F.C. Rustagi, Judicial Member - (1.) THE only dispute raised by the revenue in this appeal is in respect of deletion of addition of Rs. 6,868,representing interest income on a fixed deposit receipt ['FDR'] taken out of the insured sum obtained by the assessee on the death of his wife in respect of joint insurance policy held by him and his wife and another policy of Rs. 1,128 in which assessee was a nominee.
(2.) The facts pertaining to the issue are in a short compass. There were two life insurance policies bearing No. 6645469 for a sum of Rs. 60,040 being joint policy of Prem Chand and his wife Parsini Devi. The second policy was numbered 6606422 for a sum of Rs. 1,128 and it was on the life of Parsini Devi in which Prem Chand was nominee.Parsini Devi died in November, 1981 and the Life Insurance Corporation of India ['LIC'] sent a consolidated cheque for the two policies amounting to Rs. 61,168 to Prem Chand.The assessee Prem Chand took an FDR and on the same he earned a sum of Rs. 7,631 as interest for the year under consideration. Since Parsini Devi was survived by six sons, three daughters and her husband Prem Chand, the assessee. The assessee contended that hecould be subjected to tax only in respect of Rs. 763 being one-tenthof Rs. 7,631, total amount of interest earned on the said FDR made on the insurance policy money secured by the assessee. The ITO subjected the total amount of Rs. 7,631 in the hands of the assessee as interest on FDR but when his action came to be disputed by the assessee before the AAC, he held that the assessee could be subjected to tax only on Rs. 763, i.e., one-tenth of the interest earned on the FDR out of the funds secured on the death of Parsini Devi. It is this action of the AAC which is contested by the revenue. The learned departmental representative, Mr. M.P. Singh, after reading the ITO's order at length submitted that nomination in a policy acted as a will and once under will an amount is secured by any one on death, he becomes the owner of the same. He also submitted that the FDR was obtained in the name of the assessee, Prem Chand. He relied on the order of the ITO.
(3.) THE learned counsel for the assessee, Mr. D.K. Gupta, on the other hand, submitted that in joint policy in case one of the assured dies, other gets the money as nominee and in that circumstance the nominee is only the recipient, he does not derive any benefit whatsoever. He took us to Section 38(5) of the Insurance Act, 1938 and placed his reliance on the cases of AIR 1973 Ori. 83, AIR 1978 Ker. 8, AIR 1972 All. 167, AIR 1981 NOC 173 in which AIR 1973 Ori. 83 came to be considered. He submitted that in the light of the said decisions, in the insurance money the assessee did not hold more than one-tenth right which was his other survivor's who were to inherit the deceased' s share (sic).;