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Facts
The assessee, a non-resident Indian, did not file a return for AY 2016-17 but received maturity proceeds from a life insurance policy, leading to a notice under section 148. The AO completed the assessment, taxing the premature withdrawal of the policy on the grounds that the annual premium exceeded 20% of the sum assured, which was confirmed by the CIT(A).
Held
The Tribunal observed that the lower authorities failed to discuss the terms of the life insurance policy and did not verify if the premium paid exceeded 20% of the sum assured. Consequently, to determine the true nature of the receipt, the matter was remanded to the AO for a de novo assessment.
Key Issues
Whether the maturity proceeds of a life insurance policy are taxable due to annual premiums exceeding 20% of the sum assured, and if the lower authorities properly examined the policy terms to ascertain the nature of the receipt.
Sections Cited
148, 139(1), 147, 144B, 10(10D)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 23.10.2023 for Assessment Year (AY) 2016-17.
Brief facts of the case are that the appellant is a non-resident Indian. No regular return of income under the provisions of section 139(1) of the Income Tax Act, 1961 (the Act) was filed for AY 2016-17. However, based on the information available on AIMS/Insights portal that the appellant had received maturity proceeds of Life Insurance policy in India, a notice u/s. 148 of the Act was issued on 30.03.2021. In Narayanan Mukundan response to the notice, the appellant filed return of income on 31.05.2021 disclosing income of Rs. 86,590/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward - 1(3), Thiruvananthapuram (hereinafter called "the AO") vide order dated 29.03.2022 passed u/s. 147 r.w.s. 144B of the Act at a total income of Rs. 12,74,680/-. While doing so, the AO brought to tax the difference of surrender value of life insurance policy on premature withdrawal and the amount paid, since the annual premium paid is more than 20% of the sum assured.
Aggrieved, who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before the Tribunal in the present appeal.
When the appeal was called on nobody appeared on behalf of the assessee despite due service of notice of hearing. Therefore, we proceeded to dispose of the appeal after hearing the learned Sr. DR.
From the grounds of appeal filed before this Tribunal, it will be clear that the appellant is seeking relief on the ground that the maturity proceeds of the life insurance is chargeable under the head “capital gains”. I have carefully perused the orders passed by the lower authorities. Provisions of section 10(10D) of the Act make it clear that any sum received under insurance policy in respect of which the premium payable for any of the years during the term of policy exceeds 20% of the sum assured, is taxable under the income Tax Act. A perusal Narayanan Mukundan of the orders of the lower authorities it is clear that the AO as well as the CIT(A) had no discussed the terms life insurance policy. It is not clear whether the premium paid exceeds 20% of the sum assured or not. Therefore, I am of the considered view that in order to determine the true nature of the receipt the matter requires remand to the file of the AO for de novo assessment in accordance with law.
In the result, the appeal filed by the assessee stands partly allowed.
Order pronounced in the open court on 27th March, 2025. 8.