1981 (12) TMI 103

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....er of the Commissioner (Appeals) annulling the revised assessment by which the ITO had added back the credit given for that deducted at source amounting to Rs. 22,989. The ITO was of the view that the provisions of the Income-tax Act allowing an assessee to take credit of tax deducted at source are not applicable to the assessee who carried on insurance business. He, therefore, made the revision. ....

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....e this argument, we may refer to section 44 which states that notwithstanding anything to the contrary contained in the Act, the profits and gains of any business of insurance shall be computed in accordance with the rules contained in the First Schedule. Rule 2 of the First Schedule states that the profit of the insurance business shall be based on the actuarial valuation made in accordance with ....

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....chedule any dividend included therein ceases to be of the nature of dividend and therefore, the tax deducted at source in respect of that dividend income cannot be given credit and set off against the tax leviable on the income computed form insurance business. The assumption of the Revenue audit party that the dividend income ceased to be such when it is included in the computation of the total i....

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....s to do any credit for tax deducted at source when on the face of it is unjust and could not have been the intention of parliament by any stretch of imagination. We also notice that granting credit for tax deducted at source has not been deemed to be a case where income chargeable to tax has escaped assessment under Explanation 1 to section 147. In the circumstances, we are convinced that there wa....