Section 10(10D) Tax Exemption for Employee on Insurance Policy Assignment by Employer

Mihir Parikh Vs ACIT (ITAT Delhi)

In the case of Mihir Parikh vs ACIT (ITAT Delhi), the dispute revolves around the tax treatment of proceeds from a life insurance policy. The parties involved are the assessee, Mihir Parikh, and the revenue authority, ACIT. The legal issue at hand is the applicability of Section 10(10D) tax exemption for an insurance policy assignment by the employer.

Background: The relevant facts are that Mihir Parikh filed his income tax return for AY 2016-17, declaring total income. The Assessing Officer noticed a claim of exempt income from the maturity proceeds of a life insurance policy. The policy was initially a Keyman Insurance Policy held by a proprietorship concern, which was later dissolved, and Parikh purchased the policy. The AO treated the proceeds as taxable under Section 28(vi) of the Income Tax Act.

Contention of the Assessee: Parikh argued that the maturity proceeds were exempt under Section 10(10D) since the policy’s character changed after the assignment from employer to employee. He cited legal precedents and interpretations supporting his position, emphasizing that the policy no longer qualified as a Keyman Insurance Policy.

Contention of Revenue: The revenue authority contended that the proceeds were taxable under Section 28(vi), rejecting Parikh’s arguments. They relied on legal provisions and opposed Parikh’s interpretation of the policy’s character change.

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