1976 (12) TMI 53 - HC - Income Tax

Court exempts Rs. 65,000 insurance sum from estate duty assessment

Controller Of Estate-Duty, Madras Versus Estate Of Late R. Ramanujam

Controller Of Estate-Duty, Madras Versus Estate Of Late R. Ramanujam - [1977] 108 ITR 273, 1977 CTR 181 Issues:1. Interpretation of the Estate Duty Act of 1953 regarding the inclusion of a sum received by a legal heir under a personal accident insurance scheme in the estate duty assessment.Analysis:The case involved a reference under the Estate Duty Act of 1953 regarding the inclusion of a sum of Rs. 65,000 received by the legal heir of the deceased under a personal accident insurance scheme in the estate duty assessment. The deceased was an employee of a company that had a practice of taking out personal accident insurance policies for its employees. The key question was whether this sum should be considered part of the deceased's estate for estate duty assessment purposes. The Tribunal accepted the accountable person's contention that the sum was not chargeable to estate duty. The revenue argued that the company's action in taking out the insurance policy constituted an arrangement between the employer and the employee, thereby creating an interest that passed on the deceased's death. However, the Tribunal found that there was no such arrangement or concerted act on the part of the deceased to create the interest, and the policy was an additional advantage provided by the employer without the employee's involvement. The court agreed with the Tribunal's reasoning and held that the sum of Rs. 65,000 was not includible in the deceased's estate for estate duty assessment purposes.The court referred to Section 15 of the Act, which states that any annuity or interest provided by the deceased, either alone or in concert with another person, shall be deemed to pass on the deceased's death. The court emphasized that for an interest to be included in the estate duty assessment, there must be a nexus or arrangement created by the deceased for the benefit accruing on his death. In this case, the court found that the deceased did not have any role in the creation of the insurance policy or the benefits received by the legal heir. The employer's action in taking out the policy was voluntary and not a result of any arrangement with the deceased. The court highlighted that the policy recitals mentioning the employees and their legal heirs did not imply the deceased's involvement in creating the interest. Therefore, the court concluded that the sum received under the insurance policy was not an interest that passed on the deceased's death and was not chargeable to estate duty.In conclusion, the court answered the question against the revenue and in favor of the assessee, holding that the sum of Rs. 65,000 received by the legal heir was not includible in the deceased's estate for estate duty assessment. The court ruled in favor of the accountable person, emphasizing the absence of any arrangement or concerted act by the deceased in creating the interest under the insurance policy.