Report No. 67
Article 47 and Accident Policy
This Chapter deals with the question of stamp duty on policies of insurance against accident and sickness. A suggestion for reducing the duty on such policies was made by the Indian Insurance Companies' Association, Bombay,1 and the suggestion has been referred to the Law Commission by the Ministry of Finance.2
1. For details of the suggestion, see infra.
2. File No. F. 3(4)/57-L.C., Pt. I, S. No. 35, being a cop y of the suggestion in the Ministry of Finance (Deptt. of Revenue) Cus. VII, section, File No. F. 1/77/6, Stamp.
44.2. The subject of rates of stamp duty on policies of insurance falls within the competence of the Union1. The duties are levied by the Government of India2, but they are collected by the State3 within which the duties are respectively leviable4. The proceeds of the duty leviable within a State are assigned to the States5.
1. Union List, Entry No. 91 of the Constitution.
2. Article 268(1) of the Constitution.
3. Article 268(1)(b) of the Constitution.
4. In the case of Union territories, they are collected by the Government of India.
5. Article 268(2) of the Constitution.
44.3.The existing provisions relating to stamp Duty o fire insurance etc. and accident insurance i.e. Entries 47B and 47C the First schedule to Indian Stamp Act, 1899, are quoted below:-
Description of Instrument
|"47B. Fire Insurance and other classes of insurance, not elsewhere included in this article, covering goods, merchandise, personal effects, crops, and other property against lose or damage-|
|(1) in respect of an original policy|
|(i) when the sum insured does not exceed Rs. 5,000;||Fifty naya paisa|
|(ii) in any other case; and||One Rupee|
|(2) in respect of each receipt for any payment of an premium on any renewal of an original policy.||One half of the duty payble in respect of the original policy addition to the amount if any, chargeable under No. 53".|
|47C. Accident and sickness Insurance|
|(a) against railway accident, valid for a single journey only.||Ten naya paisa|
|When issued to a passenger travelling by the intermediate or the third class in any railway.|
|(b) In any other case-for the maximum which may become payable in the case of any single accident or sickness where such amount does not exceeds Rs. 1,000, and also where such amount exceed Rs. 1,000, for every Rs. 1,000 or part thereof.||Fifteen naye paise: Provided that, in case of a policy insurance against death by accident when tre annual premium payble does not exceed Rs. 2.50 per 1,000, the duty on such instrument shall be ten naye paise for every Rs. 1,000 or part thereof or the maximum amount which may become payble under it."|
|47CC. INSURANCE BY WAY OF INDEMNITY against liability to pay damages on account of accidents to workmen employed by ir under the insurance or against liability to pay Compensation Act, 1923, for every Rs. 100 or part thereof payble as premium.||Ten naye paise.|
44.4. Question raised by the suggestion under consideration.-
The suggestion that has been forwarded to us for consideration) raises two major questions, first, reduction of the stamp duty on original policies of accident insurance, and, secondly, clarification1 regarding stamp duty on renewal of such insurance of stamp duty is not only on point the suggestion points out (giving illustrations), that the rate of stamp duty is not only on the high side but is also out of proportion to the premium charged by the companies. It states that in view of the hardship caused to Insurance Companies, the stamp duty under Article 47B should be reduced and brought in line "more or less with that under Article 47B".
1. See I, supra.
44.5. As regards the second point, the suggestion states that in Articles 47C and 47CC there is no provision (as in Article 47B) for renewal, so that the proper stamp duty for renewal "could be nil, one half or anything". It is stated, that it is difficult for Insurance Companies to follow a uniform practice in the absence of a clear-cut provision for their guidance in this behalf. It is also stated, that the omission should be made good by prescribing a specific duty payable on renewals, "which any case could not be more than half the stamp duty payable on original policies."1
1. Analogy of Article 47B is in the suggestion given in this context.
44.6. Scheme of the Report.-
Before dealing with the merits of the suggestion, we shall try to deal with the history of the existing law, the English law on the subject, the contract of insurance and the meaning and scope of accident insurance, and other related matters. This is necessary, because without such a study some important legal aspects are likely to be overlooked, and also because the nature of the subject is such that a mere reading of the provisions of the Stamp Act may not give a full and concrete view of the problem which we have to deal with. Comments of State Governments, received by the Ministry of Finance on the suggestion in question, will be considered later1.
1. See infra.