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TMI Blog2022 (3) TMI 1605X X X X Extracts X X X X X X X X Extracts X X X X ..... viewing that Single Insurance Life Insurance Policy, named Bajaj Allianze Invest gain Policy, on its maturity, has given rise to "Other Sources" Income only, rather than "Long Term Capital Gain" and accordingly, his determination of income at Rs. 836523/-(the surplus over premium paid), instead of the long term capital loss of Rs. 326569/- (the negative surplus based on indexed cost) is contrary to both reason and law.(Tax effect - As above) 3. That on the facts and circumstances of the case and in law, the Ld. First Appellate Authority, while negating the claim of taxability of the income from Single Premium Insurance Policy under the head "Long Term Capital Gain" and accordingly, the emergence of Loss of Rs. 326569/- (on deduction of indexed cost of premium), should have appreciated their investment oriented features and thus, not have arbitrarily referred to Pension Fund contribution related Sec. 80CCC(2), to justify his stand.(Tax effect-As above) 4. That on the facts and circumstances of the case and in law, even otherwise, the Ld. First Appellate Authority ought to have appreciated that single/high premium policies, despite their exclusion from the ambit of exemption, vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 and 2008-09, therefore, the taxable income of the assessee will be arrived by deducting of the said amount of premium out of the maturity amount. The relevant part of the order of the CIT(A) is reproduced as under: "5. I have considered the facts of the case and the appellant's submissions. The Grounds of appeal are decided in the following paragraphs. 6. The Ground of appeal 1 to 4 are effectively against the treatment of the Insurance Maturity proceeds as an income from other source and not income from capital gain. Hence, these grounds are taken up and decided together. 6.1. I have gone through the documents furnished before me which include the Policy Schedule in the name of the appellant, the copies of two Policy Premium Payment Receipts aggregating to Rs. 9,87,549/- and the working of the Long Term Capital Gain on the maturity proceeds. It is observed from the Policy Schedule that The date of commencement of policy is 21.04.2006, sum assured is Rs. 13,00,000/- and the premium paying term is of 2 years. The above premiums were subsequently paid and the policy matured on 21.04.2016. During the year under consideration, the appellant received a sum of Rs. 17,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the issue of taxability of the maturity value of pension policy is covered by the provisions of Section 80CCC(2) of the Income Tax Act, 1961. ln view of the above, the proceeds from the maturity of a pension policy will be taxed as under: (i) Full maturity value will be taxable u/s. 56 of the Act where appellant has claimed any deduction under chapter VI-A of the Act in any year for premium paid in respect of said pension policy as per provisions of section 80CCC(2) of the Act. (ii) The accretion value (Maturity Value-Premium paid) will be taxable u/s. 58 of the Act where appellant has not claimed deduction under chapter VI-A of the Act for premium paid in respect of said pension policy. 6.4 The ascertain the taxability of the maturity proceeds, a notice of hearing was issued to the appellant requesting to furnish the following details- "On perusal of the submissions made by you, it is seen that payments for the premiums suggesting to Rs. 9,87,549/- against your Insurance Policy were made in the F. Vs. 200607 and 2007-08. In this regard, please state whether any tax deduction has been claimed against these premium payments in the respective A. Ys. 2007-08 and 2008-09. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to be misplaced. As discussed above in Para 6.3, the insurance policy taken by the appellant is in the nature of a pension policy wherein a sum assured is given at the end of the maturity term. The monies received from encashed pension policies do not come under the purview of exempted income as per section 1)910A) of the I.T Act. These are in the nature of income liable for taxation u/s. 56 of the Act. Hence, the AO has correctly brought to tax the insurance proceeds under the head of income from other sources. 6.8 In light of the above, I hereby restrict the addition at Rs. 8,23,523/- made by the AO under the head income from other sources and upheld the disallowance of loss made by the AO. Accordingly, Ground nos. 1 to 4 are 'Partly Allowed' in above terms." Being aggrieved by the above order of the ld. CIT(A), the assessee has come in appeal before this Tribunal. 5. I have heard the rival contentions of both the parties and also gone through the records. The assessee purchased a life insurance policy no. 00204468150 in the year 2006 with sum assured of Rs. 13,00,000/- with its date of commencement on 21.04.2016 and maturity date 21.04.2016. The annual premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under 30[sub-clause (c)], effect shall be given to the[Explanation to sub-section (3) of section 80C or the Explanation to sub-section (2A) of section 88, as the case may be] ..........." The memorandum explaining the provisions of Finance Bill, 2003 explains the rationale behind substitution of the original section 10(10D) with the substitution as under: "Under the existing provisions contained in clause (10D) of section 10, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, (other than any sum received under the a plicyfro the medical treatment, training and rehabilitation of a handicapped dependent u/s 80DDA or any sum received under the a Keyman insurance policy), is exempt. Under the existing provisions of section 88, a deduction from the income tax payable is allowed to an individual or a Hindu undivided family (HUF), in respect of any sums paid or deposited in PPF, GPE, NST, insurance premia, etc. The deduction is allowed at specified percentage of such sums. The insurance policies with high premium and minimum risk cover are similar to deposits or bonds. With a view to ensure that such insurance policies ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to provide that exemption earlier available in respect of any sum received under life insurance policy shall not be allowed on any sum received under a insurance policy in respect of which the premium paid in any of the years during the term of policy exceeds 20% of the actual capital sum assured. The purpose of bringing the aforesaid amendment/substitution of section 10(10D) was apparent that the Government did not intend to pass the exemption benefit of maturity sum received in respect of insurance policies in which the purpose of investment was embedded along with insurance. Therefore, it has been specifically held that these types of policies are similar to investments and bonds. On the same line, the new sub-section (2A) in section 88 has been inserted providing that the deduction in respect any premium or other payment paid on an insurance policy will not be allowed in excess of 20% of the actual capital sum assured. A perusal of the aforesaid provisions introduced w.e.f. 01.04.2004 would show that any sum paid in excess of 20% of the sum assured on an insurance policy is treated towards investment, however, deduction from the amount of income tax is available in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ten thousand ; or (b) in any area within the distance, measured aerially,- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation: For the purposes of this sub-clause, "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year; (iv) 6½ per cent Gold Bonds, 1977, [or 7 per cent Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government;] (v) Special Bearer Bonds, 1991, issued by the Central Government;] (vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 [or deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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