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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 ..... estment and not towards insurance or hedging of life risk. The amount of premium paid by the assessee, which was more than 20% of the sum assured was, in fact, investment made by the assessee. However, it is pertinent to note here that as per section 10(10D)(d), entire maturity amount received including sum assured has been excluded of the policies in respect of premium payable for any of the years exceeds 20% of the sum assured. Meaning thereby, the exclusion is not for any amount received over and above the sum assured, rather the entire amount received under the policy has been excluded. Therefore, the entire maturity value/gains at the time of extinguishment of the rights of the assessee in the said policy i.e. on the date of maturity are liable to be treated as capital gains. While computing the capital gains, the cost of acquisition will be taken the amount paid towards premium minus 20% of the sum assured, which amount shall be treated as not part of the investment rather towards the cost of hedging of risk under the insurance policy, for which a deduction is already available to that extent under sub section (2A) to section 88 and thereafter, indexation is to be allowed acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax effect -As above) 5. Even otherwise, the Ld. Appellate Authority while arbitrarily concluding the taxability of Single Premium Insurance Policy only under the head Other Sources , ought to have appreciated that, vide Sec. 56(2)(iv) / Sec. 2(24)(xi) such income head specifies maturity of Keyman Insurance Policy (with all Bonus and other accretions) only, implying the inapplicability thereof to other kinds of Life Insurance Policies.(Tax effect As above) 6. The Appellant craves leave to go for additional grounds, withdraw, modify, supplement, etc. any or all of the existing grounds, either before or during the Appeal Hearing. 2. The relevant issue which requires adjudication in this appeal is as to whether (i) a life insurance policy is a capital asset and whether (ii) proceeds of a maturity of a single/double premium life insurance policy are to be assessed as Long-term capital gain (LTCG) or under the head Income from other sources . 3. The brief facts of the case are that the appellant-assessee, in this case, is an individual. He filed his return of income on 03.01.2018 declaring total income of Rs. 4,21,900 and carried forward a loss of Rs. 3,26,569/-. During the year, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the proceeds received by her and after taking benefit of indexation for the premiums paid in the F.Ys 2006-07 and 2007-08, declared a long term loss of Rs. 3,26,569/- in the return of income. The CPC while processing the return, disallowed the same and made an addition of Rs. 18,14,072/- under the head income from other sources. 6.3 It appears that the CPC made the above adjustment on account of the fact that as per Form 26AS, TDS was effected u/s. 194DA of the Act on the above payment of the maturity proceeds. The moot question here is, whether an insurance policy is a capital asset or not. It is observed that 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 10(10A) of the I.T. Act. These are in the nature of income liable for taxation u/s. 56 of the Act. It is an insurance policy and not an asset. The policy holder buys a policy to cover certain risks and not the asset per se. The policy entitles the holder to certain events, which is the general feature of any insura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emium payments Rs. 4,91,269 and Rs. 4,96,280 respectively has been claimed, given its Investment character only. The appellant sincerely believes that in the light of the previous submission as well as the present clarification, the merit of the Appeal would be kindly upheld. In view of the above submission, as the appellant has not taken any deduction in the AYs. 2007-08 and 2008-09, it is held that the accretion value (Maturity Value - Premium paid) which comes out to Rs. 8,26,523 (Rs. 18,14,072/- minus Rs. 9,87,549) will be taxable u/s. 56 of the Act. 6.6 I have also gone through the decision of Hon'ble ITA T Ahmedabad relied upon by the appellant in the case of Girish Haribhai Trivedi in ITA no. 2986/Ahd/2011 dated 13.07.2012 wherein it is held that the insurance policy the proceeds of which are not exempt u/s. 10(100) of the Act, is a capital asset and the surplus on the maturity of the policy is to be treated as capital gains. However, the above case law is distinguishable from the instant case on the basis of facts and is also not binding on the AO of the appellant. The main reason for relief in Girish Haribhai Trivedi(supra)was that the policy taken by the appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total premium paid was Rs. 9,87,49/-. The term of the policy was 10 years. Though the sum assured on the life of the assessee was Rs. 13,00,000/-, however, the assessee received a maturity amount of the policy at Rs. 18,14,072/-. In view of the above undisputed facts of the case, considering the amount of premium paid, the sum assured on the life and the actual maturity value received by the assessee, it is apparent that there were two elements embedded in the policy. Firstly, the hedging of the risk of life and related benefits as are available under a simple life insurance policy; secondly, the element of investment. 6. Before the substitution of section 10(10D) of the Income Tax Act by Finance Act 2003 w.e.f 01.04.2004, any sum received under a life insurance policy included sum allocated by way of bonus of such policy was exempt from taxation. However, with effect from 01.04.2004, the following substituted section 10(10D) was introduced: Section 10 : In computing the total income of a previous year of any person, any income falling within following clauses shall not be included: [(10D) any sum received under a life insurance policy, including the sum allocated by way of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on any sum received under an insurance policy in respect of which the premium paid in any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured. However, any sum received under such policy on the death of a person shall continue to be exempt. It is also proposed to clarify that the value of any premiums agreed to he returned or of any benefit by way of bonus or otherwise, over and above the sum actually assured, which is to be or may be received under the policy by any person, shall not be taken into account for the purpose of calculating the actual capital sum assured under this clause. The new provision also provides that the amounts received under sub-section (3) of section 80DD, shall not be exempt under this clause , It is also proposed to insert a new sub-section (2A) in section 88 which seeks to provide that the deduction in respect of the sum paid or deposited as premium under an insurance policy shall be available only on so much of the premium or other payment made on an insurance policy, other than a contract for a deferred annuity, as is not in excess of twenty percent of the actual sum assured. It is also proposed to cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), (c) any unit linked insurance policy to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth provisos thereof,] but does not include- (i) any stock-in-trade [other than the securities referred to in sub-clause (b)], consumable stores or raw materials held for the purposes of his business or profession; (ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but exclude,- (a) jewellery; (b) archaeological collections; (c) drawings; (d) paintings; (e) sculptures; or (f) any work of art. [Explanation] For the purposes of this sub-clause, jewellery includes- (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2(24) of the Act, capital asset means property of any kind held by an assessee, including any unit linked insurance policy to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth provisos thereof except stock in trade, personal effects etc., the agricultural land and gold bonds and special bearer bonds as mentioned therein. The Parliament while substituting section 10(10D) and inserting section (2A) to section 88 has denied the benefit of exemption and deduction in respect of policies, which are similar to deposits/investments and also has treated the premium paid over and above of 20% of the sum assured towards investment and not towards insurance or hedging of life risk. In view of the above, it can be safely assumed that the amount of premium paid by the assessee, which was more than 20% of the sum assured was, in fact, investment made by the assessee. However, it is pertinent to note here that as per section 10(10D)(d), entire maturity amount received including sum assured has been excluded of the policies in respect of premium payable for any of the years exceeds 20% of the sum assured. Meaning thereby, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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