TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 729
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....s and circumstances of the case and the law, the CIT(A) erred in confirming the addition on account of premium deficiency of Rs 5,15,00,000/- for computing book profit u/s 115JB on the ground that the same is an unascertained provision not allowable under clause (c), to Explanation 1, to section 11 5JB(2). 3. On the facts and circumstances of the case and the law, the CIT(A) erred in directing the A.O. to compute the book profits of the Appellant for the purposes of MAT under section 1 15JB, by allowing the URR to the extent allowable under Rule 6E of the l.T. Rules even after giving a clear finding that the URR is not hit by the provisions of clause (b), to Explanation 1, to section 115JB(2) for computing book profit thereunder as this is not in the nature of a reserve but rather an allowable deduction for computing real income of an insurance company. 3 Ground no.1 is regarding exemption of gain on sale of investment. 4. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. An identical issue has been considered and decided by us in assessee's own case for the AY 2003-04 vide even dated 10th Oct 2012 order in ITA No. 2398/M....
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....sale of investments is not required to be included in the P&L Account prepared in accordance with the provisions of Insurance Act. Therefore, once the profit on sale of investment is required to be included in the P& L account in accordance with the provisions of Insurance Act, then as per the Rule 5 of First Schedule of the I T Act, no adjustment is required to be made on account of the amount of profits on sale of investment already included in the P&L Account. Thus, we find force and substance in the contention of the ld DR that once the assessee has included the gain on sale of investments in the P&L account prepared as per the provisions of the Insurance Act, 1938, then the said amount cannot be reduced while computing the income as per provisions of sec. 44 r.w First Schedule of the I T Act. 5.2 However, in the series of decisions of the Tribunal a view has been taken that the amendment vide Finance Act 1988 w.e.f 1.4.89, the sub rule (b) of Rule 5 of First Schedule was omitted with the purpose to grand exemption to the insurance companies with regard to the profit on sale of investments. The Tribunal has taken note of the fact that in the corollary, it has been provided in ....
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....nsidered the Circular No.528 dated 16.12.1988. After analyzing the impact of the omission of rule 5(b) and the Circular, the Tribunal held as under. - '8. A conclusion can be drawn on the basis of the above elaborate discussion that the deletion of sub rule (b) from Rule 5of the First Schedule was with a specific purpose. This Schedule not only prescribes the method of computation of income of Insurance Business in part (A) but also prescribe the method of computation of other Insurance Business in Part (B). Rule 5 is within Part (B) and earlier it has prescribed the method of taxation of profit on sale of investments which was later on scraped. Even by applying a reverse logic we must arrive at the same conclusion that had the impugned income' was earlier taxable under one specific clause but even on its deletion no clause was Introduced or replaced to prescribe the method of taxation of such income;. Therefore the Revenue Department has no right to tax such an income in the absence of any enabling provision. Naturally, such a deletion cannot be treated a superfluous action but this change had to give a definite judicial meaning. We have to ascribe a logical conclusion to the sai....
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.... decided in favour of the assessee and against the revenue. 5 The assessee has also raised an additional ground vide letter dated 25.09.2012 as under: "[1] On the facts and circumstances of the case and in law, the Assessing Officer has erred in computing income of the Appellant under section 115JB of the Act. [2] The Assessing Officer ought to have appreciated that provisions of section 115JB of the Act are not applicable to the Appellant as the Appellant prepares its accounts as per the Insurance Regulatory And Development Authority (IRDA) (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulation, 2002 and not as per provisions of Part II and Ill of Schedule VI of the Companies Act, 1956." 6 We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. An identical issue has been considered and decided by us in assessee's own case for the AY 2003-04 in ITA No. 2398/Mum/2009 as under: "9 We have considered the rival submissions as well as the relevant material on record. There is no quarrel on the point that the assessee, being an Insurance Company is not required to prepare its accounts as per ....
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....s II and III of Sch. VI of the Companies Act by the virtue of proviso to sec 211(2) of the Companies Act. We find that by the Finance Act 2012, with effect from 1.4.2013, even companies to which Proviso to sec 211(2) applies (the banking Companies and companies engaged in generating and distribution of electricity), should prepare their P&L and balance Sheet in accordance with the provisions of the Act Governing such companies. This would mean that prior to AY 2013-14, provisions of sec 115)B will not apply to companies to which proviso to sec 211(2) of the companies Act, 1956 applies. Th Assessee being a company to which proviso to sec 211(2) of the Companies Act 1956 applies, will not be liable to be taxed under sec 115JB. 14. The Mumbai Tribunal in the case of Krung Thai Bank Vs. JCIT (133 TTJ 435), to which one of us is a party has held that provisions of sec 115JB cannot be applied to the banking company." 9.3 Similarly, in the case of Reliance Energy (supra), the coordinate Bench of this Tribunal has held in paras 28 & 29 as under: "28 As discussed above when it is not possible to prepare the accounts under the Companies Act for the purpose of computation u/s 115JB, theref....