2022 (4) TMI 1461 - AT - Income Tax

Revenue partially successful in appeal on various issues; assessee's deduction claim dismissed. Tribunal affirms prior rulings.

The Revenue's appeal was partly allowed for statistical purposes regarding the interim bonus, dividend income, disallowance under Section 14A r.w.R. 8D, ... Addition on account of Interim Bonus - Whether no deduction on account of the Interim Bonus is required to be made from the total surplus as per the regulation of IRDA, the provisions of the LIC Act, 1956 or the Income-Tax Act, 1961? - HELD THAT:-Since, both sides have admitted that the facts in the impugned assessment year are identical to the facts in Assessment Year 2011-12 [2017 (9) TMI 1994 - ITAT MUMBAI] this issue is restored to the file of Assessing Officer with similar directions. Consequently, ground No.1 of the appeal is allowed for statistical purpose. Dividend income of the assessee as exempt u/s.10(34) - Whether dividend income is considered as part of Income of the life Insurance Business and is included as an income by actuary? - HELD THAT:- The Co-ordinate Bench in AY 2011-12 [2017 (9) TMI 1994 - ITAT MUMBAI] decided this issue in favour of the assessee by following the aforesaid decision of Hon’ble Bombay High Court in assessee’s own case [2015 (9) TMI 1718 - BOMBAY HIGH COURT] No contrary decision or any other material is furnished by the Revenue. Respectfully following the decision of Hon'ble Bombay High Court in assessee’s own case, ground No. 2 & 3 of the appeal are dismissed. Disallowance made u/s 14A r.w.r.8D - AO observed that the assessee has claimed dividend income as exempt u/s. 10(34) of the Act, therefore, the assessee cannot take the stand that no expenditure is disallowable u/s.14A r.w.r.8D - HELD THAT:- There is no finding by the CIT(A) that the assessee is having income from any other source other than insurance business during the period relevant to the assessment year under appeal. Hence, the argument made by the ld. Departmental Representative is devoid of any merit. The issue whether the disallowance under section 14A r.w.r. 8D can be made in the case of assessee engaged in insurance business is squarely covered by the decision of Co-ordinate Bench in the case of Birla Sunlife Insurance Co. Ltd. [2010 (9) TMI 1117 - ITAT MUMBAI] placing reliance on the decision in the case of Oriental Insurance Co. Ltd [2009 (2) TMI 240 - ITAT DELHI-B]] has held that no disallowance under section. 14A of the Act can be made in the case of company engaged in insurance business. Addition made on account of loss from Jeevan Suraksha Pension Fund - HELD THAT:- We find that one of the issue in substantial questions framed for consideration by the Hon'ble Bombay High Court [2011 (8) TMI 47 - BOMBAY HIGH COURT] for assessment year 2002-03 wherein held that the object of inserting Section 10(23AAB) as per the Board Circular No.762 dated 18th February 1998 was to enable the assessee to offer attractive terms to the contributors. Thus, the object of inserting Section 10(23AAB) was not with a view to treat the pension fund like Jeevan Suraksha Fund outside the purview of insurance business but to promote insurance business by exempting the income from such fund. Therefore decision of the Income Tax Appellate Tribunal in holding that even after insertion of Section 10(23AAB), the loss incurred from the pension fund like Jeevan Suraksha Fund had to be excluded while determining the actuarial valuation surplus from the insurance business under Section 44 of the Income Tax Act, 1961 cannot be faulted. Accordingly, questions (c) and (d) are answered in the affirmative, that is, in favour of the assessee and against the Revenue Addition in respect of negative reserve - AO has made addition on account of negative reserve shown by the assessee in Form-I. as resulted in increasing actuarial valuation - HELD THAT:- As in assessee’s own case for assessment year 2010-11 decided on 24/02/2016 [2016 (2) TMI 1319 - ITAT MUMBAI] dismissed the ground raised by the Revenue. The ld.Departmental Representative has not been able to controvert the findings of the CIT(A) and no contrary decision has been placed before us by the Revenue. Therefore, we find no reason to take a divergent view. In view of the fact that this issue has already been settled by Hon'ble Bombay High Court in assessee’s own case in preceding assessment years i.e. assessment year 2007-08, 2008-09 and 2009-10, the ground of the appeal are dismissed being devoid of any merit. Addition u/s 115-O r.w.s. 115Q - dividend paid to shareholders - HELD THAT:- The Co-ordinate Bench following the order of Tribunal in assessee’s own case for assessment year 2006-07 and in AY 2007-08 and 2008-09 [2013 (6) TMI 377 - ITAT MUMBAI] decided the issue in favour of the assessee. Addition in respect of credit of shareholders fund directly to the shareholder account - HELD THAT:- Tribunal following the order of Co-ordinate Bench in[2017 (3) TMI 1904 - ITAT MUMBAI] for AY 2010 decided on 07/3/2017 dismissed this ground in the appeal by the assessee. Disallowance of claim of deduction under section 80G - assessee submitted that the assessee had made donations to LIC Golder Jubilee Foundation - AO and the CIT(A) have denied the benefit of deduction under section 80G claimed by the assessee for the reason that the assessee has claimed double benefit of donation amount, first in computation of income and secondly in the form of deduction under section 80G after computation - HELD THAT:- The assessee has not refuted above contentions of the Revenue. It is a trait law that the Assessing Officer has no power to go behind accounts drawn in First Schedule applicable to insurance companies, however, the Assessing Officer can always examine correctness of the claim of the assessee with regard to deduction claimed after computation of income. The intent of Legislature while framing special provision for insurance companies can by no means be to allow the benefit of double deduction of the same amount. The CIT(A) in para 3.4.9 of the impugned order has illustrated the impact of assessess’e claim of donation as expenditure in P&L account on actuarial valuation. Argument of ld.Authorized Representative of the assessee that section 44 would also override the provisions of sub-section (5A) of section 80G, we do not concur with the same. A bare perusal of section 44 would show that, in an unambiguous terms the provisions of section list out the head of income/section it would override for the purpose of computation of income. The non-obstinate clause does not impinge the powers of Assessing Officer to examine deductions claimed after computation of income. The Assessing Officer after examining the treatment given by assessee to the donation made to the foundation concluded that the assessee has taken undue benefit of double deduction of the same amount, hence, disallowed assessee’s claim made after computation of income. The findings of the Assessing Officer have been upheld by the CIT(A) . We concur with the findings of the CIT(A) on this issue, hence, ground no.2 raised in the appeal by assessee is dismissed. Issues Involved:1. Interim Bonus2. Dividend Income3. Disallowance U/S. 14A r.w.R. 8D4. Loss from Jeevan Suraksha Pension Fund5. Negative Reserve6. Addition U/S. 115-O r.w.s. 115-Q of the Act7. Deduction under Section 80GDetailed Analysis:Interim Bonus:The Revenue challenged the deletion of addition made on account of interim bonus. The Assessing Officer noted a discrepancy between the actuarial surplus and the surplus reported in the computation of income, attributing it to interim bonus. The CIT(A) deleted the addition following a precedent from Assessment Year 2011-12, which was also restored to the Assessing Officer for a de novo examination. The Tribunal, acknowledging identical facts, restored the issue to the Assessing Officer with similar directions, allowing the ground for statistical purposes.Dividend Income:The Revenue contested the exemption of dividend income under Section 10(34). The Assessing Officer added the entire dividend income, but the CIT(A) reversed this, citing the Hon'ble Bombay High Court's decision in the assessee's favor. The Tribunal noted that this issue has been consistently decided in favor of the assessee in previous years and dismissed the Revenue's grounds.Disallowance U/S. 14A r.w.R. 8D:The Revenue disputed the deletion of disallowance under Section 14A r.w.R. 8D. The Assessing Officer made a protective disallowance, which the CIT(A) deleted, referencing a Tribunal decision in a similar case. The Tribunal upheld the CIT(A)'s decision, noting that the issue is covered by a precedent where no disallowance under Section 14A can be made for insurance companies.Loss from Jeevan Suraksha Pension Fund:The Revenue challenged the deletion of addition made on account of loss from the Jeevan Suraksha Pension Fund. The CIT(A) and the Tribunal referenced the Hon'ble Bombay High Court's decision, which held that the loss from the pension fund should be considered in actuarial valuation. The Tribunal dismissed the Revenue's grounds, aligning with the High Court's judgment.Negative Reserve:The Revenue contested the deletion of addition related to negative reserve. The Assessing Officer added the negative reserve amount, increasing actuarial valuation. The CIT(A) deleted this addition, citing the Hon'ble Bombay High Court's decision in the assessee's favor. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's grounds based on established precedents.Addition U/S. 115-O r.w.s. 115-Q of the Act:The Revenue challenged the CIT(A)'s decision that Section 115-O r.w.s. 115Q does not apply to the assessee. The Assessing Officer had made an addition, treating an amount credited to the shareholders' account as dividend. The CIT(A) deleted the addition, following Tribunal decisions from previous years. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's grounds as no contrary material was presented.Deduction under Section 80G:The assessee contested the disallowance of deduction under Section 80G. The Assessing Officer and CIT(A) denied the deduction, noting that the assessee claimed the donation amount as an expense in the P&L Account and also claimed deduction under Section 80G, resulting in a double benefit. The Tribunal agreed with the Revenue's findings, stating that Section 44 does not override the provisions of Section 80G(5A) and upheld the disallowance.Conclusion:The appeal by the Revenue was partly allowed for statistical purposes, and the appeal by the assessee was dismissed.