TMI Blog2020 (9) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of the provision. In this view of the matter, in our considered opinion, the assessee is not eligible to claim exemption under section 10(10D) of the Act on the maturity value of the Keyman Insurance Policy. Legislature in its own wisdom never intended that sum received on maturity of Keyman Insurance Policy is to be assessed under the head income from capital gain. Had it been the case, as the assessee wants us to believe, the legislature would not have restricted the assessability of the amount received under Keyman Insurance Policy to the three heads viz. salary, income from business and profession and income from other sources. In the facts of the present case, undisputedly, the sum received on maturity of Keyman Insurance Policy cannot be assessed either under the head salary or income from business and profession. Thus, the only other head under which it can be assessed is income from other sources as per section 56(2)(iv) of the Act and the Assessing Officer has assessed such income in accordance with the statutory provisions. Grounds raised by the assessee are dismissed. - ITA No. 175/Mum./2019 - - - Dated:- 3-9-2020 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain of Rs. 2,10,61,320, on the maturity value received from the Policy after availing indexation benefit on premium paid of Rs. 79,71,280, by treating it as cost of acquisition. After examining the return of income as well as the computation of total income furnished by the assessee in the course assessment proceedings, the Assessing Officer issued a show cause notice to the assessee requiring him to explain as to why the maturity value received on the Keyman Insurance Policy should not be assessed under the head salary as against the long term capital gain claimed by the assessee. 4. In response to the show cause notice, the assessee firstly claimed that the amount received on maturity of the insurance policy is not taxable as per section 10(10D) of the Act. It was submitted, since on assignment of the Keyman Insurance Policy it becomes a regular Insurance Policy in the name of the assessee, it is covered under the exemption provision of section 10(10D) of the Act. Further, it was submitted by the assessee that since the Insurance Policy is a capital asset, the gain derived from the maturity value of the Policy has to be treated as long term capital gain. Of course, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to an ordinary Insurance Policy prior to the amendment to Explanation 1 to section 10(10D) of the Act, which is prospective, it will not be applicable to the assessee. In this context he relied upon the decision of the Hon ble apex court in case of CIT V/s Vatika Township (P) Ltd. [2014] 49 taxmann.com 249 (SC). Thus, he submitted, the maturity value received by the assessee will be covered by exemption provision contained under section 10(10D) of the Act. In support of such contention, the learned Authorised Representative relied upon the following decisions: i) Brahm Dutt v/s ACIT, W.P(C) no.1109/2016, dated 06.12.2018 (Del. HC); ii) Prashant J. Agrawal, (2016) 243 taxman 119; and iii) DCIT v/s Rajan Nanda, [2013] 37 taxman.com 335 (Del.) (Trib.). 7. Without prejudice, the learned Authorised Representative submitted, if at all it is held that the maturity value of the Insurance Policy is taxable at the hands of the assessee, it can only be taxed as long term capital gain. He submitted, investment made by way of premium in the LIC Policy certainly is a capital asset. Therefore, the LIC Policy is covered u/s 2(14) of the Act. That being the case, the profit/gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 10(10D) of the Act, however, he himself has offered the gain derived from the maturity value of the Insurance Policy as income under the head capital gain. 10. Keeping in perspective the aforesaid factual position, we may proceed to examine assessee s claim of exemption under section 10(10D) of the Act. It is not disputed that when the policy was taken out in the name of the assessee by the erstwhile partnership firm, it was a Keyman Insurance Policy. A reading of section 10(10D) of the Act would make it clear that any sum received under the LIC Policy including bonus would not be taxable. However, the aforesaid provision carves out certain exceptions as provided under clause (a) to (d). The aforesaid exceptions, inter alia, provide that any sum received under a Keyman Insurance Policy would not be eligible for exemption. It is the case of the assessee that on assignment of the Policy in the name of the assessee in the year 2009, it has ceased to be a Keyman Insurance Policy and has to be treated at par with regular Life Insurance Policy. Therefore, the maturity amount received is exempt under section 10(10D) of the Act. It is the further case of the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid payment of tax, the provision of section 10(10D) of the Act was amended to provide that Keyman Insurance Policy assigned during its term shall continue to be treated as a Keyman Insurance Policy, hence, would not be eligible for exemption under section 10(10D) of the Act. No doubt, the amendment to Explanation 1 to section 10(10D) of the Act is applicable from the assessment year 2014 15. If we apply the provisions of section 10(10D) of the Act to the facts of the present case, undisputedly, the Policy was assigned in the name of the assessee on 20th December 2009, whereas, it matured on 20th November 2014, i.e., during the previous year relevant to assessment year 2015 16. Thus, it is very much clear that at the time of maturity of the Keyman Insurance Policy, the amendment to section 10(10D) of the Act by way of Explanation 1, has already been made effective, therefore, would be applicable. That being the case, the maturity value received on the Keyman Insurance Policy would be taxable at the hands of the assessee. The decisions relied upon by the learned Authorised Representative having been rendered prior to the amendment to Explanation 1 to section 10(10D) of the Act, woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke it clear that a property to be considered as a capital asset under section 2(14) of the Act must be capable of being transferred as defined under section 2(47). In our view, life insurance policy is not a property which can be transferred in the mode and manner prescribed under section 2(47) of the Act. On maturity of a Life Insurance Policy, it is repudiated and the insured receives the maturity value along with bonus, if any, from the insurer. In such cases, there is no question of any transfer of property between the insured and insurer. At best, the LIC Policy can be pledged/assigned as a security/collateral for availing loan, etc. However, the insured always remains the owner of the property. In this regard, it is further beneficial to look into the provision contained under section 56(2)(iv) of the Act, which provides that income referred to in section (2)(24)(xi), if not chargeable under the head Profit or Gain of Business or Profession or under the head salary, would be taxable under the head income from other sources. A reference to section 2(24)(xi) of the Act would reveal that it speaks of any sum received under a Keyman Insurance Policy including bonus and for the me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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