2022 (6) TMI 453 - AT - Income Tax

Deduction u/s 10(10D) - 1st installment from LIC in respect of one-time premium policy (single premium policy) after deduction of TDS u/s 194DA - HELD THAT - 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 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. 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. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues involved:
- Appeal against order of National Faceless Appeal Centre regarding addition of income from LIC policy under section 10(10D) of the Income Tax Act, 1961.

Analysis:
1. Issue of Taxability of Income from LIC Policy:
- The appellant contested the addition of Rs. 7,35,785 made by the Assessing Officer regarding the 1st installment received from LIC for a single premium policy under section 10(10D) of the Act.
- The appellant argued that the entire amount of the 1st installment should not be taxable, citing CBDT Circular number 7/2003 which states that only the net income is chargeable to tax under section 10(10D).
- The appellant also highlighted that the proportionate premium paid should be deducted from the taxable amount, and the premium paid under section 80C was not claimed.
- The Kolkata Tribunal's decision in Sandeep Modi v DCIT was referenced, emphasizing that only the net income should be taxed in the case of maturity of a life insurance policy where section 10(10D) does not apply.

2. Judgment and Decision:
- The Judicial Member agreed with the appellant's arguments, stating that the appellant should be taxed on the maturity amount received based on CBDT Circular number 7/2003, which specifies that only the net income is taxable under section 10(10D).
- The order of the CIT(A) was set aside, and the Assessing Officer was directed to re-compute the taxable amount of the maturity amount received from LIC in accordance with the CBDT Circular number 7/2003.
- The decision allowed the appeal of the assessee for statistical purposes, emphasizing the importance of correctly computing the taxable amount in line with the CBDT Circular.

3. Conclusion:
- The judgment focused on the correct interpretation of section 10(10D) and the application of CBDT Circular number 7/2003 in determining the taxable amount of income from the LIC policy.
- The decision highlighted the significance of considering the net income for taxation purposes and directed the Assessing Officer to re-evaluate the taxable amount accordingly, ensuring adherence to the legal provisions and circulars provided.