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Facts
The assessee filed her return declaring a total income and a Long Term Capital Loss. The CPC processed the return under section 143(1) and raised a demand, stating the receipts from life insurance policies were not exempt. The assessee's rectification application and subsequent appeal before the NFAC were rejected.
Held
The Tribunal held that the annual premium for all three life insurance policies exceeded 10% of the sum assured, thus rendering them ineligible for exemption under Section 10(10D) of the Act. The assessee's alternative plea regarding Section 80C was also dismissed.
Key Issues
Whether the amounts received on surrender of life insurance policies are exempt under Section 10(10D) of the Income Tax Act, considering the premium paid exceeded 10% of the sum assured.
Sections Cited
143(1), 154, 10(10D), 46A, 250, 80C
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Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2017-18 Ms. Darshana Dave v. The ITO 14/75, Civil Lines Ward 1(3)(5) Kanpur (U.P) Kanpur TAN/PAN:AHEPD2111L (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Advocate Respondent by: Shri Sunil Kumar Rajwanshi, D.R. O R D E R This appeal has been preferred by the Assessee against order dated 07.02.2024, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.
2.0 The brief facts of the case are that the assessee filed her return of income for the year under consideration on 14.09.2017, declaring a total income of Rs.7,91,625/-, claiming Long Term Capital Loss of Rs.8,69,268/-. The Centralized Processing Centre (CPC), Bangalore processed the return of the assessee under section 143(1) of the Income Tax Act, 1961 (hereinafter called “the Act’) and passed an order dated 11.01.2019, computing the total income of the assessee at Rs.34,46,712/-, thereby raising a demand of Rs.9,59,106/- as against the refund of Rs.39,250/- computed by the assessee. Against this order, the assessee filed an application under section 154 of the Act for rectification on the ground that the assessee had received the amounts on surrender of life insurance policies but had wrongly claimed capital loss whereas receipts from life insurance companies were exempt under section 10(10D) of the Act. However, the application filed by the assessee under section 154 of the Act was rejected by the CPC.
3.0 Aggrieved, the assessee preferred an appeal before the NFAC, which dismissed the appeal of the Assessee by holding that, on facts, the insurance policy receipts were not exempt under section 10(10D) of the Act in the present case.
4.0 Now, the assessee has approached this Tribunal challenging impugned order of the NFAC by raising the following grounds of appeal:
1. That CIT(A), NFAC has erred on facts and in law in disregarding the rectification return filed by the assessee on 02.09.2019 in response to order u/s 143(1).
2. That the CIT(A), NFAC has erred on facts and in law in not considering that the maturity amount of life insurance policies is inclusive of the premium amount already paid by the assessee, hence, taxing the same results in double taxation, therefore, the orders u/s 154 and 143(1) are incorrect and shall be quashed.
That the maturity amount of Rs.32,87,304/ of the life insurance policies is inclusive of premium paid by the assessee amounting to Rs.27,15,508/- which has already been accounted as income in earlier years and tax has already been paid on the same. Taxing the same again would result in double taxation and hence, the order being Incorrect be quashed.
That the CIT(A) has erred on facts and in law by disregarding the principals laid down under rule 46A(3) in as much as, no remand report in response to the petition u/r 46A filed by the assessee has been sought, hence, the appellate order u/s 250 being bad in law be quashed. 5.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that in this case the assessee had received the impugned amount on surrendering Life Insurance Policies and the same was claimed as capital receipts in rectification application moved under section 154 of the Act. It was submitted that the impugned amount received on such surrender was not received against any Keyman Policy, but pertained to Life Insurance Policies from Life Insurance Corporation of India and Bajaj Allianz Life Insurance Co. Ltd. and, therefore, this amount was rightly claimed as being exempt under section 10(10D) of the Act in the rectification application filed under section 154 of the Act. It was further submitted that the assessee had never claimed any rebate of the insurance premiums paid under section 80C of the Act and, therefore, whatever amount was received by the assessee was the actual refund of the amount invested by the assessee earlier along with bonus, which had been credited to the Life Insurance Policies from time to time. The Ld. A.R. submitted that the Ld. First Appellate Authority had wrongly disallowed the assessee’s claim of exemption under section 10(10D)(d) of the Act. He argued that the maturity amount of Rs.32,87,304/ of the life insurance policies was inclusive of premium paid by the assessee, amounting to Rs.27,15,508/-, which had already been accounted as income in earlier years and tax had already been paid on the same and, therefore, taxing the same again would result in double taxation. It was prayed that the assessee be given benefit of exemption on the amount received on such surrender of the Life Insurance Policies or alternatively only the surplus/bonus received should be taxed.
6.0 Per contra, the Ld. Sr. D.R. referred to para 5 of the impugned order and submitted that the Ld. First Appellate Authority had rightfully rejected the assessee’s claim for the simple reason that the annual premium in all the three policies exceeded 20% of the sum assured and, therefore, the amount received on surrender was specifically excluded in terms of section 10(10D)(d) of the Act. It was prayed that the assessee’s appeal be dismissed.
7.0 I have heard the rival submissions and have also perused the material on record. The only dispute before me is whether the amounts received in the present appeal on surrender of Life Insurance Policies can be claimed as exempt in terms of section 10(10D) of the Act. The assessee has filed a chart containing the status of the policies which is placed at page 41 of the paper book. This chart is being reproduced hereunder for ready reference:
Date of Rebate/ Policy Premium Maturity Sum Assured Commenceme Deduction Details amount received/date nt claimed LIC Single Rs.11,25,000/- Premium Rs.25,00,000/- 07.09.2006 Rs.18,58,750/- 0 Policy No. on 15.10.2016 233615029 Bajaj Allianz Rs.10,22,849/- Rs.4,03,192/ Policy No. Rs.8,40,000/- 28.10.2011 0 - on 21.10.2016 0235591872 Bajaj Allianz Rs.11,50,706/- Rs.4,53,566/ Policy No. Rs.9,45,000/- 28.12.2011 0 - on 29.11.2016 0245213908 7.1 Apart from the above chart, the Ld. A.R. has also filed status report obtained from two Insurance Companies, which have been placed at pages 4 to 6 of the paper book filed by the assessee. A perusal of the same shows that policy bearing No.233615029 issued by Life Insurance Corporation of India was for a sum assured of Rs.25 lakhs and it was a single premium policy and the single instalment was of Rs.18,58,750/-. Similarly, policy No.0235591872 issued by Bajaj Allianz Life Insurance Co. Ltd. was for a sum assured of Rs.8,40,000/- and the annual premium was of Rs.4,03,192/-. Similarly, the third policy bearing No.0245213908 issued again by Bajaj Allianz Life Insurance Co. Ltd. was for a sum assured of Rs.9,45,000/- and the annual premium amount was of Rs.4,53,566/-. Thus, undisputedly, in all of the three policies, the annual premium exceeded 10% of the sum assured. Section 10(10D)(d) of the Act specifically prohibits exemption of any sum received under a Life Insurance Policy including the sum allocated by way of bonus on such policy in respect of which the premium payable for any of years during the term of the policy exceeds ten percent of the actual capital sum assured. Thus, as per specific provision of the Act, since the annual premium of all the three policies exceeded 10% of the sum assured, the benefit of exemption under section 10(10D) of the Act would not be available to the assessee. The Ld. A.R. has taken an alternative plea that since the assessee had not claimed any deduction in terms of section 80C of the Act while making the payment of premiums, what was being returned by the Insurance Companies was in effect the money belonging to the assessee along with the accrued bonus and, therefore, only the surplus should be taxed. However, this submission of the Ld. A.R. is also not acceptable inasmuch as section 80C (3) of the Act specifically provides that deduction under section 80C of the Act shall be allowable only to so much of any premium as is not in excess of twenty per cent of the actual capital sum assured. As is seen, in all the three policies, the premium paid was more than 20% of the actual sum assured and, therefore, the assessee could not have in any way claimed the deduction in terms of section 80C of the Act. Accordingly, I find no reason to differ from the view taken by the Ld. First Appellate Authority and I uphold the same while dismissing the grounds raised by the assessee.