TaxTMI 
TaxTMI 
1962 (11) TMI 47
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....-56 and 1956-57, the appellant became entitled to certain refunds under the provisions of the Income-tax Act, 1922. The respondent Corporation claimed a part of those refunds under section 7 and this claim was resisted by the appellant. This dispute was taken to the Life Insurance Tribunal for decision under the Act of 1956 and this Tribunal decided it in favour of the respondent Corporation. The present appeal is against the judgment of the Tribunal. The provision of the Income tax Act under which the right to refund arose have to be briefly referred to before we proceed to consider the questions that arise in this appeal. Section 16(2) states that for the purpose of inclusion in the total income of an assessee, dividend paid to him shall be increased to such amount as would, if income-tax at the rate applicable to the total income of the company were deducted therefrom, be equal to the amount of the dividend. Sub-section (3) of section 18 requires that out of the income chargeable as interest on securities income-tax has to be deducted at the source at the maximum rate. Sub-section (4) of this section provides that all sums so deducted shall be deemed to be income received by th....
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....ppellant. We now come to the details of the dispute that arose between the parties. The previous years of the appellant for the assessment years 1955-56 and 1956-57 were respectively the calendar years 1954 and 1955. In each of these years various sums became due to the appellant as interest on securities and as dividends on shares held by it. The assessment orders in respect of the aforesaid assessment years, earlier mentioned, showed that in the first assessment year credit had been given to the appellant in the sum of Rs. 48,271.56 on account of taxes earlier paid in respect of its life department and in the sum of Rs. 3,245.25 on the same account in respect of its general department. The figures of taxes earlier paid for which credit had been given in its assessment for the second assessment year were Rs. 48,271.56 in respect of the life department and Rs. 3,196.25 in respect of its general department. The appellant's income for the assessment year 1955-56 was assessed on September 29, 1956, and later revised an May 21, 1957 and for the year 1956-57, on January 31, 1957. The assessment order for the year 1955-56 showed a profit of Rs. 1,50,191 in the life department and a loss....
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....e meaning of section 7. When section 7 mentions a right "appertaining to his controlled business" it obviously contemplates a right existing in relation to that business, for the business not being a legal person, could not own any right. The right had to be owned by the insurer to whom the business belonged but it had to be a right which he owned in relation to his controlled business. Now as to the first part of this question it seems to us plain that the right to the refund existed on September 1, 1956. It is no doubt true that the amounts of the refund had not been ascertained till the orders of assessment had been made and these had been made later than September 1, 1956. But that does not affect the question. It is well established that under the income-tax law the liability to be charged to tax, if any, exists all along. The amount of the liability depends on the Finance Act of the year concerned. That is the effect of section 3 of the Income-tax Act which says that the tax at the rates mentioned in the Finance Act shall be charged for the year specified in that Act. So it was said in Chatturam Horilram Ltd. v. Commissioner of Income-tax [1955]2 S.C.R. 290,297: "The Income....
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....carried on by him. Now regulation (2) in the First Schedule provides that the balance-sheet of the life insurance business shall be prepared as a separate document. A specimen form of a balance sheet is set out in this Schedule. That form shows that shares and securities held by an insurer in connection with its life insurance business have to be set out separately. Again, the form of the revenue account which, as we have earlier stated, has to be drawn up separately for each kind of insurance business carried on by the insurer requires the interest and dividenwds coming to the account of the life insurance business to be shown separately after deducting the income tax payable thereon. A note to the form states that in making these deductions on account of income-tax rebates allowed on income tax must be taken out of the tax. Section 13 of the Act requires every insurer carrying on life insurance business to make an actuarial valuation every three years and to submit a report in accordance with the Fourth Schedule. The regulations in this Schedule require a consolidated revenue account in form G contained in it to be annexed to the actuarial report. That form again requires that in....
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....ness including a right to refund of taxes paid before assessment must necessary belong to the owner of the business. Such rights may however be treated by the owner if he so chooses, as appertaining severally to the different business carried on by him. Or again, a statute may require these rights to be treated as appertaining severally to different business carried on by him. The latter is the case here. The Income-tax Act was not concerned with the various kinds of businesses carried on by an insurer. As we have earlier shown, the Insurance Act treated the various kinds of insurance businesses carried on by an insurer separately. Likewise the Act of 1956 treated the life insurance business as something separate from other kinds of businesses carried on by an insurer. We think that it would be a misconception to refer to the Income-tax Act in interpreting the Act of 1956 for deciding whether a right to a refund belonging to an insurer appertains to his life insurance business or to another kind of insurance business carried on by him. The right to the refund no doubt existed in the appellant on September 1, 1956 but it so existed in it as the proprietor of both the life insurance....
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.... life insurance business in this case, then that business would really be given the advantage of the loss made by the general insurance business for it was because of that loss that the right to the refund came into existence. It seems to us that this consideration is irrelevant for deciding whether a right appertains to the life insurance business. That right did not arise because there was a loss in the general insurance business. It would be a misconception to consider it as so arising for the right arose because the appellant's business as a whole suffered a loss or made a smaller income as the case was. No question of one department of the appellant's business taking advantage over another at all arise. A right to the refund appertains to the life insurance business because it was a right to the refund of moneys belonging to that business which had been applied in excess of the amount of tax for which the law made the appellant liable as the owner of the entire business. It remains now to discuss in what proportion the refund is to be distributed. On this question no difficulty arises in respect of the year 1956-57. In that year the entire amount deducted at source or treated....