TaxTMI 
TaxTMI 
2009 (10) TMI 643
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....ng on the Assessing Officer. 1.3 The CIT(A) ought to have allowed the appellant's claim for an exemption of profit on sale of investment. 1.4 The CIT(A) erred in not allowing the appellant's claim for a deduction in respect of investments written off. 1.5 The CIT(A) erred in holding that the appellant's claim for a deduction in respect of investments written off would not be entertained by him. 1.6 The CIT(A) failed to appreciate that the disallowance of the appellant's claim for a deduction in respect of investments written off was contrary to the provisions of section 44 of the Income-tax Act, 1961, read with rule 5 of the First Schedule thereto." 2. The short issue we are, thus, required to adjudicate is whether or not the CIT(A) was justified in holding that the profit on sale of investments, is taxable in the hands of the assessee. The assessment years involved are 2002-03, 2003-04 and 2004-05 and the impugned order dated 17-3- 2005 is common order passed by the CIT(A) for these three years. 3. Learned representatives agree that the issue is covered, in favour of the assessee, by Pune Bench decision dated 31-8-2009 in the case of Bajaj Allianz General Insuran....
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....re, consequently, cannot be taxed under section 44 of the Income-tax Act. 2. The observations of the Hon'ble Members of the Pune Bench at para 7 of the order is also relevant and for the sake of convenience the same is extracted below:- 'In addition to the above contentions, there was no dispute that the independent code is enacted by the introduction of section 44 in Income-tax Act which independently prescribed the mode and manner for assessment of Insurance Business. This section since contains non obstante clause, therefore, notwithstanding anything contained in any of the sections of the Act, the profits and gains of Insurance Business including any such business carried on by a Mutual Insurance Company or by an Co-operative Society shall be computed in accordance with the rules contained in First Schedule. Accordingly, there could not be any other income taxable other than Insurance Business because section 44 overrules all other provisions of the Income-tax Act.' 3. The provisions of rule 5 of First Schedule of the Income-tax Act, 1961 clearly specified that profits and gains of any business of insurance other than life insurance shall be taken to be the balance of ....
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....irst Schedule of Income-tax Act, 1961. Therefore, the deleted rule 5(b) can be read as providing for assessment as part of the profits and gains of appreciation of or gains on the realization of investments even when such appreciation or gains is not credited in the P & L A/c copy of which is required under the Insurance Act, 1938 to be furnished to the Controller of Insurance. 6. It has been held in Oriental Fire & General Insurance Co. Ltd. v. CIT 143 ITR 378 (Bom.) that the character of the entries in the annual accounts furnished by an assessee-insurer to the Controller of Insurance cannot be gone into and accounts as accepted by the Controller must form the basis of assessment in the case of insurers who fall within the ambit of the rules of the First Schedule and the Income-tax Officer has no power to do anything not contained in rule 5 of the First Schedule in computing the income from the business of insurance other than life insurance. The appellant's contention that at least the appreciation of assets in Burma and Ceylon should be excluded from the computation of profits was not accepted, inter alia, because once certain amounts had been shown as profits in the annual ....
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....ough such profits are assessable to tax by virtue of the provision contained in the Income-tax Act, 1961. 8. It has been held in Union of India v. Deoki Nandan Aggarwal 1992 Supp. (1) SCC 323, that it is not the duty of the Court either to enlarge the scope of legislation or the intention of the Legislature, when the language of the provision is plain. The Court cannot rewrite the legislation for the reason that it had no power to legislate. The power to legislate has not been conferred on the Courts. The Court cannot add words to a statute or read words into it which are not there. In State of Kerala v. Mathai Vergehse [1986] 4 SEC 746, the Court has reiterated the well-settled position that the Court can merely interpret the section it cannot re-write, recast or redesign the section. In interpreting the provision the exercise undertaken by the Court is to make explicit the intention of the Legislature which enacted the legislation. It is not for the Court to reframe the legislation for the very good reason that the powers to 'legislate' have not been conferred on the Court. In Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests Palghat 1990 (Supp.) SCC 785,....
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....no more. 10. In the case of Grasim Industries Ltd. v. Collector of Customs [2002] 4 SCC 297, it has been held that the elementary principle of interpreting any word while considering a statute is to gather the mens or sentential legis of the Legislature. Wherever the language is clear the intention of the Legislature is to be gathered from the language used. While doing so, what has been said in the statute as also what has not been said has to be noted. The construction which requires for is support addition or substitution of words or which results in rejection of words has to be avoided. 11. In the case of Jagjit Singh v. State of Haryana [2006] 11 SCC 1, it has been held that no words can be read into the Constitution which do not exist. It is, ordinarily, not the function of the Court to read words into a statute. The Court must proceed on the assumption that the Legislature did not make a mistake and it intended to say what it said. 12. It has been held in M.H. Daryani v. CIT 202 ITR 731 , 735 (Bom.) that the principle of beneficial interpretation has no application in a case where the words of statute are plain, precise and unambiguous. In such a case, the well-sett....
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....rties, however, we are inclined to follow the stand taken by the co-ordinate Bench in the case of Bajaj Allianz General Insurance Co. Ltd. (supra). 5. In our considered view, the computation of taxable profits of an insurance company is governed by a specific legal provision, i.e., section 44 read with First Schedule to the Income-tax Act. Under the said scheme of things envisaged by these provisions, only such adjustments can be made to the profits disclosed by the annual accounts drawn up under the Insurance Act, 1938, as are specifically provides for under clause 5 of the First Schedule. It is an admitted position that there are no specific provisions for making an adjustment on account of profits on sale of investment after removal of clause 5(b) with effect from 1-4-1989 and till clause 5(b)(ii ) was inserted with effect from 1-4-2011. Accordingly, there is no occasion to make an adjustment of profit on sale of investments in the profit disclosed by the annual accounts drawn up as per the Insurance Act, 1938. It is important to bear in mind the legal position that the taxability of income in the case of the insurance companies is not on commercial profits but on such profit....
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....er the Insurance Act, the whole and sole purpose of a General Insurance Company is to carry on General Insurance Business. (b)The allegation of the Assessing Officer that transaction in share and securities was one of the normal business activity of the assessee hence, liable for taxation. The contention was that though it was one of the activity to earn profit on sale on investment but the respected Parliament in his wisdom has decided not to tax the same. In support it was cited that the Insurance Company are governed by rule 5 of a Schedule. Reliance was placed on the decision of Supreme Court in the case of General Company of India 240 ITR 139 and Pandyne Insurance Company 55 ITR 716. (c)The allegation of the Assessing Officer was that any part of the profits and gains not attributable to the Insurance Business could qualify for exemption and liable to be taxed. The contention of the assessee was that firstly, the financial statements of an Insurance Company has to be finalized in accordance with the Insurance Regulatory and Development Authority. As per the said regulation profits earned by a General Insurance Company on sale of redemption of investment has to be credite....