2022 (8) TMI 519

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.... stated in brief. The assessee is a salaried person. He had taken an insurance policy with ICICI Prudential Insurance Company in an earlier year. The assessee had paid premium amount of Rs. 6,90,767/-. During the year under consideration the assessee surrendered insurance policy and received surrendered value of Rs. 3,69,999/-. The Insurance company deducted TDS of Rs. 3,700/- under section 194DA of the Act from the above said payment. Since the assessee did not earn any income and rather suffered a loss of Rs. 3,20,768/-, the assessee did not offer any income for taxation out of the maturity amount received by him. The return of income filed by the assessee was processed under section 143(1)(a) of the Act. Since there was TDS amount of Rs.....

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....rocess, the assessee has actually incurred a loss of Rs. 3,20,768/-. Explaining further learned AR submitted that the assessee had paid premium (total amount invested) of Rs.6,90,768/-, but received a sum of Rs. 3,69,999/- only upon surrendering of the policy. Hence, the assessee has incurred a loss of Rs. 3,20,768/-. Accordingly, the Ld A.R submitted that the surrender value of amount received by the assessee should not have been taxed in the hands of the assessee. He further submitted that the income tax can be levied on the income earned by the assessee. Hence the deduction of TDS from the surrender value is not relevant. He submitted that the TDS u/s 194C of the Act is deducted from the gross contract receipts, but what is taxed is the ....

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.... it was contended that the addition of Rs.3,69,999/- made by AO is not justified as no income element is involved in the above said amount. 8. I find merit in the above said contention of learned AR. The insurance sector was under the control of public sector undertakings only. With the liberalization of economy, insurance sector was opened up to private players also. Many private insurance companies have introduced innovative insurance products of different kinds, which combined life insurance with the high return, i.e., the premium collected were invested in Stock markets also and the "Net Asset value" of insurance product was also declared. Hence, such kind of insurance products combine the elements of insurance and investment, i.e., ....