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Issues: (i) Whether there was evidence to support the finding that the house property assets were acquired in the course of the assessee company's insurance business and not as part of any separate non-insurance business. (ii) Whether the sum of Rs. 2,36,416 was rightly assessed as income under paragraph 6 of the Schedule to the Income-tax Act.
Issue (i): Whether there was evidence to support the finding that the house property assets were acquired in the course of the assessee company's insurance business and not as part of any separate non-insurance business.
Analysis: The accounts maintained by the assessee were statutory insurance-company accounts prepared under the Insurance Act, and the expression "other classes of business" in those forms was read as referring only to other classes of insurance business. The assessee produced no resolution or other material showing that a distinct investment business was commenced or that the properties were earmarked for such a business. The properties were never separately returned as income from property under section 9 of the Indian Income-tax Act, and the expenses relating to them were consistently claimed in the insurance business accounts. On the statutory forms and the surrounding conduct, the assets were shown as belonging to the insurance business.
Conclusion: The finding was supported by evidence and was upheld against the assessee.
Issue (ii): Whether the sum of Rs. 2,36,416 was rightly assessed as income under paragraph 6 of the Schedule to the Income-tax Act.
Analysis: Once the properties were held to be assets of the insurance business, the profit arising on sale and transfer fell within the special computation rules applicable to insurance business. The transfer of two properties to the life department and the sale of the third did not alter their character as insurance-business assets, and the amount realised was therefore taxable under the Schedule relied upon by the revenue.
Conclusion: The assessment of Rs. 2,36,416 under paragraph 6 of the Schedule was upheld against the assessee.
Final Conclusion: The reference was answered entirely in favour of the revenue, with both questions answered in the affirmative and the taxability of the impugned amount sustained.
Ratio Decidendi: Where statutory insurance accounts and the assessee's conduct show that property was held as part of the insurance business, a claimed separate investment business will not be inferred, and profits on transfer of such assets are assessable under the insurance-business computation provisions.
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