Dismissing the appeal of the assessee the Court held that, Explanation 1 is merely of clarificatory nature and like all other Explanations, which are inserted to clarify certain issues relevant in the parent provision, applies retrospectively to the date of insertion of the main provision itself. The Explanation is not a substantive provision which creates a new tax liability on the assessee and could be normally applied prospectively. On the basis of section 10(10D) of the Act, with its Explanation 1, the clear position of law which emerges is that the character of the keyman insurance policy does not get converted into an ordinary life insurance policy despite its assignment and therefore, any benefit accruing to the employee upon its surrender or encashment will be taxable in the hands of the employee as perquisite. (AY.2007-08)