TaxTMI 
TaxTMI 
2012 (2) TMI 522
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....ces of the case and in law the learned CIT (A) ought 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, p....
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....there under. 4. On the facts and in the circumstances of the case and in law the learned CIT (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....
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....Schedule to the Income tax Act. By the virtue of this amendment, profits on sale of investments, in the case of insurance companies will be 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 ....
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....unt claimed towards value of investment written off does not require any modification. Therefore, the ground is rejected as infructuous. 5. Issue No.3: Deduction for amortization 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.....
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....is Tribunal has held that the profit on sale of investment cannot be added to the total income of the assessee who is in the insurance other than life insurance. Therefore, on the similar analogy 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 Sect....
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....ty", "Capital gains" or "Income from other sources", or in section 199 or in sections 28 to (43B), the profits and gains of any business of insurance, including any such business carried on by a mutual insurance 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....
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....d "Interest on securities", "Income from house property", "Capital gains" or "Income from other sources", do not apply in the case of computation of income from insurance business. The effect of the non-obstante clause so far as the earlier part of section 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 no....
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....language of section 10(7) of the Act of 1922 when compared with section 44 of the Act of 1961 since section 44 does not refer to the computation of tax but merely to the computation of profits and gains in the business of insurance. The Division Bench held that this would 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 ....
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....ds to be emphasized that it is not the case of the Assessing Officer that the assessee had failed to fulfill the condition which attached to the provisions of the relevant clauses of section 10 in respect of which the exemption was allowed. This of course is apart from clause (38) of section 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.....
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....tset itself that the issue now stood resolved by this latest decision of Delhi, Tribunal in the case of Oriental Insurance Co. Ltd. (supra), the relevant portion reproduced below: "17. We have heard rival submissions of the parties and have gone through the material available on record. Identical issue 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 pla....
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....ntemplates an exception for deductions as allowable under the Act are those contained under ss. 28 to 43B of the Act. Sec. 44 creates special application of these provisions in the cases of insurance companies. We therefore, agree with the assessee and delete the act as according to us, it is not permissible to the AO to travel beyond 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 orde....
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....y to the profits and gains of an insurance business. 21. The learned Departmental Representative strongly justified the act ion of the AO and that of the CIT(A) in the light of the clear provisions of s. 14A of the Act . Since the view has al ready been expressed by respected Co-ordinate Bench therefore, we have no reason to take any other view except to follow the 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 sectio....
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.... noticed that in the return of income appellant had on its own offered income under provisions of section 115JB of the Income Tax Act to the extent of Rs. 15,13,60,66,509/-. To this extent, appellant cannot be granted relief since assessed income cannot be below the returned income. Reliance is placed upon the decision of Hon'ble Supreme Court in the case of Goetze India Ltd reported 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 ....