The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that Life being insured by transaction would not alter the basic character of transaction under Section 10(10D).
The assessee filed its return of income declaring income at Rs.3,40,826/-. The return was processed at Centralized Processing Center (“CPC”) at an income of Rs.10,61,250/- by making disallowance/adjustment of Rs.7,20,424/-
Aggrieved against this, the assessee preferred appeal before CIT(A), who after considering the submissions, dismissed the appeal and sustained the addition. Aggrieved against the order of CIT(A), the assessee appealed before the tribunal.
After hearing both the parties, the tribunal noted that the lower authorities have mis-directed themselves by not considering the distinction between the ordinary life insurance scheme and ULIP. In the assessee’s case, it is unit linked insurance scheme and is related to the units of mutual fund allotted to the assessee in respect of the money paid by him.
Therefore, CIT(A) ought to have considered the issue from that perspective since the transactions are akin to mutual fund therefore, deserves same treatment. Merely, because life is insured by the transaction would not alter basic character of transaction. The CBDT has issued a circular regarding exemption under section 10(10D) of the Act. Section 10(10D) provides exemption qua the life insurance schemes.
The objective of inserting of this provision is stated to subject the matured/redeemed amount to tax which otherwise was exempt under section 10(10D) of the Act, the bench observed.
Thus, the two member bench consisting of Dr.B.R.R Kumar (Accountant member) and Kul Bharat (Judicial member) held that it can be construed that the receipt fell under the head “capital gains” but not under “income from other sources”. The AO was directed to allow indexation benefit and tax the amount under the head “capital gains”.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
