The claims configured in the first tab ( Issuance transform rules ) are not passed to the second tab (Issuance Authorization rules).
So we need to repeat the process again in the second tab (map emailaddresses -> emailaddress) as shown below.
Now the custom rule works perfectly.
If you need to add few more email domains to the acceptance criteria just use the "|" symbol:
c:[Type == "http://schemas.xmlsoap.org/ws/2005/05/identity/claims/emailaddress", Value =~ "yahoo.com$|gmail.com$"]
=> issue(Type = "http://schemas.microsoft.com/authorization/claims/permit", Value = "true");