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Income Tax Appellate Tribunal, G BENCH, MUMBAI
Per Contra, Learned Departmental Representative supported the 8. order passed by the CIT(A) and reiterated the stand taken by the Assessing Officer in the Assessment Order.
We have considered the rival submissions and perused the material 9. on record. We find the averments made by the Learned Authorised Representative for Appellant to be factually correct to the extent the Status Report of Policy No. 883065720 placed on Page 13 of the Paper-Book clearly provided that investment type was made in Bonds, number of units held were 2,33,867.402, Life Cover was not opted and the sum assured was reflected as ‘000’ (i.e. Nil). Further, the Letter, dated 25/01/2023, was issued by Sr. Branch Manager stating that the policy taken by the Appellant was similar to a Debt Mutual Fund. In our view, the CIT(A) failed to appreciate the fact that in the aforesaid letter it was stated that the ‘LIC’s Market Plus Policies, which was surrendered are single premium policies where no risk cover is opted’ and therefore, it is similar to Debt Mutual Fund. The letter was obtained by the Appellant on specific query raised by the CIT(A). The letter also gives reference to the fact that ITA No.949//Mum/2023 (Assessment Year 2013-14) (Assessment Year: 2014-15) ITA No.951/Mum/2023 (Assessment Year: 2016-17) the Appellant had disclosed the fact that ‘IT Notice’ was received by the Appellant and therefore, clarification was required. The Letter clarified that the policy was in the nature of a Debt Mutual Fund since the Appellant had not opted for risk cover. Further, during the operation of policy no other benefit in the form of annuity, accident benefit or pension benefit was paid to the Appellant. In our view, the inference drawn by the CIT(A) that the policy was a pension policy runs contrary to express statement made in the letter issued by Sr. Brach Manager, LIC. We note that the Assessing Officer/CIT(A) has not relied upon any policy term to support the conclusion that the policy taken by the Appellant is a pension policy. On the other hand the Learned Authorised Representative for Appellant has relied upon the decision of Ahmadabad Bench of the Tribunal in the case of Shri Girish Haribhai Trivedi (supra). In that case the subject matter of consideration before the Tribunal was surrender value received on surrender of investment made the assessee in that case in the ICICI Pru Life Term, a unit linked insurance plan by ICICI Prudential Life Insurance. The Tribunal accepted the alternative contention of the assessee and upheld the order of the CIT(A) holding that the surplus on maturity of the policy was in the nature of Long Term Capital Gains. The relevant extract of the aforesaid decision reads as under: “7. After hearing both the parties and perusing the record we find that ld. CIT(A), after properly appreciating the facts of this case, has passed a well reasoned speaking order by partly allowing the appeal of the assessee. The findings of the ld. CIT(A) has remained uncontroverted by ld. D.R. at the time of hearing before us. Therefore, we are not inclined to interfere with the order passed by ld. CIT(A). For the sake of clarity, the relevant portion of the order of ld. CIT(A) is reproduced as under:-
ITA No.949//Mum/2023 (Assessment Year 2013-14) (Assessment Year: 2014-15) ITA No.951/Mum/2023 (Assessment Year: 2016-17)
“I have carefully perused the assessment order and the submissions given by the appellant. The brief facts of the case are that the appellant purchased a unit linked insurance policy from ICICI Prudential Life Insurance Company Limited. The name of the policy was ICICI Pru. Life Time. The policy was purchased by the appellant on 31.07.2003. The sum assured was Rs.1,00,000/-. The appellant initially made a payment of Rs.3,00,000/- by cheque on 30.07.2003. Subsequently payment of another 15,00,000/- were also made by him during the next two years. The policy was encashed by him on 22.08.2007. Accordingly, the return of income for the present assessment year was filed by the appellant showing the surplus amount of Rs.14,74,492/- as amount received on maturity of policy in the capital account. The A.O. analysed the various aspects of the policy and held that the receipts from the policy would not be exempt in view of the limitations imposed by section 10(10D) and held that the receipts would not be exempt from tax. After careful perusal of all the facts, it is evident that the policy purchased by the appellant was a unit linked insurance policy. In this type of policy, out of the premium paid during the year, a small portion of the investment goes towards providing the life cover to the person and the residual portion is invested in a fund which in turn invests in stocks or bonds. The value of investment grows or declines as per the type of the investment made by the fund. The investor also has a choice to choose between the equity based funds or the bond based funds. The investor also can regularly change his investment from one type of fund to another considering the overall scenario of the equity market. These kind of changes are called „switch‟. At the time of the maturity, the investor is paid the amount equal to the value of the units of the date of maturity. It is observed from the statement of account of the policy which has been enclosed to the assessment order by the A.O. that the appellant initially opted for investment in protector fund and later on is switched certain part of maximiser fund. At the time of surrender i.e. on 21.08.2007, the full value of policy was Rs.32,74,492.91 for which the cheque was issued to the appellant. The A.O. was not ITA No.949//Mum/2023 (Assessment Year 2013-14) (Assessment Year: 2014-15) ITA No.951/Mum/2023 (Assessment Year: 2016-17) justified in treating the entire receipts as income of the appellant as only the surplus could have been considered for the purpose of taxation. As evident from above, the investment by the appellant was in a unit linked insurance policy in which major portion was invested in mutual funds and accordingly, the surplus on maturity of the policy should be treated as capital gain. Since no security transaction tax has been deducted at the time of transaction by the fund, the benefit of indexation will be available to the appellant. The last payment in the fund was made by the appellant on 25.08.2005 and the policy has been surrendered on 22.08.2007 which shows that the investment was for more than three years for the overall policy and more than one year from the date of last investment. The surplus will, therefore, be treated as long term capital gain on investment in mutual funds. The A.O. is, therefore, directed to take the sale consideration of units as the amount received on account of maturity of the policy and the cost of investment as the amount invested by appellant during the span of 2-3 years i.e. Rs.18,00,000/- and accordingly work out the long term capital gain and tax payable thereon, if any. The ground of appeal is accordingly partly allowed.” (Emphasis Supplied)
As was the case in the above decision, the Appellant has held 10. investment for a period of more than three years. Single premium was paid on 31/03/2008 and surrender value was received after 31/03/2011 during the relevant previous year. In the present case the investment were in the nature of investment in Debt Mutual Fund. According, we hold that the accretion value of INR 44,91,793 was in the nature of long term capital gains. Accordingly, the addition of INR 44,91,793/- made by the Assessing Officer in the hands of the Appellant holding the same to be ‘Income from Other Sources’ is set aside. The Assessing Officer is directed to compute the amount of capital gains tax liability, if any, as per law. The ITA No.949//Mum/2023 (Assessment Year 2013-14) (Assessment Year: 2014-15) ITA No.951/Mum/2023 (Assessment Year: 2016-17)
Assessing Officer is also directed to grant the benefit of Section 54F of the Act to the Appellant after verifying the claim of the Appellant taking into consideration the Agreement for Sale, dated 09/12/2014 filed by the Appellant. In case the need arises, the Assessing Officer shall also grant reasonable opportunity of being heard to the Appellant. In view of the aforesaid Ground No. 1, 3, 4 and 5 are allowed, while Ground No. 6 is allowed for statistical purposes. Ground No. 2 raised by the Appellant is disposed off as being infructuous.
ITA No. 950/MUM/2023 (Assessment Year: 2014-15) (Assessment Year: 2016-17)
Both the sides agreed for the Assessment Years 2014-15 and 2016- 17, in identical facts and circumstances addition of INR 29,75,489/- (in respect of surrender value of INR 67,75,489/- received on surrender of LIC Market Policy No. 883439720 purchased for INR 38,00,000/-) and INR 23,34,963/- (in respect of surrender value of INR 43,34,963/- received on surrender of LIC Market Policy No. 883065725 purchased for INR 20,00,000/-), respectively, were made by the Assessing Officer. The aforesaid additions were confirmed by the CIT(A) and in respective appeals preferred by the Appellant were dismissed. In appeals before us, both sides, adopted their arguments in respect of appeal for the Assessment Year 2013- 14 and agreed that out finding/adjudication in appeal for the Assessment Year 2013-14 shall apply mutatis mutandis to appeal for the Assessment Year 2014-15 and 2016-17 also.
We note that the grounds raised in appeals for the Assessment Year 12.
ITA No.949//Mum/2023 (Assessment Year 2013-14) (Assessment Year: 2014-15) ITA No.951/Mum/2023 (Assessment Year: 2016-17)
2014-15 and 2016-17 are identical to the grounds raised in appeal for the Assessment Year 2013-14. Accordingly, in view of paragraph 7 to 10 above, the addition of INR 29,75,489/- and INR 23,34,963/- made by the Assessing Officer in the hands of the Appellant for the Assessment Year 2014-15 and 2016-17, respectively, holding the same to be ‘Income from Other Sources’ is set aside. For both the aforesaid assessment years the Assessing Officer is directed to compute the amount of long term capital gains tax liability, if any, as per law by treating the accretion value as long term capital gains. The Assessing Officer is also directed to grant the benefit of Section 54F of the Act to the Appellant after verifying the claim of the Appellant for the assessment years under consideration taking into consideration the Agreement for Sale, dated 09/12/2014 filed by the Appellant. In case the need arises, the Assessing Officer shall also grant reasonable opportunity of being heard to the Appellant. In view of the aforesaid, Ground No. 1, 3, 4 and 5 of the Appeal for the Assessment Year 2014-15 and 2016-17 are allowed, while Ground No. 6 of the respective appeal is allowed for statistical purposes. Ground No. 2 of the respective appeal raised by the Appellant is disposed off as being infructuous.
In result, all the three appeals are allowed.