TaxTMI 
TaxTMI 
2019 (4) TMI 959
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AO. 3. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the addition of Rs. 49,84,91,810/- u/s 14A of the Act, made by the AO." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee, a public sector undertaking of Government of India, is into the business of non-life insurance product offering insurance cover for large projects like power plants, petrochemical, steel and chemical plants as well as offering products like motor insurance policies, health and medi-claim/ overseas medi-claim, personal accident, etc. AO noticed that the assessee company has received an interest income of Rs. 80,52,21,000/- which was recognised as income for the year under assessment. AO also noticed that in the preceding year, similar interest income of Rs. 92,00,59,000/- was brought to tax. Declining the contentions raised by the assessee, AO proceeded to make addition of Rs. 80,52,21,000/- on account of accrued interest on loans, debentures and bonds. AO made addition of Rs. 47,43,236/- by disallowing 50% of the total expenditure of Rs. 94,86,472/- claimed by the assessee being guest house expenditure on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Hon'ble. Delhi High Court in AY 1986-87 to 1988-89, which is reported as 125 Taxman 1094 (Del.), decided the issue in favour of the assessee by holding that section 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 rules 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 section 44, as held in the case of General Insurance Corpn. of India Vs. CIT (1999) 240 ITR 139 (SC), wherein Their Lordships of the Apex Court have categorically held that the provision of section 44 being a special provision, govern computation of taxable income earned from business of insurance. It mandates the tax authorities to compute the taxable income in respect of insurance business in accordance with the provisions of the First Schedule to the Act. In the light of these, their Lords....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the absence of any finding by the Assessing Officer that the taxable income has not been computed in accordance with section 44 of the Act, no fault can be found with the view taken by the Tribunal. No question of law, much less a substantial question of law, survives for our consideration. Consequently, both the appeals are dismissed." 9. So, following the decision rendered by the coordinate Bench of the Tribunal as well as Hon'ble High Court in the assessee's own case, as discussed in the preceding paras, we are of the considered view that the assessee company had rightly not recognised an amount of Rs. 80,52,21,000/- as income for the years as per its accounting policy and as per policy issued by the Insurance Regulatory Development Authority (IRDA). So, finding no illegality or perversity in the findings returned by the ld. CIT (A), ground no.1 is determined against the Revenue. GROUND NO.2 10. The ld. CIT (A) deleted 50% of the disallowance of Rs. 47,43,236/- made by the AO on account of expenses incurred on guest house repairing. Again, it is brought to our notice by the ld. AR for the assessee that this issue has already been decided in favour of the assessee b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is ground by relying upon the decision rendered by the Hon'ble Apex Court in the case of Maxopp Investment Ltd. vs. CIT - (2018) 91 taxmann.com 154 (SC) and contended that since Maxopp Investment Ltd. (supra) judgment was rendered by Hon'ble Supreme Court on February 12, 2018, the Tribunal was not having its benefit to rely upon. 13. The coordinate Bench of the Tribunal in AY 2005-06 decided this issue in favour of the assessee by relying upon the decision in AYs 2000-01 & 2001-02 by returning following findings :- "18. The next common dispute relates to the order of the CIT(A) in sustaining the action of AO in making (sic) allowing 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 provision 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 both taxable as well as tax free. An estimated disallowance of 50 per cent out of the management expenses incurred and as claimed in the P&L a/c is treated as expenses incurred in connection with the looking after tax-free investment. 19. The learned couns....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er sources', or in s. 199 or in ss. 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 co-operative society, shall be computed in accordance with the rules contained in the First Schedule." 23. The above provision makes it very clear that s. 44 applies notwithstanding anything to the contrary contained within the provisions of the IT Act relating to computation of income chargeable under different heads. We agree with the learned counsel that there is no requirement of headwise bifurcation called for while computing the income under s. 44 of the Act in the case of an insurance company. The income of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished to the Controller of Insurance. The actual computation of profits and gains of insurance business will have to be computed in accordance with r. 5 of the First Schedule. In the light of these special provisions coupled with non obstante clause the AO is not permitted to travel beyond these provisions. 24. Sec. 14A contemplates an exception for deductions as al....