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Whether the maturity value of Life Insurance received by the assessee from American Life Insurance Company is it exempt u/s 10(10D) of the IT Act ?
TARAGAURI T. DOSHI vs. INCOME TAX OFFICER
ITAT, BOMBAY TRIBUNAL (I) T R SOOD, AM & VIJAY PAL RAO, JM ITA
No.549/Mum/2010 12th March, 2012
(2012) 31 CCH 0528 MumTrib
(2016) 160 ITD 0343 (Mumbai)
Legislation Referred to
Section 234B, 234C
Case pertains to
Asst. Year 2006-07
Sanjay R Parikih by the Assessee. : R K Jalali by the Revenue.
VIJAY PAL RAO, JM:-
- This appeal by the assessee is directed against the order dated 16.11.2009 of the CIT(A) for the AY 2006-07.
- The assessee has raised the following grounds in this appeal:
A. On the facts and circumstances of the case and in law, the learned Income Tax officer erred in law in interpreting the personal effects i.e. capital receipts as revenue receipts received by your appellant for maturity of Life Insurance Policy and by adding the same while computing the Total Income. Your appellant therefore request your honor to direct learned Income Tax Officer to delete the said addition in toto amounting to Rs.4,16,200/-
B. On the facts and in the circumstances of the case and in law, the AO erred in levying and calculation U/s 234B and 234C of the Act.
C. The appellants reserve the right to amend, alter, add aforesaid ground of appeals as they may think deem fit by themselves or by their representative.
3. The only issue arising for our consideration and adjudication is whether the maturity value of Life Insurance received by the assessee from American Life Insurance Company taken by the husband of the assessee is exempt u/s 10(10D) of the IT Act or otherwise not liable to be taxed being capital receipt.
3.1 The assessee received a sum of US $ 9441.98 from National Bank of Abu Dhabi which is equal to Rs. 4,16,200/-. The Assessing Officer asked the details for the said receipt for which the assessee submitted that the amount received is on account of maturity of insurance policy taken by the husband of the assessee from American Insurance Company in Abu Dubai. The Assessing Officer taxed the said receipt in the hands of the assessee by holding that the provisions of sec. 10(10D) of I T Act are not applicable because the policy was not taken from any Indian Life Insurance Company as per section 2(28BB) of the I T Act.
- On appeal, the CIT(A) has confirmed the action of the Assessing Officer on similar reasons.
- Before us, the ld AR of the assessee has submitted that the assessee’s husband was earlier working in the Middle East and had taken a Life Insurance Policy wherein the assessee is the person insured. The policy was taken from American Life Insurance Company in US Dollars wherein the face value was US $ 25000/-. The period of policy was for 21 years. It was submitted that during the year under consideration, the assessee received t US $ 9441.92 equivalent to Rs. 4.16.000/towards maturity proceeds of the aforesaid policy. He has referred clause (10D) of Section 10 and submitted that any sum received under a Life Insurance Policy including the sum allocated by way of bonus is exempt from tax. Accordingly, it was contended that the assessee would be covered by the main provisions of Section l0(I0D) of the Income-tax Act and the amount received from the American Life Insurance Company would be exempt from tax. The ld AR has further submitted that the Assessing Officer while denying exemption under Section l0(1OD) referred to the Definition of insurer in Section 2(28BB) of the Income-tax Act and has also referred to the provisions of Section 80C and 88 in this regard. It was submitted that clause (10D) does not refer to the word “insurer” in the entire clause and it would not be proper to read the word “insurer” in Section 10(l0D).
5.1 Without prejudice to the above, the ld AR of the assessee has submitted that the amount received by the assessee from the American Insurance Company is not the income of the assessee and accordingly, cannot be taxed in the hands of the assessee. It was submitted that in the present case, the policy was taken by the assessees’s husband on her life and as per the contract between the Insurance Company with the assessee’s husband; the assessee has received the aforesaid sum. It was submitted that since the amount is a Capital Receipt and not a Revenue Receipt; therefore, the same is not liable to tax as the income of the assessee.
5.2 On the other hand, the ld DR has relied upon the orders of the authorities below and submitted that the tax concession is available only on the Life Insurance policy taken from Indian Insurance Companies namely LIC or any other company registered under the provisions section 2 of Insurance Act, 1938. He has referred the definition of Insurer as given in section 2 (28BB) and submitted that even in the case of Private Insurance company, the same should be an Indian company as defined under clause 7 of sec 2 of Insurance Act.
- We have considered the rival contention as well as the relevant material on record. The assessee claimed exemption u/s 10(10D) of the maturity amount of Life Insurance policy from American Life Insurance which was taken by the husband of the assessee while working at Abu Dubai. The lower authorities have denied the claim of the assessee on the ground that the insurance policy was not taken from Indian insurance company and therefore, provisions of sec. 10(10D) are not applicable.
- For the sake of convenience we quote the provisions of 10(10D)
“10(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than;
(a) any sum received under sub sec. (3) of sec. 80DD or sub sec.(3) of sec. 80DDA; or
(b) any sum received under a Keyman insurance policy; or
(c) any sum received under any insurance policy issued on or after the 1st day of April 2003, in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured;
Provided that the provisions of this sub clause shall not apply to any sum received on the death of a person;
Provided further that for the purpose of calculating the actual capital sum assured under this sub clause effect shall be given to the Explanation to sub sec (3) of sec 80C or the Explanation to sub sec (2A) of section 88 as the case may be.
Explanation: For the purposes of this clause, Keyman Insurance policy’ means a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person.”
7.1 From the bare reading of the provisions of sec. 10(10D), any sum received under Life Insurance Policy is eligible for exemption, except in case of exceptions as culled out under clause (a)(b)& (c). It is not the case of the revenue that the assessee falls under any of the exemption as enumerated in clause (a)(b)& (c) of sec. 10(10D). The question before us is in a narrow-compass as to whether any sum received under the Life Insurance policy taken from a non Indian insurance company is eligible for deduction u/s 10(10D) or not. The lower authorities have given much stress on the definition of term ‘insurer’ and as provided under sec. 2(28BB) as under:
”Insurer” means an insurer, being an Indian Insurance Company, as defined under clause (7A) of sec 2 of the Insurance Act, 1938(4 of 1938), which has been granted a certificate of registration under sect 3 of the that Act.”
- It is pertinent to note that the term ‘insurer’ has not been used in sec. 10(10D) and as it is clear that as per provisions of sec. 10(10D) any sum received under Life Insurance Policy including the benefit on such policy is eligible for the deduction. Therefore, it is apparent that there was no intention of the legislature to restrict the benefit of exemption/s 10(10D) only on the insurance policy taken from Indian Insurance Company.
- The ld AR has pointed out that the term ‘insurer’ has been used u/s 80C(xii). Therefore, the definition of Insurer, in our opinion, is not relevant in sec 10(10D) where no such condition has been specified; but the language of sec. 10(10D) is clear that any sum received under Life Insurance Policy. When there is no such condition of policy to be taken from Indian insurance company, then we cannot read anything in the provisions of sec. 10(10D), which has not been specifically provided by the legislature.
- In view of the above discussion, we hold that the assessee is entitled for deduction u/s 10(10D) on the sum received under the Life Insurance Policy taken by the husband of the assessee from American Life Insurance Company. Accordingly, the orders of the lower authorities are set aside on this issue.
- In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 12th, day of Mar 2012