TaxTMI 
TaxTMI 
2012 (2) TMI 522
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....t to have allowed the appellant's claim for deduction in respect of investments written off which was without prejudice to the appellant's claim for exemption of the profit on sale of investments and not doing so is wrong and contrary to the facts of the case and the provisions of the Income Tax Act, 1961 and rules made there under. 1.3 On the facts and in the circumstances of the case and in law the learned CIT (A) ought to have allowed the appellant's claim for deduction in respect of amortization of premium on investment debited to the Profit & Loss A/c and not doing so is wrong and contrary to the facts of the case and provisions of the Income Tax Act, 1961 and rules made there under. 1.4 Without prejudice to the above ground and on the facts and in the circumstances of the case and in law, the authorities below ought to have given the benefit of exemption under section 10(38) in respect of profit on sale of investments and rebate under section 88E and the concessional rate of tax under section 111A of the Income Tax Act, 1961 and not doing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961 and Rules made there under. ....
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....IT (A) having held that the provisions of section 115JB are not applicable to the appellant ought to have not restricted the relief to the extent the assessed income is not reduced below the total income offered under section 115JB in the return of income and the reasons assigned for doing so are wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961 and Rules made there under. 5. On the facts and in the circumstances of the case and in law the learned CIT (A) erred in not appreciating that the interest of Rs. 6,95,54,985/- under section 234C has been wrongly charged as against Rs. 6,50,54,986/- computed by the appellant on tax due on the returned income and thereby the learned Assessing Officer erred in charging higher interest under section 234C to the extent of Rs. 44,99,999/- which is wrong and contrary to the facts of the case, provisions of Income Tax Act 1961 and rules made there under". 2. We have heard the learned Counsel Shri Farrokh V. Irani and the learned CIT (DR) Shri Paran Ved. The learned Counsel placed on record a chart indicating the relevant grounds of appeal, reference to Assessing Officer's order and CIT (A)'s ord....
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.... taxable w e f 2011-12.Since the amendment so made in the statute, which cannot be infer red to be a superfluous amendment, is with effect from 2011-12, the conclusion arrived at by the Pune Bench stands further fortified. This fortifies the stand taken by the co ordinate bench in the case of Bajaj Allianz General Insurance Co. Ltd. (supra), we uphold the grievance of the assessee. 9. In view of these discussions, as also following the coordinate bench decision in the case of Bajaj Allianz General Insurance Company assessee. The profits on sale of investment in the years before us, which are year prior to the years with effect from which prospective amendment is made, are not taxable in the hands of the assessee. The taxability of income of insurance companies under the head "income from business and profession" as governed by provisions of sect ion 44 read with first schedule to the Income tax Act, does not extend to taxability of profits on sale of investments - so far as the assessment years before us are concerned. 10. For the reasons set out above, we direct the Assessing Officer to exclude profits on sale of investments from income of the assessee liable to be taxed. Th....
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....mortization of Premium on Investment debited to Profit & Loss A/c. (Modified Ground of Appeal No.1.3 - Original Ground of Appeal No.1.6, 1.7 and 1.8). An amount of Rs. 34,95,85,335/- was similarly added back to the net profit while offering income in the computation of total income consequent to assessee's decision in claiming exemption on profit on sale of shares. As stated in issue No.2 above, consequent to the bringing to tax the profit on sale of investments by the Assessing Officer, the assessee made alternate claim for deduction of amortization of amount debited to Profit & Loss A/c. The company made the following note to the computation: "2. The company is claiming exemption of the profits on sale of investment as per Rule 5(b) of the first schedule to the Income Tax Act, 1961 in view of the legislative object behind the deletion of clause (b) of Rule 5 of the First Schedule as borne out by the notes on clauses and the explanatory memorandum to the Finance Bill, 1988 and by Para 45.1 of Circular No.528dated 16.12.1988 issued by the CBDT explaining the provisions of the Finance Act, 1988. This claim has been disallowed by the Assessing Officer in AY 2002-03 to 2006-07 and c....
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....logy any provision or written off the amount on account of depreciation or loss on the realization of investment shall not be allowed as deduction. Accordingly, grounds of appeal no.2 and 3 are decided against the assessee". Respectfully following the same, we are of the opinion that claims for deduction for amortization of premium on investment cannot be allowed as a deduction. Accordingly modified ground No.1.3 is rejected. 6. Issue No.4: Benefit of Exemption under section 10(38) in respect of Profit on sale of investments, Rebate under section 88E and concessional rate of tax under section 111A. (Modified Ground of Appeal No.1.4 - Original Ground of Appeal No.1.9). This is an alternate ground without prejudice to Ground No.1.1. For the reasons stated above the issue No.2 & 3, there is no need to consider this issue since the entire amount of profit on sale of investment was considered not taxable. Therefore, this alternate ground is also rejected. 7. Issue No.5: Availability of Section 10 Exemption (Modified Ground of Appeal No.2 - Original Ground of Appeal No.2.1 & 2.2) -. The issue arises in a peculiar manner in this Asst.Year. While dealing with the issue of profit on sal....
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.... company or by a cooperative society, shall be computed in accordance with the rules contained in the First Schedule". Section 44 provides that the profits and gains of any business of insurance of a mutual insurance company shall be computed in accordance with the rules in the First Schedule. Part 'A' of the First Schedule containing Rules 1 to 4 deals with profits of life insurance business while Part B consisting of Rule 5 deals with computation of profits and gains of other insurance business. Rule 5 provides as follows: "5. The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the Insurance Act, 1938 (4 of 1938), to be furnished to the Controller of Insurance subject to the following adjustments: (a) Subject to the other provisions of this rule, any expenditure or allowance (including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed) which is not admissible under the provisions of section 30 to (43B) in computing the profits an....
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....ion 44 is concerned, therefore, is that the provisions of section 44 will prevail notwithstanding the fact that there are contrary provisions in the Act relating to computation of income chargeable under the four heads mentioned in section 44. The only other overriding effect of section 44 is that its provisions operate notwithstanding the provisions of section 191 and of section 28 to 43A. Thus, the only effect of section 44 is that the operation of the provisions referred to therein is excluded in the case of an assessee who carried on insurance business and in whose case the provisions of rule 2 of the First Schedule are attracted. If the deductions which are claimed by the assessee do not fall within the provisions which are referred to in section 44, it will have to be held that the applicability of those provisions in the case of an assessee whose assessment is governed by section 44 read with rule 2 in the First Schedule is not excluded". This judgment is sought to be distinguished by the Assessing Officer while disposing of the objections on the ground that the decision was rendered in the context of an assessee which carried on life insurance business to whom Rules 1 to....
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....d however not make any difference to the principle laid down by the Court in the earlier decision in the case of New India Assurance Co. Ltd. Accordingly, the decision of Life Insurance Corporation (Supra) could not have been ignored by the Assessing Officer on the supposition that the decision was rendered in the context of an assessee who carried on life insurance business and was, therefore, not available to an assessee which carries on general insurance business. 12. In General Insurance Corporation of India v. Commissioner of Income-Tax, the Supreme Court considered in an appeal arising out of a judgment of the High Court the issue as to whether a sum of Rs. 3 crores, being a provision for redemption of preference shares, was not liable to be added back in the total income of the assessee for AY 1977-78?. The Supreme Court held that a plain reading of rule 5(a) of the First Schedule made it clear that in order to attract the applicability of the provision the amount should firstly be an expenditure or allowance and secondly it should be one not admissible under the provisions of section 30 to 43A. The Supreme Court held that the sum of Rs. 3 crores in that case which was se....
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....ion 10 where the Assessing Officer had rejected the claim for exemption in the original order of assessment under section 143(3). The Assessing Officer above all was bound by the communication of the CBDT. Having followed that in the order under section 143(3) he could not have taken a different view while purporting to reopen the assessment. Having applied his mind specifically to the issue an having taken a view on the basis of the communication noted earlier, the act of reopening the assessment would have to be regarded as a mere change of opinion which has also not been based on any tangible material. Consequently, we hold that the reopening of the assessment is contrary to law. The Petition would have, therefore, to be allowed". Respectfully following the above, we hold that the assessee is entitled for exemption under section 10. The enhancement made by the CIT (A) is therefore, cancelled. Ground is accordingly allowed. 9. Issue No.6 Non applicability of provisions of section 14A. (Modified Ground of Appeal No.3.1 to 3.4 - Original Ground of Appeal No.3.1 to 3.5). The issue is with reference to the applicability of section 14A and disallowance of expenditure in respect of ....
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....sue arose in assessee's own case for asst. yr. 1985-86. The Tribunal accepted the plea of the assessee and in fact the issue went up to the Hon'ble Delhi High Court in asst . yrs. 1986-87 to 1988-89, which is reported as CIT v. Oriental Insurance Co. Ltd. [2003] 179 CTR (Delhi ) 85 : [2002] 125 Taxman 1094 (Delhi ), decided the issue in favour of the assessee by holding that s. 44 of the Act is a special provision dealing with the computation of profits and gifts of business of insurance. It being a non obstinate provision, has to prevail over other provisions in the Act. It clearly provides that income from insurance business has to be computed in accordance with the rule contained in the First Schedule. It is not the case of the Revenue that the assessee has not computed the profits and gains of its insurance business in accordance with the said rules. Reliance was placed on the scope of s. 144, as held in the case of General Insurance Corporation of India v. CIT [1999] 156 CTR (SC) 425 : [1999] 240 ITR 139 (SC), wherein their Lordships of the apex Court have categorically held that the provisions of s. 44 being a special provision govern computation of taxable income ear....
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....ond s. 44 and First Schedule of the IT Act ." 18. I t may not be out of place to mention that the respected Co-ordinate Bench has duly taken the note of an earlier decision of that very Bench decided in the case of that very assessee vide order dt . 29th Sept . 2004 bearing ITA Nos. 7815/Del/1989, 3607 to 3609/Del /1990; 5035/Del / 1998 and 3910/Del /2000 named as Dy. CIT v. Oriental General Insurance Co. Ltd. [2005] 92 TTJ (Delhi ) 300. As seen from the Paras reproduced above on due consideration of the relevant provisions as applicable to resolve this issue a conclusion was drawn that since the Courts have held, s. 44 creates a special provision in the cases of assessment of insurance companies therefore it was not permissible to the AO to travel beyond s. 44 of First Schedule of IT Act . 18. The next common dispute relates to the order of the CIT (A) in sustaining the act ion of AO in al lowing only 50 per cent of the management expenses by invoking the provisions of s. 14A of the Act . The addition is made by the AO on the plea that the provisions of s.14A was inserted by Finance Act, 2001 w.e.f. 1st April, 1962. It is stated that the investments made by the assessee are ....
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....e same. With the result we hereby accept the argument of learned Authorized Representative to the extent that in the present situation the provisions of s. 14A need not to apply while granting exempt ion to an income earned on sale of investment primarily because of the reason of the withdrawal or deletion of sub- r. 5(b) to First Schedule of s. 44 of IT Act. Once we have taken this view therefore the enhancement as proposed by learned CIT(A) is reversed and the directions in this regard are set aside. Resultantly ground No. 1 is al lowed consequent thereupon ground No. 2 automatically goes in favour of the assessee". Accordingly, by following the orders of this Tribunal, we decide this issue in favour of the assessee. Therefore, the ground is allowed. 10. Issue No.7 Non-applicability of provisions of section 115JB i.e. MAT (Modified Ground of Appeal No.4 - Original Ground of Appeal No.4). The assessee had offered income under section 115JB book profit in the original return and subsequently in revised return. Before the CIT (A) it raised an additional ground where it was contended that provisions of section 115JB are not applicable to the assessee. As this ground goes to the ro....
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....in 284 ITR 323. To the extent of this declared income therefore, relief cannot be granted. However, any further additions to this income cannot be upheld. The additional ground of appeal is decided accordingly". ( emphasis provided) Even though there was a finding that provisions of section 115JB cannot be invoked in the case of the assessee, the finding of which was not contested by the Revenue since there is no cross appeal, the assessee's contention was that having given a finding that provisions of section 115JB are not applicable, the CIT (A) is bound to allow the ground and cannot reject the additional ground based upon the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd reported in 284 ITR 323. 11. It was submitted by the learned Counsel that the issue of non applicability of 115JB was decided by the Coordinate Bench in the case of Krung Thai Bank PCL vs. Jt DIT in ITA No.3390 of 2009. It was further submitted that the CIT (A) is bound to grant relief following the decision of the Hon'ble Supreme Court in the case of National Thermal Power Corporation vs. CIT 229 ITR 383 followed by the Hon'ble Bombay High Court judgment in the case of Se....