ABHAY MARUTI TODANKAR, NAVI MUMBAI V. CIT (A) NFAC, DEHI

ITA 696/MUM/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2132 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 17-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 154; 80C; 10(10D); 194C

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL “SMC” Bench, Mumbai Shri B.R. Baskaran (AM) I.T.A. No. 696/Mum/2022 (A.Y. 2017-18) Abhay Maruti Todankar Flat No. 502 5 th Floor, Krishna Kunj Plot No. 40A & B Sector 28, Nerul Navi Mumbai-400 706. PAN : ABYPT1441M Vs. CIT, NFAC Delhi (Appellant) (Respondent) Assessee by Shri Navin B. Gandhi Department by Ms. Naina Krishnakumar Date of Hearing 21.07.2022 Date of Pronouncement 28.07.2022 O R D E R The assessee has filed this appeal challenging the order dated 9.3.2022 passed by learned CIT(A), National Faceless Appeal Centre, Delhi and it relates to A.Y. 2017-18. 2. The assessee is aggrieved by the decision of learned CIT(A) in confirming the addition of Rs. 3,69,999/- made to the total income while processing assessment under section 143(1)(a) of the I.T. Act. 3. Facts relating to the issue are 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 Abhay Maruti Todankar 2 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. 3,700/-, the AO made adjustment to the total income by including the maturity amount of Rs. 3,69,999/- as income of the assessee while processing the return of income u/s 143(1)(a) of the Act. Accordingly, the tax demand was raised upon the assessee. Not agreeing with the adjustment so made, the assessee filed rectification application under section 154 of the Act but the same was rejected. Hence, the assessee filed appeal before learned CIT(A). 4. In the appellate proceedings, the learned CIT(A) took the view that it is the duty of the assessee to offer income corresponding to TDS amount of Rs.3,700/-. Since the assessee has failed to offer the same, the Ld CIT(A) held that the amount of Rs.3,69,999/- was rightly added by the AO while processing assessment under section 143(1)(a) of the Act. Accordingly, the learned CIT(A) took the view that the order passed by AO rejecting 154 application filed by the assessee is valid in law. Accordingly, learned CIT(A) dismissed the appeal of the assessee. Aggrieved, the assessee has filed this appeal before the Tribunal. 5. The Learned AR submitted that it is true that insurance company has deducted TDS amount of Rs. 3,700/-from the maturity value from surrendered value of insurance policy. He submitted that the assessee has purchased the insurance policy as an investment product and hence the assessee has not claimed the premium amount paid by him as deduction u/s 80C of the Act. The investment product has been sold and in this process, 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 Abhay Maruti Todankar 3 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 income derived from contract works only. Since the assessee has not earned any income, the AO was not justified in assessing the surrender value as income of the assessee, as it represents receipt of capital amount only. Accordingly, he submitted that the Ld CIT(A) was not justified in confirming the addition without appreciating the factual aspects surrounding the issue. 6. The Learned DR, on the contrary supported the order passed by learned CIT(A). 7. I have heard the rival contention and perused the record. I noticed that the assessee has actually incurred a loss of Rs. 3,20,768/- in respect of investment made in the insurance policy taken from ICICI Prudential Life Insurance company Limited. According to learned AR, the assessee has held this life insurance policy as an “investment product” only. The Ld A.R supported this contention by submitting that the premium amount paid was not claimed as deduction u/s 80C of the Act. Though TDS has been deducted from the maturity value in terms of sec.194DA of the Act, the submission of learned AR is that the assessee has not treated it as life insurance policy and hence the provisions of sec. 10(10D) cannot be invoked in the hands of the assessee. The Ld A.R also submitted that what could be taxed under the Act is not the entire amount of surrendered value received by the assessee, but only the income element embedded therein. In the instance case the assessee has suffered a loss i.e. he did not earn any income. Accordingly, 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 Abhay Maruti Todankar 4 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., it would offer insurance as well as try to achieve capital appreciation. In the instant case, it is the submission of the Ld A.R that the assessee has treated the payment of insurance premium as his “investment product” only. According to Ld A.R, the assessee has not claimed insurance premium as deduction u/s 80C of the Act. If that be the case, in my view, the intention of the assessee would determine the nature of the transaction. If the assessee’s intention was to treat the premium payments as his investment, then the the provisions of sec. 10(10D) should not be applied. 9. It is noticed in the instant case that the assessee has not earned any income on surrender of insurance policy. On the contrary, the assessee has only incurred loss of Rs.3,20,769/-. However, in my view, it is required to be examined as to whether the assessee has claimed deduction u/s 80C of the Act in respect of premium paid on this insurance product. If the assessee has not claimed deduction u/s 80C of the Act in respect of premium amount paid on this insurance product, then the above said loss should be treated as Capital loss and nothing should be brought to tax, since it supports the stand of the assessee that he has treated these payments as his investment. On the contrary, if the assessee has claimed deduction of the premium amount paid on this insurance product, then the AO is required to deal with the surrender value in accordance with law. Since this matter requires verification, I set aside the order passed by Ld CIT(A) and restore the same to the file of the AO for examining this issue in the light of discussions made supra. Abhay Maruti Todankar 5 10. In the result, appeal filed by the assessee is treated as allowed for statistical purposes. Order pronounced in the open court on 28.07.2022. Sd/- (B.R. BASKARAN) ACCOUNTANT MEMBER Mumbai; Dated : 28/07/2022 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai