COMMISSIONER OF INCOME TAX Vs. RAJAN NANDA

JUDGEMENT

(1.) All these appeals relate to the same episode, which is reenacted year after year and therefore, various assessment years are involved. Even the characters in the said episode are the same, who are three assessees, though for the purpose of taxability qua each of them, separate cases have originated. However, the disputes which have arisen flow from the same set of facts, although nature of dispute in respect of one assessee is little different from the disputes in respect of other two. One assessee, viz., Escorts Heart Institute & Research Centre Ltd. is the company which had taken "key man" policy for the other two assessees, who were employees/Directors of the assessee company. After nursing these policies for sometime by paying premium thereupon, they were assigned to other two assessees, i.e., employees/Directors receiving surrender value from them. Where after, for the remaining period of all those policies, the insurance premium were paid by the assignees. Insofar as the assessee company is concerned, the question is as to whether premium paid by it, after adjusting the surrender value, is to be treated as business expenditure or not as claimed by the assessee. Insofar as other two assessees are concerned in whose favour the 'key man' policies were assigned, the question is as to whether the difference between the actual premium paid and surrender value given by them is to be treated as 'salary' in their hands and is to be taxed accordingly. Another issue qua these two Directors is as to whether the maturity value received by them on the said policy is to be taxed or not.

(2.) With this little indication of the nature of issues which arise in three sets of appeal, we advert to the facts in detail, which would be common to all the cases. Thereafter, we will refer to specific issues.

(3.) As pointed out above, the assessee company has been taking 'key man' insurance policies on the lives of two employees/Directors in different years. For the sake of brevity and clarity, we shall give facts in respect of such 'key man' policy taken by the assessee company on the life of Mr. Rajan Nanda, its Chairman and Director.