Whether the assessees are not entitled to deduction u/s 80C of the Act on the LIC premium paid in respect of his LIC policies if:
- Assessee derives salary income from a concern named M/s SME. Thus, filing his return of income under the salary and income from other sources and claiming deduction u/s 80C of Rs. 1,00,000/-.
- The above premium amounts were paid by the Grandfather of the assessee
- The grandfather was the proprietor of M/s SVR where –
- LIC accounts were shown as assets
- The above amounts were duly debited to the account of the assessee in the books of the proprietary concern of his grandfather.
- The assessee could not pass corresponding credit entry, since he did not maintain books of account
So the question arises, whether LIC premium so paid by his grandfather would be eligible as a deduction to the assessee in a case where the assessee neither in receipt of any loan nor a gift from his grandfather? Or for ease in understanding can LIC premium be said to be paid by the assessee or his grandfather.
Analysis of section 80C:
|Analysis of 80C before the introduction of rebate u/s 88||Analysis of 80C after the introduction of rebate u/s 88|
|The old provisions of sec. 80C which prescribed the condition that the eligible payments should have been made out of income chargeable to tax.
B. Deductions in respect of certain payments
|The present provisions of sec. 80C do not contain the words “out of income chargeable to tax”.|
|54a[55[Deduction in respect of life insurance premia, contributions to provident fund, etc.
5680C.57[(1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section, an amount calculated, with reference to the aggregate of the sums specified in sub-section (2), at the following rates, namely:
(2) The sums referred to in sub-section (1) shall be the follow ing, namely:
(a) where the assessee is an individual, any sums paid in the previous year by the assessee out of his income chargeable to tax
|77[Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.
7880C.7980(1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed 81[one hundred and fifty thousand rupees].
Thus, it can be inferred that:
- The deduction under sec. 80C shall be made if the sums specified in sub-section (2) are paid or deposited in the previous year.
- It does not place any condition about the source for making the payments or deposit.
- Further, the deduction is given while computing the total income, i.e., out of gross total income.