TaxTMI 
TaxTMI 
2019 (2) TMI 335
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....s under Section 260A of the Income-tax Act, 1961 ("the Act" for brevity), who are Insurance Companies, viz., United India Insurance Company Limited, Cholamandalam MS General Insurance Company Limited, and Royal Sundaram General Insurance Company Limited, the challenge is to the common order passed by the Income-tax Appellate Tribunal 'A' Bench, Chennai ("the Tribunal" for brevity), in I.T.A.No.2276/Chny/2014, dated 31.07.2018, for the assessment year 2009-10; I.T.A.No.1350/Chny/2013, dated 31.07.2018, for the assessment year 2008-09; I.T.A.No.1676/Chny/2011, dated 31.07.2018, for the assessment year 2007-08; I.T.A.No.1621/Chny/2011, dated 31.07.2018, for the assessment year 2007-08; I.T.A.No.2146/Chny/2008, dated 31.07.2018, for the assessment year 2005-06; I.T.A.No.1759/Chny/2011, dated 31.07.2018, for the assessment year 2006-07; I.T.A.No.40/Chny/2009, dated 31.07.2018, for the assessment year 2005-06; I.T.A.No.1666/Chny/2011, dated 06.08.2018, for the assessment year 2005-06; I.T.A.No.1626/Chny/2011, dated 06.08.2018, for the assessment year 2005-06; I.T.A.No.1356/Chny/2013, dated 0....
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....cases on hand have had a chequered history and this is the second round of litigation before this Court. Earlier, the assessees had approached this Court by filing tax case appeals in T.C.(A) Nos.361 to 370 of 2012 and etc., batch challenging the order passed by the Tribunal by which, the assessments were set aside and the matter was remanded to the Assessing Officer for fresh consideration. The Tribunal opined that both the assessee and the Revenue had filed fresh documents and therefore, the matter has to be remanded to the Assessing Officer for fresh consideration. The assessee as well as the Revenue filed miscellaneous petitions before the Tribunal contending that no fresh documents were produced and remand to the Assessing Officer was unnecessary. The Tribunal rejected those applications, which were challenged by way of writ petitions, which were not numbered, however, were tagged along with the tax case appeals. 6.The Division Bench, by judgment dated 17.06.2013, in Cholamandalam MS General Insurance Co. vs. Assistant/Deputy commissioner of Income-tax, [2013] 357 ITR 597 (Madras), allowed the appeals filed by the assessee and set aside the order of remand passed by the Tri....
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.... 9.The other limb of the direction was permitting the assessee to file additional grounds on the points of law before the Tribunal. It is not disputed before us that no such additional grounds, raising points of law, were filed before the Tribunal and the parties were left to contest the issues, which they have raised in their respective memorandum of grounds of appeal. We have perused the memorandum of grounds of appeal filed by the assessee as well as the Revenue, in September, 2018. There is no dispute or controversy on this issue, and the parties are clear that the grounds raised by them are those which are contained in the grounds of appeal filed before us in the typed set of papers. Thus, the Tribunal should have endeavoured to consider the grounds raised by both parties and take fresh decision on merits. 10.Section 254 of the Act states that the Appellate Tribunal, may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. What is to be borne in mind is the words "such orders thereon". Therefore, the Tribunal is required to take a decision on the appeal petition and in the instant case, on the grounds raised....
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.... would be whether at all this is an expenditure? However, we do not propose to deal with this, as that was never decided by the Tribunal in the impugned order and leave the issue open. Thus, we are required to examine as to whether in the facts and circumstances, the Tribunal was right in holding that payment of reinsurance premium to non-resident insurance companies is prohibited and to be disallowed under Section 37 of the Act. 15.As pointed out earlier, neither the Revenue, nor the assessee referred to Section 37 of the Act. Thus, the error committed by the Tribunal firstly is in exceeding the scope of the order of remand passed by the Division Bench of this Court in the earlier decision noted above. Secondly, the Tribunal has no jurisdiction to declare a transaction to be either prohibited or illegal occurring under a different statute over which, it has no control. In other words, the Income-tax Officer cannot declare a transaction as illegal under the provisions of the Insurance Act or the Regulations framed thereunder. The Incometax Officer can examine as to whether any income accrued in the hands of the assessee is required to be taxed. In the instant case, neither the A....
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....tage of the sum assured on each policy as may be specified by the [the Authority with the previous approval of the Central Government] under sub-section (2). (2) For the purposes of sub-section (1), [the Authority] may, by notification in the Official Gazette,- (a) specify the percentage of the sum assured on each policy to be re-insured and different percentages may be specified for different classes of insurance: Provided that no percentage so specified shall exceed thirty per cent. of the sum assured on such policy; and (b) also specify the proportions in which the said percentage shall be allocated among the Indian re-insurers. (3) Notwithstanding anything contained in sub-section (1), an insurer carrying on fire insurance business in India may, in lieu of re-insuring the percentage specified under sub-section (2) of the sum assured on each policy in respect of such business, re-insure with Indian re-insurers such amount out of the first surplus in respect of that business as he thinks fit, so however that, the aggregate amount of the premiums payable by him on such re-insurance in any year is not less than the said percentage ....
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...."other insurer", held that the definition of "insurer" under sub-Section (9) of Section 2 of the Act alone should be relied upon and that is the only definition of "insurer" and if such a definition is applied, re-insurance with foreign companies is prohibited by law. The Tribunal held that the word "other insurer" provided in Section 101A(7) of the Insurance Act enables the Indian insurer for reinsuring over and above the percentage fixed by the Regulatory Authority and the reinsurance may be either with Indian re-insurer or other insurer. It further held that by taking advantage of the term "other insurer", the assessee claims that they can re-insure with non-resident reinsurance company ignoring the provisions of the Insurance Act. It further proceeded to hold that the term "other insurer" as provided in Section 101A(7) of the Insurance Act is only the insurer, which is defined in Section 2(9) of the Insurance Act and there cannot be any extended meaning, which can be given to the term "other insurer". Thus, it held an Indian insurer cannot have any reinsurance arrangement with reinsurance company other than the insurer, as defined in Section 2(9) of the Insurance Act. In our....
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....anations in respect of the reinsurance programme of an insurer and may issue such direction, as it considers necessary; (7) Insurers shall place their reinsurance business outside India with only those reinsurers who have over a period of the past five years counting from the year preceding for which the business has to be placed, enjoyed a rating of at least BBB (with Standard & Poor) or equivalent rating of any other international rating agency. Placements with other reinsurers shall require the approval of the Authority. Insurers may also place reinsurances with Lloyd's syndicates taking care to limit placements with individual syndicates to such shares as are commensurate with the capacity of the syndicate. (8) The Indian Reinsurer shall organise domestic pools for reinsurance surpluses in fire, marine hull and other classes in consultation with all insurers on basis, limits and terms which are fair to all insurers and assist in maintaining the retention of business within India as close to the level achieved for the year 1999-2000 as possible. The arrangements so made shall be submitted to the Authority within three months of these regulations coming into for....
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.... also spelt out in the Regulations. The insurer has to disclose payments made outside India and there is also a restriction on with whom, they can enter into a contract of re-insurance, as the Regulations place an embargo stating that such entity should have enjoyed the rating of at least BBB or equivalent rating of any other international rating agency. Thus, the reading of the Regulations will clearly show there is absolutely no prohibition for re-insurance with a foreign re-insurance company. 22.The observations made in the finding rendered by the Tribunal stating that the Regulations are inconsistent with the provisions of the Act are utterly perverse and to be outrightly rejected. In 2008, the Standing Committee on Finance proposed the amendment to the Insurance Laws and the Insurance Laws (Amendment) Bill, 2008 was introduced. The report of the Committee states that the General Insurance Corporation Re is the only national re-insurer operating in India and also has re-insurance business in international market and its share of international business is 44 per cent. The Chairman of the General Insurance Corporation (GIC), who is one of the respondents in these appeals....
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.... time, the Income-tax Department took a stand that the reinsurance business with a foreign re-insurance company was a prohibited business. Further, the Tribunal fell in error in rendering such a finding without noticing the Re-insurance Regulations, which has been provided by the Insurance Regulatory and Development Authority of India. In the said Regulations, the highlights of the statement and objects for introduction of Chapter IVA to the Insurance Act in the amendment, in the year 1961, had been brought into after which, there is an order of Preference for Re-insurance Cessions. In the order of preference, the last among them is what can be offered to Indian insurers and overseas insurers. Thus, the regulations does not wholly prohibit any re-insurance with overseas re-insurance companies subject to the condition that the other priorities contained in Clauses 1, 2 and 3 of the regulations are exhausted. Furthermore, the Reserve Bank of India, Exchange Control Department, Central Office, Mumbai notified the Foreign Exchange Management (Insurance) Regulations, 2000. The major changes in the procedure as per the memorandum of Exchange Control Regulations relating to General Insura....
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.... Act, "other insurer" should mean the insurer, who is outside India and not a person in terms of the definition under Section 2(9) of the Act. In the light of the above discussion, we are of the clear view that the Tribunal erred in coming to a conclusion that it is not the intention of the Parliament to authorize an Indian insurer to have re-insurance outside the country ignoring the provisions of Insurance Act referred above. The Tribunal had no jurisdiction to declare any provisions of the regulations to be inconsistent with the provisions of the Insurance Act. This was wholly outside the purview of the Tribunal. Thus, the Tribunal clearly exceeded its jurisdiction in stating that the assessees have engaged in a transaction, which is prohibited by law and therefore, not entitled for deduction under Section 37 of the Act. This has never been the case of the Revenue either before the Assessing Officer or before the CIT(A) or before the Tribunal, when they filed appeals challenging that portion of the order passed by the CIT(A), which was against the Revenue. 26.The Tribunal while upholding the order of the Assessing Officer did not assign any independent reasons. The discussion....