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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT & DR. B.R.R.KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & DR. B.R.R.KUMAR, ACCOUNTANT MEMBER ITA No.1382/Del/2023 [Assessment Year : 2017-18] Subhash Tandon, vs ITO, J-3/44-A, Rajouri Garden, Ward-43(1), New Delhi-110027. New Delhi. PAN-AADPT7651D APPELLANT RESPONDENT Appellant by Shri D.R.Arora, CA Respondent by Shri Om Parkash, Sr.DR Date of Hearing 15.06.2023 Date of Pronouncement 17.08.2023
ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee for the assessment year 2017-18 is directed against the order of Ld. CIT(A), National faceless Appeal Centre (“NFAC”), Delhi dated 16.03.2023. 2. The assessee has raised following grounds of appeal:-
“That the learned CIT(A) erred both on facts and in law in subjecting to tax the gross redemption amount of insurance policies as income from other sources instead of treating the same as long term capital gain after deducting the indexed cost of the investment of the assessee from the gross redemption amount. 2. That the learned CIT(A) is wholly misconceived in stating that the assessee has claimed the entire redemption amount as tax free under section 10(100) of the Act. 3. That the learned CIT(A) has grossly failed to appreciate that the assessee has offered the long term capital gains on the redemption amounts for taxation after claiming the index cost in his computation of income. Page | 1
That the authorities below are absolutely wrong in taxing the amount of cost of investments made by assessee which by any means is not income but is refund of assessee's own money.” 3. Facts giving rise to the present appeal are that the assessee filed its return of income declaring income at Rs.3,40,826/-. The return was processed at Centralized Processing Center (“CPC”) at an income of Rs.10,61,250/- by making disallowance/adjustment of Rs.7,20,424/-.
Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, dismissed the appeal and sustained the addition.
Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal.
Ld. Counsel for the assessee submitted that the authorities below failed to appreciate the fact that the assessee has not claimed exemption u/s 10(10D) of the Act which is available for the life insurance. However, he had offered it as capital gain on account of the fact that this is related to Unit Linked Insurance Plan and that amount in question was out of the redemption proceeds from two Reliance Unit Linked Insurance Plans.
On the other hand, Ld. Sr. DR opposed the submissions and supported the orders of the authorities below.
We have heard Ld. Authorized Representatives of the parties and perused the material available on record. The grievance of the assessee is that the amount received on redemption/maturity of unit linked insurance scheme is subject to tax under the head “income from other sources” instead of capital Page | 2
gains as claimed by the assessee. The lower authorities have declined the claim of the assessee on the basis that section 10(10D) of the Act, does not provide exemption in the case where the premium paid exceeds the pecuniary limits. Therefore, entire receipt ought to have been offered as “income from other sources”. It is the case of the assessee that since it was a long term investment would be taxed under the head “capital gains”. Ld.CIT(A) decided this issue by observing as under:-
DETERMINATION AND DECISION 5.1. “The grounds of appeal taken by the appellant are against the action of the Assessing Officer on account of addition/adjustment of gross redemption amount of Rs. 7,20,424/- from insurance policies as income from other sources. 5.1.1. I have perused the order of the assessing Officer, submission of the appellant and material available on the record. The appellant filed its return of income for the assessment year under consideration and same was processed at CPC by disallowing the entire gross amount of redemption of insurance policies as income from other sources and taxed accordingly. The appellant contention that the CPC has wrongly taken the gross redemption of Rs.7,20,424/- from insurance policies and taxed the same under head income from other sources whereas the same should have been taxed under head 'Capital Gain' after allowing the credit of indexation of cost of acquisition. The appellant has submitted the calculation chart of capital gain on the redemption amount of life insurance policies. 5.1.2. The submission of the appellant has been considered but is not acceptable. The redemption receipts from life insurance policies covered under section 10(100) of the Income Tax Act, 1961 but not comes under purview of head capital gain. Further, the claim of the appellant has been examined under the provisions of section 10(10D) of the Income Tax Act. The case of the appellant falls under certain Page | 3
exceptional cases of section 10(10D) of the Income Tax Act, 1961, wherein, the exemption is not available under section 10(10D). Exclusions under section 10(10D) of the Income Tax Act- Exemption under section 10(10D) of the Income Tax Act is not available under the following circumstances- 1. Any sum received under section 80DD(3) of the Income Tax Act. Any sum received under section 80DDA(3) of the Income Tax Act. 2. Any amount received under the Keyman Insurance Policy. Please note 'Keyman Insurance Policy' means the life insurance policy taken by a person- On the life of another person who is (or was) the employee of the first mentioned person; or On the life of another person who is (or was) connected, in any manner, with the business of the first mentioned person. 3. Any sum received under an insurance policy, if the following criteria are satisfied- 1. The insurance policy issued on or after 1st April 2003 but on or before 31st March 2012. The premium payable, exceeds 20% of the actual capital sum assured, for any of the years (during the term of the policy). 2. The insurance policy issued on or after 1st April 2012 The premium payable, exceeds 10% of the actual capital sum assured, for any of the years (during the term of the policy). 5.1.3. In the case of the appellant, the insurance policy issued on or after 1st April 2003 but on or before 31st March 2012 and the premium payable, exceeds 20% of the actual capital sum assured, for any of the years (during the term of the policy, the whole maturity amount is taxable under the head income from other sources.
5.1.4 In view of the facts and circumstances of the case, I hold that CPC has rightly taxed the gross redemption from insurance policies under income from other sources. Therefore, the order passed by the CPC is hereby confirmed.” 9. In our considered view, the lower authorities have mis-directed themselves by not considering the distinction between the ordinary life insurance scheme and ULIP. In the assessee’s case, it is unit linked insurance scheme and is related to the units of mutual fund allotted to the assessee in respect of the money paid by him. Therefore, Ld.CIT(A) ought to have considered the issue from that perspective since the transactions are akin to mutual fund therefore, deserves same treatment. Merely, because life is insured by the transaction would not alter basic character of transaction. The CBDT has issued a circular regarding exemption u/s 10(10D) of the Act. Section 10(10D) provides exemption qua the life insurance schemes. It is pertinent to note that a new provision has been inserted w.e.f. 01.04.2021 by Finance Act, 2021 i.e. Section 45(1B) of the Act which reads as under:-
45(1B) “Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any amount under a unit linked insurance policy, to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth provisos thereof, including the amount allocated by way of bonus on such policy, then, any profits or gains arising from receipt of such amount by such person shall be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of such person of the previous year in which such amount was received and the income taxable shall be calculated in such manner as may be prescribed.]” 9.1. Now, question arises that what would be the fate of ULIP redeemed prior to insertion of this provision. The objective of inserting of this provision is stated to Page | 5
subject the matured/redeemed amount to tax which otherwise was exempt u/s 10(10D) of the Act. Hence, it can be construed the receipt fell under the head “capital gains” but not under “income from other sources”. We therefore, direct the AO to allow indexation and tax the amount under the head “capital gains”. The grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed in the terms indicated herein above.
Order pronounced in the open Court on 17th August, 2023.
Sd/- Sd/- (DR.B.R.R.KUMAR) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI