2019 (6) TMI 84 - AT - Income Tax

Tribunal upholds CIT(A)'s order in favor of assessee, dismissing Revenue's appeal. Decision based on rulings & interpretations.

Deputy/Assistant Commissioner of Income Tax, Circle-6 (2), Kolkata Versus M/s. National Insurance Company Limited

The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s order in favor of the assessee. The decisions were based on prior ... Disallowance of written off depreciated investments - assessment of an assessee carrying on general insurance business - HELD THAT:- As decided in assessee's own case [2016 (8) TMI 326 - ITAT KOLKATA] because of the restrictions contained in section 44 read with Rule 5 of the First Schedule, there could not be any disallowance of the amount written off out of investments and, accordingly, the disallowance is deleted - Decided in favour of assessee Addition on account of amortization of premium paid on investments - HELD THAT:- As decided in assessee's own case [2016 (8) TMI 326 - ITAT KOLKATA] the particular item of dispute (debit entry made in the profit and loss account) falls under the category of ‘expenditure’ or ‘allowance’ or ‘provision’ and the same is not admissible under the Act, only then the concerned item can be added back in computing the income from general insurance business. The disallowance of amortised premium paid on investments made by the ld AO is not in accordance with the prescribed specific procedure in the assessee’s case. CIT-A duly appreciated the contentions of the assessee deleted the dis allowance correctly. SEE case of General Insurance Corporation of India vs CIT 1999 (9) TMI 3 - SUPREME COURT] and CIT vs Oriental Fire & General Insurance Co Ltd [2007 (5) TMI 193 - SUPREME COURT] - Decided in favour of assessee. Disallowance u/s 14A r.w.s. 8D - HELD THAT:- ld. CIT(Appeals) by relying, inter alia, on the decision of the Tribunal in the case of REI Agro Limited –vs.- DCIT [2013 (9) TMI 156 - ITAT KOLKATA] has directed the AO to re-compute the disallowance by taking into consideration the value of only those shares, which had yielded dividend income to the assessee during the year under consideration. Since the decision of the Tribunal in the case of REI Agro Limited [2013 (9) TMI 156 - ITAT KOLKATA] has been upheld by the Hon’ble Calcutta High Court and three is no other decision of the Hon’ble Jurisdictional High Court or the Hon’ble Supreme Court cited by the ld. D.R. taking a contrary view, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee. Addition towards Reserve created for Unexpired risk u/s 115JB - HELD THAT:- As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of A.Ys 2005-06, 2007 08 and 2008-09, we respectfully follow the order of the Tribunal for the said years and uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue AS dealt this issue very elaborately and had given proper finding that the reserve created for unexpired risk need not be added back for the purpose of computation of book profits u/s 115JB. The revenue was not able to controvert the findings of the ld CITA before us. Hence we find no infirmity in the order passed by the ld CITA in this regard - Decided against revenue Disallowance u/s 14A while computing the book profit u/s 115JB - CIT(Appeals) deleted the said addition relying, on the decision of M/s. Philips Electronics India Limited –vs.- DCIT [2016 (3) TMI 1056 - ITAT KOLKATA] - HELD THAT:- . Since this view taken by the Division Bench of the Tribunal has been affirmed by the Special Bench of the Tribunal in the case of VIREET INVESTMENT (P.) LTD [2017 (6) TMI 1124 - ITAT DELHI] holding that artificial disallowance u/s 14A as worked out by applying Rule 8D cannot be added while computing the book profit u/s 115JB of the Act and it is only the actual expenditure incurred by the assessee in relation to the exempt income, which is debited to the profit & loss account, can be added. Keeping in view the said decision of the Special Bench of this Tribunal, we find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the disallowance - Decided against revenue Issues Involved:1. Disallowance of written-off depreciated investments.2. Amortization of premium paid on investments.3. Re-computation of disallowance under section 14A read with Rule 8D.4. Reserve for unexpired risk in computing Book Profit under section 115JB.5. Disallowance under section 14A while computing book profit under section 115JB.Issue-wise Detailed Analysis:1. Disallowance of Written-off Depreciated Investments:The Revenue's appeal challenged the deletion of Rs. 450,02,000/- disallowed as written-off depreciated investments. The Tribunal noted that this issue had been previously decided in favor of the assessee in A.Ys 2005-06, 2007-08, and 2008-09. The Tribunal reiterated that the write-off of investments is not an expenditure or allowance and, therefore, cannot be added back under section 44 read with Rule 5 of the First Schedule to the Income-tax Act. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.2. Amortization of Premium Paid on Investments:The Revenue contested the deletion of Rs. 5,78,44,000/- disallowed for amortization of premium paid on investments. The Tribunal referred to its earlier decision, which held that such amortization is not an inadmissible expenditure under section 44 read with Rule 5 of the First Schedule. The Tribunal emphasized that the premium paid on investments is a necessary business expense and should be allowed. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.3. Re-computation of Disallowance under Section 14A Read with Rule 8D:The issue involved the direction to re-compute the disallowance under section 14A read with Rule 8D. The Tribunal noted that the CIT(A) directed the Assessing Officer to re-compute the disallowance based on the judicial pronouncement in the case of REI Agro Limited, which was upheld by the Hon’ble Calcutta High Court. The Tribunal found no contrary decision from the jurisdictional High Court or the Supreme Court and upheld the CIT(A)'s order, dismissing the Revenue's ground.4. Reserve for Unexpired Risk in Computing Book Profit under Section 115JB:The Revenue appealed against the deletion of the addition of Rs. 738,37,27,000/- made towards the reserve for unexpired risk while computing book profit under section 115JB. The Tribunal referred to its prior decision, which clarified that the reserve for unexpired risk is a statutory requirement and not an expenditure or provision that needs to be added back under section 115JB. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.5. Disallowance under Section 14A while Computing Book Profit under Section 115JB:The issue was the deletion of the addition of Rs. 37,14,38,000/- made under section 14A while computing book profit under section 115JB. The Tribunal referred to the decision in M/s. Philips Electronics India Limited and the Special Bench ruling in Vineet, which held that disallowance under Rule 8D is not applicable while computing book profit under section 115JB. Only actual expenditure debited to the profit & loss account can be added. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.Conclusion:The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s order in favor of the assessee. The decisions were based on prior rulings and statutory interpretations, ensuring consistency in the application of the law.