Tribunal allows appeal, reduces taxable income, and criticizes unwarranted addition.

The Tribunal admitted the time-barred appeal, condoning the delay. Regarding the addition of Rs. 10,00,000/- as income from other sources, the Tribunal held that only the net amount of Rs. 3,09,000/- was taxable, deleting the additional amount. The Tribunal noted the confusion arising from TDS deduction on the entire maturity amount and found the CPC/AO's addition unwarranted. The appeal was allowed, and the order was pronounced on March 4, 2022.

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Issues Involved:
1. Whether the appeal filed by the assessee, which is time-barred by 21 days, should be admitted.
2. Whether the addition of Rs. 10,00,000/- as income from other sources by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] was justified.
3. Whether the premium paid on the maturity proceeds received from the Life Insurance Corporation (LIC) should be deducted to determine the correct taxable income.

Issue-wise Detailed Analysis:

1. Admission of Time-Barred Appeal:
The appeal filed by the assessee was time-barred by 21 days. However, after reviewing the reason for the delay, the Tribunal decided to condone the delay and admit the appeal for hearing.

2. Addition of Rs. 10,00,000/- as Income from Other Sources:
The assessee, an individual and promoter director of a company, had taken a single premium life insurance policy from SBI Life Insurance Co. Ltd. with a premium of Rs. 10,00,000/- maturing after 3 years. The maturity amount received was Rs. 13,09,000/-. The assessee reported the net income of Rs. 3,09,000/- (maturity amount minus premium paid) as "Income from Other Sources" in his Return of Income (ROI). However, the Central Processing Centre (CPC) added the entire premium amount of Rs. 10,00,000/- as income from other sources, which was upheld by the CIT(A).

The CIT(A) reasoned that under Section 10(10D) of the Income Tax Act, for policies issued on or after April 1, 2012, the exemption is available only if the premium amount does not exceed 10% of the actual capital sum assured. Since the assessee’s policy did not meet this condition, the entire maturity proceeds were taxable.

3. Deduction of Premium Paid from Maturity Proceeds:
The assessee argued that the premium amount of Rs. 10,00,000/- was paid from his already taxed income, and only the income component of Rs. 3,09,000/- should be taxable. The confusion arose because SBI deducted TDS at 1% on the entire maturity amount of Rs. 13,09,000/-. The assessee contended that TDS should have been deducted only on the net income component of Rs. 3,09,000/-.

The Tribunal noted that the government had acknowledged this issue in the Finance No. 2 Bill 2019, proposing TDS on the net income component rather than the gross amount. The Tribunal found that the assessee neither claimed any deduction under Section 80C nor under Section 10(10D) and had correctly offered Rs. 3,09,000/- for tax. Thus, the addition of Rs. 10,00,000/- by CPC/AO was unwarranted.

Conclusion:
The Tribunal concluded that only the net amount of Rs. 3,09,000/- was taxable, which the assessee had already offered in his ROI. The addition of Rs. 10,00,000/- was directed to be deleted, and the appeal was allowed.

Order Pronouncement:
The appeal of the assessee was allowed, and the order was pronounced in the open court on March 4, 2022.

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