1982 (5) TMI 103 - AT - Income Tax

Summary

Issues: Deduction of life insurance premia paid by the assessee for adult children under section 80C(2)(a) of the Income-tax Act, 1961 for the assessment year 1977-78.

Analysis:
The appeal before the Appellate Tribunal ITAT Hyderabad revolves around the deduction of life insurance premia paid by the assessee for her adult children under section 80C(2)(a) of the Income-tax Act, 1961 for the assessment year 1977-78. The Income Tax Officer (ITO) disallowed the claim based on the earlier assessment year's decision by the Assistant Commissioner of Income Tax (AAC), stating that the assessee was not eligible for the deduction as the children had become majors. The AAC reiterated his previous decision, emphasizing that when a minor becomes a major, they should adopt the policy in their name and pay the premiums themselves, which was not the case here. The assessee argued that similar claims for deduction were allowed in previous years and challenged the disallowance for the assessment year 1976-77 before the Commissioner in revision. The assessee contended that the provisions of section 80C(2)(a)(i) should apply, as she had paid insurance premia on her children's lives.

The Appellate Tribunal analyzed the provisions of section 80C(2)(a)(i) and concluded that the assessee was entitled to the deduction. The Tribunal noted that the assessee had paid insurance premia on her children's lives, which squarely falls under the said provision. The Tribunal highlighted that the legislative intent did not specify that the child mentioned in the provision must be a minor, as seen in other sections of the Income-tax Act. Referring to a departmental circular, the Tribunal supported the assessee's position regarding the interpretation of the law. Additionally, the Tribunal discussed the historical context of Children's Endowment Assurance Policies and how the benefit of such policies evolved over the years, emphasizing that the benefit was extended to fathers from the assessment year 1970-71 onwards.

Based on the above analysis, the Appellate Tribunal directed the ITO to allow the deduction claimed by the assessee and make the necessary amendments to the assessment. Consequently, the appeal was allowed in favor of the assessee.