TaxTMI 
TaxTMI 
1989 (4) TMI 53
X X X X Extracts X X X X
X X X X Extracts X X X X
....he facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that Rs. 45,000 representing the value of insurance policies did not pass on the death of Harchamal and is not includible in the principal value of the estate of the deceased ? (2) Whether the moneys payable on the three policies became the property of the nominees on the death of the deceased ?" The material facts giving rise to this reference, briefly, are as follows The dispute relates to the computation of the net principal value of the estate of Shri Harchamal who died on February 2, 1978. The deceased had taken three insurance policies for Rs. 15,000 each for which the premium was being paid out of the funds of the Hindu undivid....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Having heard learned counsel for the parties, we have come to the conclusion that this reference must be answered in favour of the Revenue and against the assessee. There is a well-settled distinction between an assignment of a policy and a nomination in a policy. The relevant provisions of section 39 of the Insurance Act, dealing with nomination, are as follows: "39. Nomination by policy-holder. - (1) The holder of a policy of life insurance on his own life may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death : Provided that where any nominee is a minor, it shall be lawful for the policy-hold....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inction was recognised by a Division Bench of this court in Mohanavelu Mudaliar v. Indian Insurance and Banking Corporation Ltd. [1957] 27 Comp Cas (Ins) 47 (Mad) in relation to sections 38 and 39 of the Insurance Act. Section 38(5) clearly states that the effect of an assignment is that the assignee is the only person entitled to the benefit under the policy and such a person shall also be subject to all liabilities and equities to which the assignor was subject at the date of assignment. But 'nomination', as seen from sub-section (1) of section 39, merely means that the person nominated is the one to whom moneys secured by the policy shall be paid in the event of the death of the assured. Unlike an assignment which is irrevocable, a nomin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k the view that a person who is nominated by an assured in his policy of life insurance for receiving money due under it upon his death, is not entitled to enforce his claim against the company as he, though a nominee, is no party to the contract and no interest passes to him merely by reason of his being named in the policy and the money forms part of the assets of the deceased and is liable for his debts." We respectfully agree with the aforesaid observations. In our opinion, therefore, the observations made by a Division Bench of this court in Maharaja Bahadursingh Kasliwal v. CED [1979] 116 ITR 96, 106, that "it could not be disputed that when the policies have been nominated in favour of a particular person, the value of the policy ....