A contract of insurance on the life of the assessee is the main intention of the contract, and the other clauses are merely ancillary or subordinate to that main purpose.

Headnote:
{'KEYWORD': 'Income Tax', 'SUBJECT': 'Rebate on Insurance Premium', 'ACT SECTION LIST': ['Section 15(1) of the Income-tax Act, 1922'], 'SUMMARY': 'The court interpreted Section 15(1) of the Income-tax Act, 1922, and held that a contract of insurance on the life of the assessee was the main intention of the contract, and the other clauses were merely ancillary or subordinate to that main purpose. Therefore, rebate under Section 15(1) of the Act was admissible on the premium payable during the minority of the assessee.'}
Fact of the Case:

The assessee claimed rebate on insurance premium paid under Section 15(1) of the Income-tax Act, 1922, for a policy taken on his life while he was a minor. The Income-tax Officer, appellate Assistant Commissioner, and appellate Tribunal rejected the claim. The High Court also upheld the rejection.
Finding of the Court:

The court held that the contract of insurance was in substance a contract of insurance on the life of the assessee and therefore rebate under Section 15(1) of the Act was admissible on the premium payable during the minority of the assessee.
Issues: Whether rebate under Section 15(1) of the Income-tax Act, 1922 is admissible on the premia payable during the minority of the assessee?
Ratio Decidendi: The court interpreted Section 15(1) of the Income-tax Act, 1922, and held that a contract of insurance on the life of the assessee was the main intention of the contract, and the other clauses were merely ancillary or subordinate to that main purpose. Therefore, rebate under Section 15(1) of the Act was admissible on the premium payable during the minority of the assessee.
Final Decision: The appeal was allowed with costs of the Supreme Court and the High Court.

Judgment

RAMASWAMI, J. : This appeal is brought, by certificate, from the judgment of the High Court of Gujarat dated September 9, 1963 in Income-tax Reference No. 20 of 1962.

2. On June 23, 1959, a policy called Children s Deferred Endowment Assurance" for a sum of Rs. 50,000 was issued by the Life Insurance Corporation of India. The proposer was Harjiwandas Kotecha, the father of the appellant (hereinafter called the assessee ) and the Life assured was that of the assessee. The premium payable in respect of the policy was Rs. 1,925/- per annum. That amount was paid as premium out of the taxable income of the assessee. In the course of the assessment for the assessment year 1960-61, the assessee claimed rebate on the insurance premium of Rs. 1,925/- under the provisions of S. 15 (1) of the Income-tax Act, 1922 (hereinafter called the Act). The Income-tax Officer rejected the claim on the ground that under the said policy the life of the minor assessee had not been assured. The appellate Assistant Commissioner agreed with the Income-tax Officer and held that the claim of the assessee was rightly rejected. The assessee took the matter in further appeal before the appellate Tribunal but the appeal was dismissed. At the instance of the assessee the appellate Tribunal stated a case to the High Court on the following question of law:

"Whether rebate under S. 13 (1) of the Income-tax Act, 1922 is admissible on the premia payable as per Annexure A during the minority of the assessee?"

The High Court of Gujarat answered the Reference in favour of the respondent and against the assessee. The High Court held that the contract of insurance with the Life Insurance Corporation was entered into by the father of the assessee and under the terms thereof the contract was to become the assessee s contract only by his adopting it on attaining majority. The High Court further held that on the true interpretation of the terms of the contract, even if the minor were to be alive on the deferred date it was the assessee s father who was entitled to receive the cash option unless the assessee adopted the contract as his own. The High Court accordingly observed that the real contracting parties were the father of the assessee and the Life Insurance Corporation and it was only under certain contingency on the happening which the contract was to become the contract of the assessee.

3. Section 15(1) of the Act provides as follows:

"Exemption in the case of life insurances - (1) The tax shall not be payable in respect of any sums paid by an assessee to effect all insurance on the life of the assessee or on the life of a wife or husband of the assessee or in respect of a contract for a deferred annuity on the life of the assessee or on the life of a wife or husband of the assessee or as a contribution to any Provident Fund to which the Provident Funds Act, 1925 (XIX of 1925) applies."

4. The policy, a copy of which is annexed to the statement of the case as Annexure A mentions the following details:

"Cash Option Rs. 11,693.50 Deferred Date 11-3-65 Date of Maturity 11-3-82

Event on the happening of which sum assured payable. On the stipulated date of Maturity if the Life Assured is then alive or at his prior death if it shall occur on or after the Deferred Date "

Clause 5 of the policy provides :

"All money payable in terms of these provisions shall, if the Policy has been adopted by the Life Assured, be payable to the Life Assured, or his Assigns or Nominees under Section 39 of the Insurance Act or Proving Executors or Administrators or other legal Representatives .. ... ......

Provided always that in the event of the Life Assured not having adopted the Policy, the moneys payable in terms of these provisions shall become payable to the proposer or his proving Executors or Administrators or other Legal Representatives..............."

Certain other provisions contained in the policy which are material are to the following effect:

"The Life Assured shall at any t

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