TaxTMI 
TaxTMI 
2025 (9) TMI 282
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....horities erred in not granting exemption to the capital gains earned under section 10(38) of the Act. 5. The appellant submits that both the lower authorities erred in not allowing the benefit of indexation while computing "Capital Gains" in respect of the surrendered insurance policy. 6. Both the lower authorities erred in taxing the surrender proceeds from the insurance policy under the head "Income from Other Sources'. 7. Without prejudice to the ground nos. 1 to 6 above, if the surrender proceeds of the insurance policy are to be taxed under the head "income from Other Sources", the premium paid should be allowed as a deduction under section 57, following the 'real income theory'. 2. The assessee vide application dated 14.07.2025 as raised following additional ground of appeal: "The assessing officer erred in not granting credit for tax deducted at source of Rs. 60,145/- by HDFC Life Insurance Company Limited, even though the same was appearing in 26AS of the said assessment year." 3. Rival submissions of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits that he h....
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...." in which 80-100% of fund value is invested in equity market and, therefore, the underlying units represent investments made in equity markets for a period of almost seven years and gains were required to be exempt under section 10(38) of the Act. Considering the exemption granted to shares and mutual fund unit. 4. The assessee in alternative submitted that to treat sum as a non-equity investment subject to tax @ 20% being long term capital asset as per provisions of section 112. The working was also provided to the assessing officer wherein it resulted into capital loss. In other alternative, the ld AR of the assessee explained that tax is required to levied on real income and the assessing officer was required to allow deduction of the premium of Rs. 20.00 lakhs being cost of acquisition of the policy underlying the units. The assessing officer disregarded the submissions of assessee and held that redemption proceeds are governed by the provisions of section 10(10D) and that case of assessee falls within exception and the assessee is not entitled for exemption and treated the entire sum of Rs. 30,07,227/- as chargeable to tax. The ld. CIT(A) held that section 2(14)(c) specifi....
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....023 w.e.f. 1" April, 2024 which, thereafter, includes any sum referred to Section 56(2)(xiii). Section 56(2)(xiii) was simultaneously inserted by the Finance Act 2023 w.e.f. 1 April, 2024 which has made provision for taxing under the head "Income from Other Sources", maturity of certain Life Insurance Policies, other than a ULIP, which Policies are not exempt under section 10(10D). Prior to this insertion in Section 56(2)(xiii) and correspondingly in Section 2(24)(xviid), there was no provision to tax the maturity proceeds of a Life Insurance Policy as income. This is besides the fact that even today ULIPs are excluded from such taxation under "Income from Other Sources". The only rationale for this is that ULIPs are like any other investment scheme, and the gains on redemption can only be taxed under the head "capital gains". It was submitted that in a series of decision, Tribunal held that a ULIP amounts to a capital asset even prior to the insertion of section 2(14)(c) and the redemption proceeds are required to be taxed under the head capita gain after allowing indexation cost. To support his submission, the ld. AR relied upon the following decision: * Mihir K. Jhaveri....
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....rought that surrender value of ULIP to tax by taking view that the assessee has not invested in blue chips fund directly. It is the HDFC after receipt of premium from policy holders invested. The investment made in a Life Insurance Policy and the sums so received is governed by the provisions of section 10(10D) of the Act. The ld CIT(A) confirmed the action of AO by taking view that the assessee purchased policy in question in 2010-11and entire premium of Rs. 20.00 lacs was paid in single premium. It was noted that this policy is covered by clause-c of section 10(10D). It is not covered by the exemption under section 10(10D) and hence suffered TDS under section 194DA. The ld CIT(A) also applied the 4th and 5th Proviso of section 10(10D) and held that the receipt is taxable under the head 'other sources". 8. I find that 4th and 5th Proviso of section 10(10D) were inserted in the Act w.e.f. 01.04.2021 and thus not applicable on the present case which relates to AY 2017-18. Further, mere making TDS any receipt does not determine its nature or chargeability to tax or head of income. I find that division bench of Mumbai Tribunal in Mihir K Jhaveri Vs CIT (supra) on almost similar set....
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....red 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 u/s 10(10D) of the Act. Section 10(10D) provides exemption qua the life insurance schemes. It is pertinent to note that a new provision has been inserted w.e.f. 01.04.2021 by Finance Act, 2021 i.e. Section 45(1B) of the Act which reads as under:- 45(1B) "Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any amount under a unit linked insurance policy, to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth provisos thereof, including the amount allocated by way of bonus on such policy, then, any profits or gains arising from receipt of such amount by such person shall be chargeable to income-tax under the head "Capital gains" and shall be deemed to be the income of such person of the previous year in which such amount was received and the income taxable shall be calculated in ....