2024 (9) TMI 1191 - AT - Income Tax

Section 80CCC(2) inapplicable when no deduction claimed under 80CCC(1), LIC surrender proceeds need section 10(10D) examination (10D)

The ITAT Mumbai held that section 80CCC(2) was not applicable to the assessee as no deduction was claimed under section 80CCC(1). The tribunal ruled that ... Deduction in respect of contribution to certain pension funds u/s 80CCC(2) - Addition u/s 56 being accretion value on account of premature surrender of pension policies from LIC - HELD THAT:- On a plain reading of section 80CCC, it clear that 80CCC(2) is applicable only when the assessee is covered under sub section (1) i.e. where a deduction had been claimed and allowed under sub section (1). Admittedly, there has been no claim of deduction u/s 80CCC(1) of the Act by assessee and therefore 80CCC(2) is not applicable. However, in respect of the accretion of Rs. 16,39,726/- [ i.e. surrender value (51,23,726) - investment (34,84,000(] reference is required to be made to the provisions of section 10(10D) to determine whether this amount is exempt u/s 10(10D). For this limited purpose, the matter is restored to the file of AO to examine the eligibility of the proceeds from surrender of policy for exemption u/s 10(10D) of the Act. Appeal of the assessee is partly allowed. Issues:Interpretation of section 80CCC(2) of the Income-tax Act, 1961 regarding the taxation of accretion value on premature surrender of pension policies.Detailed Analysis:1. Background of the Case:The appeal was filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals) for Assessment Year 2015-16. The issue pertained to the accretion value of Rs. 16,39,726 on account of the premature surrender of pension policies from LIC.2. Facts and Arguments:The assessee had purchased three pension policies from LIC on different dates and surrendered them in 2014. The Assessing Officer (AO) added the accretion value to the income under section 56 of the Act. The assessee contended that since no deduction was claimed under chapter 6A in earlier years, the accretion value should not be taxed under section 80CCC(2).3. Decision of CIT(A):The Commissioner of Income Tax (Appeals) upheld the AO's decision and confirmed the addition of Rs. 16,39,726 under section 56 of the Act.4. Arguments Before ITAT:The assessee argued before the ITAT that the provisions of section 80CCC(2) should not apply as no deduction was claimed under section 80CCC(1). The assessee cited favorable decisions and judgments to support the argument.5. Counter-arguments by DR:The Departmental Representative contended that the interpretation of section 80CCC by the assessee was erroneous. The DR argued that the provisions of section 80CCC(2) do not require a deduction under section 80CCC(1) for taxation of accretion value.6. ITAT's Analysis and Decision:The ITAT carefully considered the submissions and the provisions of section 80CCC. It noted that section 80CCC(2) is applicable only when a deduction has been claimed and allowed under section 80CCC(1). Since the assessee did not claim a deduction under section 80CCC(1), section 80CCC(2) was held not applicable in this case.7. Restoration of the Matter:The ITAT directed the matter to be restored to the AO to examine the eligibility of the proceeds from the surrender of policy for exemption under section 10(10D) of the Act.8. Conclusion:In conclusion, the ITAT partially allowed the appeal of the assessee, ruling that the accretion value of Rs. 16,39,726 should not be taxed under section 80CCC(2) due to the non-claim of deduction under section 80CCC(1).This detailed analysis highlights the interpretation of section 80CCC(2) in the context of the taxation of accretion value on premature surrender of pension policies, providing a comprehensive overview of the legal proceedings and the ITAT's decision in the case.