Mandatory insurance-profit computation under separate statutory clauses justified remand where no factual finding supported departure from the prescribed method.

An assessee-company's annuity policies on human life were treated as life insurance business, so profits had to be computed under the statutory schedule for insurance profits. The taxing authority was required to make separate determinations under the relevant clauses and then adopt the higher figure; it could not bypass that method without a factual finding that the assessee had withheld material needed for computation. As the record contained no such finding, the Tribunal was justified in remanding the matter for fresh disposal according to law, and the referred question was answered in the negative.

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Issues: Whether the income of the assessee-company for the relevant years was liable to be computed under rule 2(a) of the Schedule to the Income-tax Act, and whether, in the absence of an independent computation under that clause, the Tribunal was justified in remanding the matter for fresh enquiry.

Analysis: The company's annuity policies dependent on human life fell within life insurance business, so the profits had to be computed under rule 2 of the Schedule. Under that rule, the Income-tax Officer was required to make separate determinations under clauses (a) and (b) and then adopt the higher figure. The record did not contain a finding that the necessary materials for a proper computation under rule 2(a) had been withheld by the assessee. The Tribunal's statement on the point was only an explanation from the Departmental Representative, not a factual finding. In the absence of a proper determination under rule 2(a), the Tribunal was right in directing a remand for fresh disposal according to law.

Conclusion: The remand was justified, and the answer to the referred question was in the negative.

Final Conclusion: The assessee succeeded in challenging the High Court's view, and the assessment had to be reconsidered by the Income-tax Officer in accordance with the statutory method prescribed for insurance profits.

Ratio Decidendi: Where a statutory computation scheme requires distinct ascertainment under separate clauses, the taxing authority cannot substitute an estimate based on one clause for the mandatory determination under the other in the absence of a factual finding that relevant materials were withheld.

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