2018 (8) TMI 2129 - AT - Income Tax

Tribunal rules in favor of assessee on taxability of insurance profits & pension fund loss

Dy. Commissioner of Income Tax, Circle–9 (3) (2), Mumbai Versus Future Generali India Life Insurance Ltd

The Tribunal upheld the Commissioner's decision in the case concerning the taxability of profits from a life insurance business and the deletion of ... Taxability of profits of life insurance business - additions relating to net surplus as per actuarial valuation was made by the AO - HELD THAT:- As decided in assessee own case [2017 (3) TMI 1696 - ITAT MUMBAI] relying on case of ICICI Prudential Insurance Co. Ltd [2012 (11) TMI 13 - ITAT MUMBAI] has held that “where assessee was carrying on life insurance business and Tribunal following a decision of Supreme Court, while determining assessee’s income under section 44, had taken into consideration total surplus as arrived at by actuarial valuation and further held that income from shareholders account was also to be taxed as a part of life insurance business, there was no substantial question of law arising for consideration”. Reference was made to the decision in LIC of India vs. CIT [1963 (12) TMI 5 - SUPREME COURT] wherein the Hon'ble Supreme Court has held that the Assessing Officer has no power to modify the account after actuarial valuation is done. Decided against revenue. Disallowance of loss from pension fund - assessee in the computation of income has claimed exemption u/s 10(23AAB) on account of surplus / deficit pension fund - AO disallowed exemption as case of Life Insurance Corporation of India Ltd [1963 (12) TMI 5 - SUPREME COURT] relied upon by assessee as justifying its claim was challenged by the Department before the Hon'ble Supreme Court by filing Special Leave Petition - HELD THAT:- Merely because the Revenue has filed SLP against the decision of the Hon'ble Jurisdictional High Court in case of Life Insurance Corporation Ltd. cannot be valid reason for the Assessing Officer in not following the decision of the Hon'ble Jurisdictional High Court which is binding on him. Be that as it may, we have noticed that while deciding identical issue raised by the Revenue in assessee’s own case for assessment year 2011–12, [2017 (3) TMI 1696 - ITAT MUMBAI] held that (i) amount set apart by insurance company towards solvency margin as per the direction given by IRDA is to be excluded while computing actuarial valuation surplus, and (ii) pension fund like Jeevan Suraksha Fund would continue to be governed by provisions of section 44 irrespective of the fact that income from such fund is exempted, or not and, therefore, even after insertion of section 10(23AAB), loss incurred from pension fund like Jeevan Suraksha Fund has to be excluded while determining actuarial valuation surplus from insurance business u/s 44. Revenue appeal dismissed. Issues:1. Taxability of profits of life insurance business2. Deletion of disallowance of loss from pension fundAnalysis:Issue 1: Taxability of profits of life insurance businessThe appeals were filed by the Revenue challenging two orders passed by the Commissioner (Appeals) for the assessment years 2009-10 and 2012-13. The Revenue raised common grounds questioning the taxability of the surplus shown in the actuarial valuation as part of the income under section 44 of the Income Tax Act. The Assessing Officer added back the surplus amounts to the total income, which was contested by the assessee. The Commissioner (Appeals) relied on previous Tribunal decisions and deleted the additions, following the principle that the surplus from actuarial valuation should not be added to the income of the insurance business. The Tribunal upheld the Commissioner's decision based on precedents and dismissed the Revenue's appeal.Issue 2: Deletion of disallowance of loss from pension fundDuring assessment, the Assessing Officer disallowed the exemption claimed by the assessee under section 10(23AAB) of the Act regarding the surplus/deficit in the pension fund. The assessee justified the claim citing a High Court decision, but the Assessing Officer disallowed it. The Commissioner (Appeals) deleted the disallowance based on previous decisions in the assessee's favor. The Tribunal upheld the Commissioner's decision, emphasizing that the Assessing Officer must follow binding High Court decisions. The Tribunal dismissed the Revenue's appeal, stating that the issues were covered by previous judgments and consistent with the treatment of similar cases.