Nominee rights under insurance proceeds do not create exclusive ownership; interest income was taxable only on the assessee's share.

Interest on fixed deposits created from life insurance proceeds was taxable only to the extent of the assessee's beneficial share, not in full. The analysis notes that the proceeds arose under a joint life policy and another policy on the deceased wife's life, and were received by the assessee as surviving co-assured and nominee. Although nomination under section 38 of the Insurance Act entitles a nominee to collect the policy amount, it does not by itself confer exclusive title against other heirs. Because the deceased was also survived by children and the husband, the insurance money was treated as a shared fund, and the interest earned from it had to be apportioned accordingly.

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Issues: Whether the interest earned on the fixed deposit made out of the life insurance proceeds received by the assessee was taxable wholly in his hands or only to the extent of his share in the insurance money.

Analysis: The insurance proceeds arose from a joint life policy and another policy on the life of the deceased wife, and the amount was received by the assessee as surviving co-assured and nominee. Section 38 of the Insurance Act, 1938, as relied upon in the decision, recognises that a nominee is entitled to receive the policy amount but does not, by that fact alone, acquire exclusive title to it against other heirs. On the facts, the deceased was survived by children and the husband, so the insurance money represented a fund in which the assessee did not have exclusive ownership. The interest earned on the fixed deposit created out of that fund therefore had to be apportioned according to the assessee's beneficial share.

Conclusion: The addition could not be sustained in full, and only the assessee's fractional share in the interest income was taxable in his hands.

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