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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 ..... 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 surrender/maturity of the policy. Hence, the exempt income of Rs.14,74,492.91/- regarding which the assessee has claimed exemption, is brought to tax. *As per Act, the assessee is entitled to claim exemption u/s 10(10D) of the Act on the receipts of Rs.32,74,492.91/- received upon surrender/maturity of the policy, but since, the assessee has violated the provisions of section 10(10D)(c ) of the Act, therefore, it is held that the assessee cannot claim exemption u/s 10(10D). *The assessee is entitled to claim the exemption (u/s 10(10D) on the entire sum received upon the maturity/surrender of the life insurance policy (subject to the fulfilling of conditions mentioned therein) i.e. Rs.32,74,492.91/-. It means that if he does not fulfill the conditions mentioned in the relevant section then the exemption will be withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 actively (by jotting down the section in his submission), but by not offering the entire amount of Rs.32,74,492.91/- for taxation, he has taken exemption for the entire amount of Rs.32,74,492.91/- (irrespective of the section of Act mentioned by him in his submission). Therefore, the entire amount of Rs.32,74,492.91/- is required to be brought under the tax net. *Therefore, in the light of the above discussion, an addition of Rs.32,74,492.91/- is made under the head "income from other sources." 4. Aggrieved by this order the assessee went in appeal before ld. CIT(A) before whom assessee placed reliance on the following written submissions:- "The appellant was interested in investing the money in share market but since the appellant does not have knowledge of share market he has decided to invest his surplus fund on regular b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 but is taxable. Therefore, the Learned A.O. cannot force the appellant to claim exemption u/s 10(10D) of the Act. Importantly, the appellant has not claimed SIP (so-called premium) u/s 80C of the Act. It was not the intention of the appellant to claim the deduction u/s 80C of the Act on account of so-called premium. The appellant was interested to double the investment within 4 to 5 years only. He was tempted by the agent who directed the appellant to make investment in the so-called Mutual Fund controlled by ICICI Pru. Life Insurance Company. It may also be noted that the capital of the appellant is increased by the profit of Rs.14,74,492.91/-. Therefore, even the addition is to be made. It would be up to the amount by which the capital is increased. In view of the above, the Learned A.O. is not justified in taxing the full amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 obtain and submit a certificate from ICICI regarding STT on the redemption/surrendered value of the units for exemption u/s 10(38), but as on date he is unable to submit the same, therefore, the above working is prepared. (refer Para-12.5 at page 13 of the asst. order). In view of the facts available on record and submissions made, it may kindly be held that the A.O. has wrongly made addition of Rs.32,74,492/- against the above stated long-term capital gain of Rs.14,72,493 chargeable @ 10% + surcharge @ 3%." 5. After taking into consideration these sub missions of the assessee ld. CIT(A) partly allowed the appeal of the assessee. Aggrieved by this order of ld. CIT(A) now the Revenue is in appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket. 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.32,74,492.91 for which the cheque was issued to the appellant. The A.O. was not justified in treating the entire receipts as income of the appellant as only the surplus could have been considered for the purpose of taxation. As evident from above, the investment by the appellant was in a unit linked insurance policy in which major portion was invested in mutual funds and accordingly, the surplus on maturity of the policy should be treated as capital gain. Since no security transaction tax has been deducted at the time of transaction by the fund, the benefit of indexation will be available to the appellant. The last payment in the fund was made by the appellant on 25.08.2005 and the policy has been sur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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