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ii) Ami Ashish Shah v/s ITO 440 ITR 417 (Gujrat).

7. On the other hand, Ld. DR vehemently argued that the interpretation being given regarding the applicability of section 80CCC is erroneous. In his written submission, he has made the following arguments:

"It is assessee's contention that since no deduction is claimed under chapter VIA in either of the earlier years, no income shall be liable to be taxed in the year of surrender, i.e. AY 2014-15, according to the provisions of section 80CCC. However, while doing so the assessee has not appropriately considered the provisions of section 80CCC of the Act. The assessee has misinterpreted the provisions of section 80CCC in saying that if no deduction is claimed under chapter VIA, no income shall be liable to be taxed in the year of surrender. It is noted that the Assessee has considered the expression "referred to in sub-section (1) in respect of which a deduction has been allowed under sub section (1)" as a pre-requisite condition, for an amount, in order to fall under the purview of income as provided in section 80CCC(2) whereas the said expression needs to be read in conjunction with the A.Y. 2015-16 Dipendu Bapalal Shah expression prior to it, i.e., "Where any amount standing to the credit of the assessee in a fund". The provisions of the section may read into three parts:
when read with the text prior to it gives a clear understanding that it qualifies the amount which has to be included in the income under this section along with the interest or bonus accrued. However, it nowhere sets a condition that if deduction has been claimed in section 80CCC(1) of the Act, only then the income under section 80CCC(2) of the Act would arise.
Hence, in assessee's case, in order to determine to what extent the proceeds received on premature surrender of pension policy should be taxed, the interpretation, of the provisions of section 80CCC(2) of the Act, as discussed above needs to be adopted.
Therefore, as the Assessee has not claimed deduction under section 80CCC(1) or under any other section in respect of the pension policy, the first constituent i.e. Investment in the policy (Rs.34,84,000/-) is not considered while determining the amount of income under section 80CCC(2) of the Act and the only amount over and above the investment i.e. interest or bonus of Rs.16,39,726/- (being the difference of total proceeds of Rs.51,23,726/- and the investment of Rs.34,84,000/-) is the amount of income determined under section 80CCC(2) of the Act and the same is liable to be added to total income of the assessee under section 56 under the head "Income from other sources."

[(3) Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section,-

(a)....
(b) a deduction with reference to such amount shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.]]"

9. On a plain reading of section 80CCC, it clear that 80CCC(2) is applicable only when the assessee is covered under sub section (1) i.e. where a deduction had been claimed and allowed under sub section (1). Admittedly, there has been no claim of deduction u/s 80CCC(1) of the Act by assessee and therefore 80CCC(2) is not applicable. However, in respect of the accretion of Rs. 16,39,726/- [ i.e. surrender value (51,23,726) -