ULIP surrender proceeds were not exempt, but tax was deferred because actual receipt occurred in the next financial year.

Surrender proceeds from a unit linked insurance plan were not treated as exempt under section 10(10D) because the policy was a non-participating ULIP without life insurance cover. However, taxability in the year under consideration depended on actual receipt, and the record showed the surrender request on 27.03.2014, cheque issuance on 04.04.2014, and credit only in the subsequent financial year. On that factual basis, the addition was deleted for the assessment year in question.

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Issues: Whether the surrender proceeds of the unit linked insurance plan were exempt under section 10(10D) and, in any event, taxable in the assessment year under consideration.

Analysis: The policy was found to be a non-participating unit linked plan without life insurance cover, so the claim for exemption under section 10(10D) was not accepted. However, the material on record showed that the surrender application was made on 27.03.2014, the cheque was issued on 04.04.2014, and the amount was actually credited only in the subsequent financial year. As the charging of such receipt depends on actual receipt, the addition could not be brought to tax in the year under consideration.

Conclusion: The exemption claim under section 10(10D) was rejected, but the addition was deleted for the assessment year in question because the amount was received in the subsequent financial year.

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