TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 228
X X X X Extracts X X X X
X X X X Extracts X X X X
....) of the Act by the CPC wherein the CPC has added the amount received on the maturity of keyman insurance policy as income of the assessee and denied the exemption claimed by the assessee u/s 10(10D) of the Act. 3. Against the said order, assessee filed rectification application u/s 154 of the Act before the CPC which was dismissed by the CPC. Thereafter, assessee filed appeal against the intimation order passed u/s 143(1) before the ld. CIT(A) and claimed that CPC has incorrectly added the amount received on the maturity of keyman insurance policy and requested for the deletion of same. After considering the submissions, ld. CIT(A) vide impugned order dated 06.04.2023 dismissed the appeal of the assessee. 4. Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking following grounds of appeal: "1. That the orders of Ld. CIT(A), NFAC u/s 250 are illegal, erroneous and perverse and thus needs to be quashed. 2. That the orders of the Ld. CIT(A), NFAC u/s 250 concurring with the original intimation u/s 143(1) dated 27.03.2019 and u/s 154 dated 17.02.2020 is illegal, having confirmed the maturity amount of Rs. 47,50,000/- without consi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on 14.03.2011 and since the assessee owned the policy after 01.04.2003 and, therefore, maturity sum received on such policy is taxable in the hands of the assessee. 8. Reliance is placed by the Ld. Sr. DR on the judgment of Hon'ble Madras High Court in the case of Allu Arvind Babu Vs. Asst. CIT reported [2020] 122 taxman.com 66 (Madras). 9. Heard both the parties and perused the material available on record. The solitary issue before us is regarding the taxability of maturity amount received under keyman insurance policy assigned to the life of the person in whose name it was taken. In the instant case, originally policy was taken by the employer in the name of assessee and later it was assigned to the assessee. Section 10(10D) of the Act reads as under: (10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than- (a) any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA; or (b) any sum received under a Keyman insurance policy; or (c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 but on or before ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce was initially purchased by the employer of assessee on 08.02.2002 on the life of assessee which was assigned to assessee on 24.03.2011 as could be seen from the letter dated 24.03.2011 submitted by the employer to the LIC available at PB-10. Since, after assigning the policy to assessee, it was held by assessee and no payment whatsoever was made by the assessee either at the time of assignment and at the time of maturity to the employer. The Hon'ble Madras High Court in the case of Allu Arvind Babu (supra) has held as under: "13. We find considerable force in the submission made by the learned counsel for the Revenue and we are unable to accept the submissions made by the learned counsel for the Assessee. 14. The Key Insurance Policy taken by a limited company in favour of its key employee, the Managing Director of the Company in the present case, even though it is Life Insurance Policy, is excluded from the ambit of exemption under section 10(10D) by specifically mentioning the same in clause (b) of the said exception of the provision quoted above. Therefore, any amount received under Keyman Insurance Policy is a taxable receipt in the hands of the employee co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anges its character from Keyman insurance also to an ordinary policy. It is because of the reason that if it remains Keyman insurance policy, then the maturity value received is subjected to tax as mary policy per Section 10(10D) of the Act. On the other hand, if it had become ordinary policy, the premium received under this policy, in view of the aforesaid section 10(10D) itself, the same would not be subjected to tax. 53. Once there is an assignment of company/employer in favour of the individual, the character of the insurance policy changes and it gets converted into an ordinary policy. Contracting parties also change inasmuch as after the assignment which is accepted by the insurance, the contract is now between the insurance company and the individual and not the company/employer which initially took the policy. Such company/employer no more remains the contracting parties. We have to bear in mind that law permits such an assignment even LIC accepted the assignment and the same is permissible. There is no prohibition as to the assignment or conversion under the Act. Once there is an assignment, it leads to conversion and the character of policy changes. The insurance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vious years, including the Assessment Year 2007-08 in the present case, the reliance placed by the learned counsel for the Assessee of Delhi High Court decision is misplaced and cannot ensure to the benefit of the Assessee. 19. We are also a bit surprised by the concession given on behalf of the Department before the Bombay High Court in the case of Prashant J Agarwal. The relevant portion of the short judgment of the Bombay High Court in this regard is quoted below for ready reference: "5. The Revenue's appeal before the Tribunal was dismissed by the impugned order dated 6th September. 2013. It held that the assessment year being A.Y. 2010-11, the issue stand concluded against the Revenue by the decision of Delhi High Court in Rajan Nanda (supra) on identical facts. This it held is particularly so as Explanation -I to Section 10(10D) of the Act was amended by clarifying the meaning of "Keyman Insurance Policy" to include a Keyman Policy which has been assigned to any other person only effective from 1st April, 2014. The amended Explanation I to Section 10(10D) of the Act now reads as under: "[Explanation 1] - For the purposes of this clause, "Keyman ....