TaxTMI 
TaxTMI 
2016 (4) TMI 125
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....ance made by the Assessing Officer on account of expenditure (incurred in relation to exempt income) u/s 14A of the Income Tax Act, 1961. 3. On facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in allowing the club expenses without appreciating the fact that assessee failed to establish that these expenses are for business purposes. 4. On facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in holding that the provisions u/s 115JB of the I.T. Act are not applicable to the assessee for A.Y. 2010-11. 5. On facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in entertaining the ground of appeal regarding credit for Dividend Distribution Tax u/s 115-0 since the issue of credit of this tax is not emanating from the order of assessment and is not one of the specified issue u/s 246A on which appeal can be preferred and further also because tax as defined in Section 2(43) does not include Dividend Distribution Tax so as to make appeal permissible in terms of "Tax" appearing in Section 246A( 1) of the Act. " 3. At the outset, the Ld. Counsel for the assessee submits that except ground No. 3 &....
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.... the profit disclosed by the annual accounts drawn up as per the Insurance Act, 1938. It is important to bear in mind the legal position that the taxability of income in the case of the insurance companies is not on commercial profits but on such profits as are computed in accordance with the provisions of the Insurance Act, subject to, of course, permissible adjustments under the Income Tax Act. It is, therefore, futile to suggest, as has been suggested by the learned Departmental Representative, that the profits on sale of investments are taxable in the hands of the assessee unless there is a specific provision for exemption of such profits. The question of exemption only arises when something is taxable, but, as we have noted above, the taxability of profits in the hands of the insurance companies is confined to profits as per annual accounts of such insurance companies drawn up in accordance with the Insurance Act. 6. What is taxable in the case of the insurance companies is, as we have noted above, is not commercial profit as per the normal rules of computation of business 9 General Insurance Corporation of India income but the profit reflected by accounts drawn up as....
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....pany has to be finalized in accordance with the insurance regulatory and development authority. As per the said regulation profits earned by a General Insurance Company on sale of redemption of investment has to be credited to the profit and loss account and not to be shifted to the balance sheet directly. It was wrong on the part of the AO through a suggestion that had the assessee ever intended to claim the exemption then he could have reflected the profit on sale of investment in the balance sheet directly instead of crediting in P & L account. The contention of the assessee was that such a method has not been prescribed by the designated regulatory authority. (d) The applicability of provisions of sec 43(D) and section 36(1)(viia) have also been denied. The contention of the assessee was that these provisions are applicable to Public Financial Institutions (PFI) and the assessee company do not fall under that category. 7. In addition to the above contentions there was no dispute that the independent code is enacted by the introduction of sec 44 in IT Act which independently prescribed the mode and manner for assessment of Insurance Business. This section since....
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....en by the co ordinate bench in the case of Bajaj Allianz General Insurance Co Ltd (supra). 9. In view of these discussions, as also following the coordinate bench decision in the case of Bajaj Allianz General Insurance Company Limited (supra), we uphold the grievance of the 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 section 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. The assessee gets the relief accordingly". Respectfully following the said decision, we direct the AO to exclude profit on sale of investments from income of the assessee as not liable to be taxed. 7. With respect to ground No. 2 i....
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....ement reliance of learned Authorised Representative it is worth to mention at the outset 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 obstnate 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 g....
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....O is not permitted to travel beyond these provisions. 24. Sec. 14A contemplates 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. It may not be out of place to mention that the respected Coordinate 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 Schedul....
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....e purpose, object and purview of s. 14A has no applicability to the profits and gains of an insurance business. 21. The learned Departmental Representative strongly justified the action 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 already been expressed by respected Coordinate 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 Authorised Representative to the extent that in the present situation the provisions of s. 14A need not to apply while granting exemption 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 allowed consequent thereupon ground No. 2 automatically goes in favour of the assessee. 9. Accordingly, by following the earlier orders of this Tribunal, we decide this issue in favour of the assessee". Respectfully....
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....e decisions, we uphold the order of the Ld. CIT(A) deleting the disallowance. 14. The next issue is whether the provisions of Sec. 115JB of the Act are applicable to the assessee or not. The Ld. Counsel for the assessee referring to page-194 of the compilation submits that in assessee's own case for the assessment year 2007-08, the Coordinate Bench held that the MAT provisions are not applicable to the assessee, the General Insurance Company. 15. We have perused the orders of the Co-ordinate Bench for the assessment year 2007-08 in ITA No. 354 of 2011 dated 15.2.2012 and we find that the Co-ordinate Bench following the decision in the case of Krung Thai Bank PCL Vs DIT in ITA No. 3390 of 2009 directed the AO to exempt the assessee from the applicability of provisions of Sec. 115JB of the Act. Respectfully following the Co-ordinate Bench decision in assessee's own case for A.Y. 2007-08, we affirm the order of the Ld. CIT(A) on this issue. 16. Last issue in the appeal of the Revenue is that the Ld. CIT(A) erred in entertaining the ground of appeal regarding credit for Dividend Distribution Tax u/s. 115-0. 16.1. The Ld. DR submits that the issue of credit for Dividend Dist....