COMMISSIONER OF INCOME TAX DELHI CENTRAL -II vs. RAJAN NANDA

Q: Which sections of the Income-tax Act were involved?

Section 37, Section 17, Section 10(10D)

ITA - 210 / 2009HC Delhi16 December 201153 pages

For Petitioner: RM MEHTA

AI SummaryPartly Allowed

What did the High Court hold?

The High Court held in favour of the assessees. Regarding the company's claim for business expenditure, the judgment implies that the premium paid after assignment, when the policy became an ordinary policy, was not deductible. However, the primary focus of the detailed reasoning is on the taxability in the hands of the individual assessees. The Court held that once a 'key man' insurance policy is assigned by the employer company to an individual employee/Director, and the individual subsequently pays the premiums, the policy ceases to be a 'key man' policy and transforms into an ordinary insurance policy. Consequently, the maturity value received by the individual from such an ordinary policy is not taxable under Section 10(10D) of the Income Tax Act, 1961, as the section does not envisage any bifurcation of maturity amounts. The Court found that the assessees had arranged their affairs to avail statutory exemptions, which is permissible. The appeals filed by the Revenue were dismissed, and the appeals filed by the assessees were allowed.

What were the facts?

The assessee company, Escorts Heart Institute & Research Centre Ltd., took 'key man' insurance policies on the lives of its employees/Directors, Rajan Nanda and Naresh Kumar Trehan. These policies were later assigned to the employees/Directors. The company claimed the premiums paid, after adjusting for the surrender value received upon assignment, as business expenditure. For the employees/Directors, the dispute concerned whether the difference between the premium paid and the surrender value was taxable as 'salary', and whether the maturity value received on the policies was taxable. The assessment years are not explicitly stated for all cases but are implied to be multiple years preceding 2011.

What were the issues?

1. Whether, for the assessee company, the premium paid on 'key man' insurance policies, after adjusting for the surrender value received upon assignment to employees/Directors, is to be treated as a business expenditure (Question of law turning on Section 37 of the Income Tax Act, 1961). 2. Whether, for the employee/Director assessees, the difference between the actual premium paid and the surrender value received upon assignment of the 'key man' policy is to be treated as 'salary' and taxed accordingly (Question of law turning on Section 17 of the Income Tax Act, 1961). 3. Whether, for the employee/Director assessees, the maturity value received on the assigned 'key man' policy is taxable (Question of law turning on Section 10(10D) of the Income Tax Act, 1961). Assessee's Contentions (implied from the judgment's reasoning): The policies, after assignment, become ordinary policies and the maturity value received by individuals is not taxable under Section 10(10D) as it is not a 'key man' policy at that stage. The company's premium payments were for business purposes. Revenue's Contentions (implied from the judgment's reasoning): The policies remain 'key man' policies even after assignment, and the maturity value is taxable. The difference between premium and surrender value for individuals is salary.

Which sections of the Income-tax Act were involved?

Section 37,Section 17,Section 10(10D)

AI-generated summary — verify with the full judgment below

2011:DHC:11832

More judgments on Section 37

Mohammed Javed Bhati, Sikar vs Income Tax Officer, Ward 1, Sikar
ITA 994/JPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
Deputy Commissioner of Income Tax, Circle… vs Sun Pharma Advanced Research Company…
ITA 933/AHD/2025[2013-14]Status: Disposed15 Oct 2026AY 2013-14
Deputy Commissioner of Income Tax, Circle… vs Sun Pharma Advanced Research Company…
ITA 932/AHD/2025[2015-16]Status: Disposed15 Oct 2026AY 2015-16
Deputy Commissioner of Income Tax, Circle… vs Sun Pharma Advanced Research Company…
ITA 931/AHD/2025[2014-15]Status: Disposed15 Oct 2026AY 2014-15
Sun Pharma Advanced Research Company… vs The ACIT, Circle-2(1)(1), Vadodara
ITA 768/AHD/2025[2015-16]Status: Disposed15 Oct 2026AY 2015-16

All 4,334 judgments and leading authorities on Section 37 →

Recent GST High Court judgments

Search GST case law →