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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi in DIN & Order No. ITBA/NFAC/S/250//2020-21/1031534011(1) vide order dated 16/03/2021 passed for the assessment year 2017-18.
The assessee has taken the following grounds of appeal:-
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“The learned Commissioner of Income Tax (Appeals) National Faceless Centre erred in law and on facts in confirming addition of Rs. 7,35,785/- made by Assessing Officer in respect of 1St INSTALLMENT RECEIVED FROM LIC FOR SINGLE PREMIUM POLICY U/S. 10(10D) OF THE ACT as against Rs. 61,103/- 2. The appellant reserves right to amend, to modify or to withdraw any ground of appeal.”
The brief facts of the case are that the assessee is an individual senior citizen deriving “income from other sources” only. During the year under consideration, the assessee received 1st installment of � 7,95,000/- from LIC in respect of one-time premium policy (single premium policy) after deduction of TDS of � 7,950/- u/s 194DA of the Income Tax Act, 1961 (Act). The assessee had paid one-time premium of � 38,63,753/- for a policy sum assured of � 53,00,000/- which exceeds 20% of capital sum assured, and therefore a portion of sum received (of 1st installment of � 7,95,000/- from LIC) is taxable u/s 10(10D) of the Act. While furnishing the original return of income, the assessee included entire 1st installment of � 7,95,000/- from LIC as taxable income without deducting therefrom proportionate premium paid on the aforesaid sum. Thereafter, the assessee furnished revised return of income declaring only the surplus of � 59,215/- as taxable income in respect of 1st installment of � 7,95,000/- received from LIC after deducting therefrom a sum of � 7,35,785/- (being the proportionate premium paid i.e. 15% of Rs. 38,63,753/- in respect of the aforesaid 1st installment of � 7,95,000/-). The assessee placed reliance on the CBDT circular number 7/2003 at paragraph 10.3 on taxability of maturity of policies under section 10(10D) which states that the income accruing on such policies (but not including the premium paid by the
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assessee) shall become taxable. However, while filing the revised return, as per the assessee, by way of bona-fide mistake, he incorrectly computed net surplus on the basis of surrender value received in February 2018, which was incorrect since the surrender was not done in assessment year 2017-18. However, the Ld. Assessing Officer brought the entire sum of � 7,35,785/- (7,95,000/- i.e. the 1st installment received by the assessee less � 59,215 being the sum already considered in the return of income by the assessee) as taxable income in the hands of the assessee. The Ld. CIT(A) confirmed the addition by observing as below:
“2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. Ground No. 1 and 2 are interrelated and regarding disallowance of Rs, 7,35,785/- as receipts of Rs. 7,95,000/- of 1st instalment of insurance policy. In original return of income, entire income was offered to tax. After revision of return of income, deduction of Rs. 7,95,000/- was claimed on account of proportionate cost of one time premium paid.
2.3.1 Assessee claimed that CBDT Circular No. 7/2003, dated 05.09.2003 provides that income accruing shall become taxable. On perusal of overall facts, it is seen that under section 10(10D) , sum received under issuance policy issued on or after 01.04.2012 was taxable where premium payable for any year exceeds the actual capital sum insured.
2.3.2 In this case, sum assured was Rs. 53,00,000/- and one time
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premium paid was Rs. 38,63,753/- which is more than 10% of the sum assured. Accordingly, sum received by the appellant is taxable. Hence, these grounds of appeal are dismissed.”
Before us, the Ld. Counsel for the assessee reiterated the arguments which were earlier placed before Ld. CIT(A) and relied upon the CBDT Circular number 7/2003 at paragraph 10.3 on taxability of maturity of policies under section 10(10D) to argue that the entire amount of 1st installment (less sum offered for tax by the assessee in the return of income) could not be subject to tax in the hands of the assessee in view of the above CBDT Circular. The assessee is entitled to deduct therefrom the proportionate principal amount paid for obtaining the aforesaid 1st installment. The Ld. Counsel for the assessee submitted that the assessee has also not claimed deduction of the premium paid under section 80C of the Act. The assessee also placed reliance on the decision of Kolkata Tribunal in the case of Sandeep Modi v DCITTS-184-ITAT- 2022 (Kol), which has held that on maturity of life insurance policy, where section 10(10D) does not apply, it is only the net income which is chargeable to tax in the hands of the assessee. The Ld. Departmental Representative in response relied upon the observations of Ld. CIT(A) in the appeal order.
We have heard the rival contentions and perused the material on record. In our considered view, we are in agreement with the Ld. Counsel for the assessee that he would be entitled to be taxed on the maturity amount received in terms of CBDT Circular number 7/2003 dated 5-9-2003 on taxability of maturity of policies under section 10(10D) of the Act, as per
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which only net income is chargeable to tax in the hands of the assessee. Accordingly, in the interest of justice, we set aside the order passed by Ld. CIT(A) to the file of Ld. Assessing Officer for re-computing the taxable amount of maturity amount of LIC received by the assessee in light of the CBDT Circular No. 7/2003 dated 5-9-2003 referred to above. The Ld. Assessing Officer is directed to work out the correct taxable amount in the hands of the assessee in terms of CBDT Circular No. 7/2003 dated 5-9-2003 referred to above.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 08-06-2022
Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 08/06/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद