from the insurer in relation to a life policy taken out by the deceased remained taxable in the principal value of the estate under section 14 of the Estate Duty Act, 1953. The court treated the insurer's unilateral description of the amount as ex gratia as immaterial because the receipt was traceable only to the insurance contract and was made in relation to that policy. Even if the policy were assumed void for non-disclosure, the insurer's payment would still be regarded as payment under the policy and attract estate duty.

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Issues: Whether the sum of Rs. 35,000 received from the Life Insurance Corporation as an ex gratia payment was includible in the principal value of the estate under section 14 of the Estate Duty Act, 1953.

Analysis: The deceased had effected and kept up the life insurance policy by payment of premium during his lifetime, and the amount paid to the accountable person was traceable only to that policy. The unilateral description of the payment as ex gratia did not change its character, because the payment was made only in relation to the insurance contract. Even on the assumption that the policy was void for non-disclosure, payment by the insurer would still be treated as payment in respect of the policy, and the statutory charge under section 14 would apply.

Conclusion: The amount of Rs. 35,000 was includible under section 14 and the answer was in favour of the Revenue.

Ratio Decidendi: A payment made by the insurer in relation to a policy of insurance effected on the deceased's life remains a receipt under that policy for estate duty purposes, and the label 'ex gratia' does not take it outside section 14 even if the insurer disputed liability on the footing that the policy was void.

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