Harsimron Singh Sandhu Vs DCIT (ITAT Delhi)
The ITAT Delhi adjudicated an appeal concerning the taxability of ₹47,50,000 received by the assessee on maturity of a Keyman Insurance Policy and denial of exemption under Section 10(10D) of the Income Tax Act. The assessee, an individual, had filed a return declaring income and claimed the maturity proceeds as exempt. The policy had originally been taken by the employer in 2001–02 and was later assigned to the assessee in 2010–11. The assessee argued that both the purchase and assignment occurred prior to amendments that brought such receipts into the tax net and relied on earlier judicial precedent to support the exemption claim.
The revenue authorities treated the maturity amount as taxable, and the assessee’s rectification application and appeal were rejected. Before the Tribunal, the assessee reiterated that the amendments to Section 10(10D), including Explanation 1 inserted from 01.04.2013, should not apply to the case. The revenue contended that the Explanation is clarificatory in nature, applies retrospectively, and includes policies assigned to any person within the definition of Keyman Insurance Policy.
The Tribunal examined Section 10(10D) and noted that amounts received under a Keyman Insurance Policy are expressly excluded from exemption. It further observed that Explanation 1 clarifies that such policies include those assigned to any person during the term of the policy, with or without consideration. Relying on the judgment of the Madras High Court, the Tribunal held that the character of a Keyman Insurance Policy does not change upon assignment and remains taxable in the hands of the recipient.
