2019 (9) TMI 1710 - AT - Income Tax

Tribunal Upholds Deletion of Additions in Actuarial Surplus, Aligns with High Court Precedents on IT Act Sections 44 & 10(23AAB.

Dy. CIT-9 (3) (2), Mumbai Versus M/s Future Generali India Life Insurance Company Ltd.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision. It upheld the deletion of additions related to surplus in the Actuarial ... Taxability of profits of life insurance business - addition on account of Surplus disclosed in Form 1 of Actuarial Report - 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 the claim of the assessee and passed the assessment order by adding the amount on account of the provision for solvency margin and loss from Jeevan Suraksha Fund, inter alia, on the ground that the provision for solvency margin was not an ascertained liability and that income from Jeevan Suraksha Fund being exempt u/s 10(23AAB), the loss incurred from the said fund could not be adjusted against the taxable income - HELD 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. Addition of surplus disclosed in Form 1 of Actuarial Report.2. Addition of loss from Jeevan Suraksha Fund.3. Interpretation of provisions of section 44 and section 10(23AAB) of the Income Tax Act.Analysis:1. The appeal by the Revenue challenged the CIT(A)'s deletion of additions made by the assessing officer regarding the surplus disclosed in Form 1 of the Actuarial Report. The Revenue contended that the CIT(A) ignored the provisions of section 44 r.w.r. 2 of the First Schedule of the IT Act, 1961. The Tribunal referred to a previous case where the High Court held that the Assessing Officer cannot modify accounts post actuarial valuation. Consequently, the Tribunal dismissed this ground of appeal, following the precedent.2. The second issue involved the addition of loss from Jeevan Suraksha Fund. The Revenue disputed the deletion of this addition by the CIT(A), arguing that income includes loss and income from such funds should not be exempted from total income. The Tribunal cited a High Court ruling stating that even if income from such funds is exempted, losses must be excluded while determining actuarial valuation surplus. Therefore, the Tribunal dismissed this ground of appeal as well, in line with the High Court's decision.3. The third issue revolved around the interpretation of provisions in section 44 and section 10(23AAB) of the IT Act. The Tribunal upheld the CIT(A)'s order based on precedents and rulings from the High Court. It was established that certain amounts, like solvency margin provisions and losses from pension funds, should be excluded while computing actuarial valuation surplus. The Tribunal followed the High Court's judgment and dismissed the relevant grounds of appeal by the Revenue.In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision based on legal precedents and interpretations of the Income Tax Act provisions. The judgment provided a detailed analysis of each issue raised, aligning with established legal principles and court rulings.