Composite insurance business allows set-off of life insurance losses against general insurance profits under income-tax law.

A composite insurer carrying on both life insurance and general insurance was treated as carrying on the same business for the purpose of carry forward and set-off of losses under section 24(2) of the Indian Income-tax Act, 1922. The separate accounting required by the Insurance Act did not change the character of the undertaking under income-tax law, and the distinction between life insurance and other insurance classes was relevant only to insurance regulation and profit computation. Accordingly, unabsorbed losses from the life insurance segment of earlier years were available to be set off against subsequent profits from the general insurance segment.

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Issues: Whether unabsorbed losses incurred in the life insurance business of a composite insurer could be carried forward and set off against profits from its general insurance business for the relevant assessment years.

Analysis: Section 24(2) of the Indian Income-tax Act, 1922 permitted carry forward and set-off of business losses against the profits of the same business in the succeeding year. The question was whether a composite insurance undertaking carrying on life insurance and general insurance should be treated, for income-tax purposes, as carrying on two separate businesses. The separate accounting treatment required by the Insurance Act did not alter the character of the insurer's business under the Income-tax Act. The distinction between life insurance and other classes of insurance was relevant to insurance law and computation of profits, but it did not justify splitting the composite insurance undertaking into different businesses for the purpose of section 24(2).

Conclusion: The life insurance and general insurance activities constituted the same business for the purpose of section 24(2), and the unabsorbed losses of the earlier years were available to be set off against the profits of the subsequent years.

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