1979 (4) TMI 60 - AT - Income Tax

Tribunal upholds assessment reopening but rules in favor of accountable person on insurance amount

The Tribunal upheld the reopening of the assessment under Section 59 of the Estate Duty Act, finding the Assistant Controller's action justified due to ... - Issues Involved:1. Validity of reopening the assessment under Section 59 of the Estate Duty Act.2. Includibility of the insurance amount under Section 14(1) of the Estate Duty Act.3. Alternative applicability of Section 10 of the Estate Duty Act.Detailed Analysis:1. Validity of Reopening the Assessment under Section 59 of the Estate Duty Act:The accountable person (A.P.) contested the reopening of the assessment, arguing that all pertinent facts, including the insurance policy assigned to the deceased's grandson, were disclosed to the Assistant Controller. The Tribunal found no merit in this contention, noting that the information regarding the insurance policy was not fully disclosed. The Assistant Controller's action was prompted by an audit objection, which constitutes sufficient information under Section 59 of the Estate Duty Act to warrant reopening the assessment. The Tribunal upheld the reopening of the assessment as proper and legal.2. Includibility of the Insurance Amount under Section 14(1) of the Estate Duty Act:The A.P. argued against the inclusion of Rs. 1,22,678 under Section 14(1), despite an alleged concession by the A.P.'s counsel. The Tribunal found that no such concession was made, and even if it had been, a concession on a point of law does not preclude challenging its applicability. The Tribunal examined the facts: the deceased had taken an endowment life insurance policy, which matured before his death, and the amount was paid to the assignee (grandson) before the deceased's death. The Tribunal referred to the Madras High Court's decision in CED vs. Estate of Pichai Thambi, which held that money received under a policy that matured before the death of the assured does not fall under Section 14(1). The Tribunal concluded that the amount received under the insurance policy could not be deemed to pass on the death of the deceased and thus was not includible in the estate under Section 14(1).3. Alternative Applicability of Section 10 of the Estate Duty Act:The Department raised an alternative argument that the amount should be deemed to pass under Section 10, which deals with gifts where the donor is not entirely excluded. The Tribunal noted that the assignment of the policy constituted a complete and irrevocable transfer of rights under Section 38 of the Insurance Act. There was no evidence that the deceased retained any benefit from the policy. Although the deceased had obtained a loan against the policy, this was done illegally, as confirmed by a letter from the LIC of India. The Tribunal held that the amount could not be deemed to pass under Section 10, as the deceased had no right to the policy after its assignment.Conclusion:The Tribunal allowed the A.P.'s appeal, holding that the insurance amount of Rs. 1,22,678 was not includible in the estate under Section 14(1) or Section 10 of the Estate Duty Act. Consequently, the departmental appeal was dismissed.