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TMI Blog2012 (10) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... : D.K. TYAGI, JUDICIAL MEMBER This is Revenue s appeal against the order of ld. CIT(A)-XIV, Ahmedabad dated 26.09.2011. 2. The effective ground taken by the Revenue is as under:- The Ld. Commissioner of Income Tax (A) has erred in law and on facts in directing the Assessing Officer to treat the sale consideration of the units of an insurance policy as the amount received on account of maturity of the policy, and the cost of investment as the amount invested by the Assessee, and work out of the Long Term Capital Gain and tax payable thereon. 3. This ground relates to addition of Rs.32,74,492/- made by the A.O. While making this addition the A.O. observed as under:- After careful consideration of the facts of the case, material on record, reply furnished by the assessee and the legal provisions of the Act, the undersigned has arrived at the following conclusion, which is discussed below: *It is held that the investment made by the assessee on ICICI Pru. Life is an insurance policy and not a mutual fund. *Since the investment in life insurance kpolicy, hence it is held that the assessee has wrongly claimed exemption u/s 10(35) of the Act on the receipts on surr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m should be exempted from taxation. In this regard, the Act has a provision in the form of section 80C, where the assessee can claim deduction at the time of investment up to Rs.1,00,000/- per annum. If the assessee has not availed the benefits of section 80C because of reasons known to him (may be he had claimed deduction or other investments in the relevant Assessment Years), and/or has invested more sum in the life insurance policy than is allowable for deduction u/s 80C, then it is poor tax planning on his part or, his concern to which taxability of proceeds on surrender of policy is not related. Since it is clearly mentioned in the relevant section 10(10D) that the assessee is liable to get total (100%) exemption of sum received upon surrender/maturity of the insurance policy, therefore, upon withdrawal of exemption due to valuation of enabling conditions of the exemption, total sum of Rs.32,74,492.91/- (upon surrender of policy) is taxable. The argument of the assessee that he has not claimed exemption u/s 10(20D) hardly matters as he has kept the entire amount on surrender of policy (Rs.32,74,492.91/-) tax free. Though he ha not availed the benefit of the said section active ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of investment and realization of investment from Maximiser Fund, the Unit-link based fund controlled by ICICI Pru. Life Insurance Company. The Learned A.O. is of the opinion that since the fund is controlled by ICICI Pru. Life Insurance Company, the amount received on that account would be treated as surrender value of the Policy. In respect of this behalf of the Learned A.O. the appellant would like to submit that no prudent person will invest yearly 3 lacs or more against the life coverage of Rs.1,00,000/-. This is absurd. The Learned A.O. has tried to establish that the exemption provided u/s 10(35) of the Act is not available to the appellant looking to the documents collected from ICICI Pru. Life Insurance Company. Therefore, the available section for exemption is u/s 10(10D) only. The appellant has neither claimed the exemption u/s 10(10D) of the Act nor under section 10(35) of the Act. It was belief of the appellant that the gain arises from investment in Maximiser Fund (100%) equity oriented) would be exempted looking to the exemption for long term capital gain if the shares/security held for more than 1 year. However, it is found that the same is not exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee (Pg. No.19-20) as enclosure to the assessment order. In this Statement of Account the premium collected is allocated to Protector Fund initially and later on switched to the Maximiser Fund . The NO. of units bought and its Net Asset Value as on date is also distinctively mentioned therein. Thus, this very document which the A.O. has made part of the Assessment Order unequivocally goes to prove beyond doubt that it is an investment in Mutual Fund and therefore eligible for Capital gain. In the appellant case, it is a long term capital gain as per working given below. Working of Long Term Capital Gain: Sale Consideration received on account of sale of Units of Maximiser Mutual Fund of ICICI Rs.32,74,493/- Less: Cost of Investment + Charges As per Page 19 being enclosure to The order .. Rs.18,00,000/- Long term Capital Gain accrued on sale Of Units .Rs.14,72,493/- Tax (without taking benefit of indexation) Under section 112(1) @10% on Rs.14,72,493 Rs.1,47,249/- Add: Surcharge @ 3%...........................Rs.4,417/- Tax Payable Rs.1,51,666/- As the appellant was to ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . After careful perusal of all the facts, it is evident that the policy purchased by the appellant was a unit linked insurance policy. In this type of policy, out of the premium paid during the year, a small portion of the investment goes towards providing the life cover to the person and the residual portion is invested in a fund which in turn invests in stocks or bonds. The value of investment grows or declines as per the type of the investment made by the fund. The investor also has a choice to choose between the equity based funds or the bond based funds. The investor also can regularly change his investment from one type of fund to another considering the overall scenario of the equity market. These kind of changes are called switch . At the time of the maturity, the investor is paid the amount equal to the value of the units of the date of maturity. It is observed from the statement of account of the policy which has been enclosed to the assessment order by the A.O. that the appellant initially opted for investment in protector fund and later on is switched certain part of maximiser fund. At the time of surrender i.e. on 21.08.2007, the full value of policy was Rs.32,74, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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