i'm a CA Fresher! I've a doubt on the aforesaid subject! I know it seems useless to have a doubt on it but I've as there's a conceptual mismatch between our CA Fraternity itself.
The case is - Mr.X pays Rs.2 lacs LIP from his bank a/c on policies in his wife Mrs.X's name! Now the question that arises is - WHO CAN AVAIL THE DEDUCTION?
Text of the Section 80-C reads as "ANY PAYMENT MADE BY AN INDIVIDUAL"
So in this case, me & my CA Fresher friends are of the opinion that only Mr.X can claim the deduction as HE has paid the sum & not Mrs.X!
HOWEVER, MY EMPLOYER CA IS OF THE OPINION THAT EITHER OF THE TWO SPOUSE CAN CLAIM DEDUCTION! HE FURTHER AFFIRMED THAT [u]IT IS NOT NECESSARY THAT PAYMENT OF LIP BE MADE BY ANY OF THE SPOUSE i.e. EVEN A THIRD PARTY CAN PAY LIP OR DEPOSIT SUM IN PPF A/C & DEDUCTION CAN BE CLAIMED BY MR.X OR MRS.X.[/u]
I find his opinion contrary to the text of the section as the principal of payment based deduction is violated!
Kindly advise me on the same as in what should be done in this case!
07 June 2010
I don't think there are any scope for internal funding agreement as the Section clearly provides the assessee/taxpayer must pay the premium, however in India everything is possible and we are not discussing the same.
07 June 2010
I think by interpreting the law as it is intended to be so interpreted - the deduction should be limited to the actual payer! If we permit availment to either of the spouse, then the very purpose of the section as in PAYMENT BASED DEDUCTION will be violated!
One possible treatment suggested by one of my fellow CA is - to treat it as funding arrangement and transfer the sum paid by Husband into the books of A/c of the wife & treat the same as Gift or Unsecured loan! But I doubt if there's any such concept of DEEMED PAYMENT OF LIP in the Income Tax Act?
CAclubindia
