TaxTMI 
TaxTMI 
2015 (9) TMI 488
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.... same are taken together for disposal by this common order. Facts, for the sake of convenience, have been taken from ITA No.1683/M/2012 for A.Y. 2004-05. ITA No.1683/M/2012 for A.Y. 2004-05 2. The assessee in this appeal has taken the following three grounds of appeal: "Ground No 1 The Learned CIT (A) has erred in confirming the action of the AO in reopening of assessment u/s 147, ignoring the legal position laid down by the Supreme Court interalia in the case of CIT, Delhi-vs - Kelvinator of India Ltd. (2010)-320 ITR 561 and Bombay High Court in the case of ICICI Prudential Life Insurance Company Ltd. (2010) - 325 ITR 471. Ground No 2 The Learned CIT (A) has erred in confirming the action of the AO in making addition of negative rese....
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....ade in the reassessment order passed under section 147 of the Act before the Ld. CIT(A). It was contended before the Ld. CIT(A) that all the facts and relevant details were already there before the AO at the time of original scrutiny assessment proceedings under section 143(3) of the Act. The details of negative reserve in Form - I were duly furnished before the AO. Hence, it was not a case where the assessee had failed to disclose fully and truly all the material facts. No new fact or tangible material had come into the knowledge of the AO. It was further contended that the belief of escapement of taxable income in relation to taxability of negative reserves, thus, was nothing but change of opinion of the AO. It was therefore contended, wh....
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....as been unsuccessfully contested by the assessee in appeal before the Ld. CIT(A). However, before us, the assessee has not raised any ground of appeal relating to rejection of his contention by the Ld. CIT(A) on this issue. Hence, it can be safely said that the belief of the AO regarding escapement of income in relation to the rate of tax leviable on income other than insurance income was correct and bonafide. So far as the second reason relating to the escapement of income because of the assessee offering negative reserves at 'zero', had not come into the knowledge of the AO and no discussion had taken place in this respect. The AO was under bonafide belief that the assessee had wrongly adopted the value of negative reserves at ....
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....ration do not warrant any provision and is, in fact, an asset. However, in certain circumstances, such as for following IRDA guidelines, insurers may not treat policies as assets and they set any negative reserves to 'zero'. For example, if an insurer had two policies, one with a reserve of 100 and the other with a reserve of - '10, it might think of its liabilities at 100 rather than 90 to take into account the eventuality in case the second policy lapsed. This process is called eliminating negative reserves. As mentioned earlier, a policy which has a negative reserve is in nature of an asset." 8. Now coming to the facts of the case, the AO noticed that the assessee company was having negative reserves of 98374000/-. The negat....
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.... Actuary has erred in applying Insurance Act correctly and properly, which results in understatement of taxable surplus, the AO can point out the defects in non compliance of Insurance Act and determine the actual taxable surplus. He further observed that the as per the Regulations of the Insurance Regulatory and Development Authority (IRDA) the value of negative reserves is to be taken at 'zero' only in specific situations and not in general for all purposes. While observing so, he relied upon section 35 of the Insurance Act which is related to amalgamation and transfer of insurance business, in which case it has been provided that the mathematical reserves should be taken without any modifications. He therefore held that for deter....
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....for statistical purposes. Ground No.3 11. The ground No.3 is relating to the question of applicability of provisions of section 14A while determining the income of the Life Insurance Company. The Ld. A.R. of the assessee has brought our attention to para 14 of the order of the Tribunal dated 23.05.2014 passed in the own case of the assessee (supra) wherein this issue has been considered by the Tribunal in relation to the subsequent assessment year A.Y. 2006-07. The Tribunal while relying upon the decision of the co-ordinate bench of the Tribunal in the case of ICICI Prudential Co. Ltd. (supra) and further in the case of HDFC Standard Life Insurance Co. Ltd. (supra) has held that in view of the special provisions applicable to the insuranc....