Life insurance income computation under section 44 must follow actuarial valuation without reworking surplus or fund loss treatment.

In life insurance business, income is computed under the special regime in section 44 on the basis of actuarial valuation, and the Assessing Officer cannot rework the actuarial surplus after valuation. The actuarial surplus addition was therefore not sustainable. The treatment of loss from the Jeevan Suraksha Fund also had to follow that special regime; exemption for pension fund income did not displace its inclusion in actuarial surplus computation. The loss could not be separately taxed or ignored on the footing that the fund's income was exempt. Relief to the assessee was affirmed and the Revenue's appeal failed.

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Issues: (i) Whether the addition made on account of surplus disclosed in the actuarial report could be sustained while computing income of a life insurance business; (ii) Whether the loss from Jeevan Suraksha Fund could be brought to tax or ignored on the footing that the fund's income was exempt.

Issue (i): Whether the addition made on account of surplus disclosed in the actuarial report could be sustained while computing income of a life insurance business.

Analysis: The computation of income of a life insurance concern is governed by the special scheme under section 44, and the actuarial valuation surplus has to be accepted in the manner recognised by binding precedent. The earlier decision in the assessee's own case, following the jurisdictional High Court and the Supreme Court, had held that the Assessing Officer cannot rework the actuarial figures after valuation.

Conclusion: The addition on account of actuarial surplus was not sustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether the loss from Jeevan Suraksha Fund could be brought to tax or ignored on the footing that the fund's income was exempt.

Analysis: The special regime applicable to life insurance business continues to operate under section 44 notwithstanding the exemption provision relating to pension fund income. The earlier binding decision had held that the loss from Jeevan Suraksha Fund must be taken into account while determining actuarial surplus, and the exemption under section 10(23AAB) does not displace that treatment.

Conclusion: The loss from Jeevan Suraksha Fund could not be separately taxed in the manner suggested by the Revenue, and the issue was decided in favour of the assessee.

Final Conclusion: The Revenue's appeal failed in full, and the order granting relief to the assessee was affirmed.

Ratio Decidendi: In the case of life insurance business, income must be computed under the special statutory regime of section 44 on the basis of actuarial valuation, and the Assessing Officer cannot disturb that computation by separately disallowing actuarial surplus or by disregarding the treatment of losses from a pension fund merely because the fund's income is exempt.

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