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2017 (8) TMI 1566
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....ation there under and accordingly allowing adjustment from the 'surplus' worked as per "actuarial valuation" (and as shown by the assessee in Form-11 in violation of the ratio of the Apex Court in the case of LIC Vs. CIT 51 ITR 778?" 2. Whether on the facts and circumstances of the case and in law, the LcICIT(A) was correct in interpreting that on account of "legislation by incorporation", 'only' the "un-amended" insurance Act 1938 and the Regulations there under became part of Sectin 44 r. w. Rule 2 of the First Schedule of the LT. Rules. " 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in interpreting Section 44 of the I. T. Act read with rule 2 of the First Schedule that the legislature consciously omitted incorporation of the provision of Insurance Regulatory and Development Authority Act 1999 and regulation made there under in Rule 2 of the First Schedule which 'refers' only to un-amended Insurance Act 1938 and Regulations made there under?" 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the provisions of Section 28 of Insuranc....
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.... 11. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in failing to appreciate that negative reserve has an impact of reducing the 'taxable surplus' as per Form-1 and therefore corresponding adjustment for "negative reserve" need to be made to arrive at "taxable surplus?" 10. We have heard Shri H. N. Singh, learned Departmental Representative appearing for the Revenue and Ms. Aarti Vissanji, learned Counsel appearing for the assessee. 11. Learned Departmental Representative fairly submitted before us, all the issues raised in the appeals of the Revenue are covered by the decision of the Tribunal in assessee's own case for the assessment year 2002-03 and 2009-10, in ITA no. 2203/Mum. /2012 and others dated 20th September 2013. 12. Learned Authorised Representative submitted, not only the issues raised by the Department in grounds of appeal are covered by the decision of the Tribunal in assessee's own case, but, the Tribunal has consistently taken similar view in respect of other insurance companies as well. In this regard, the learned Counsel for the assessee relied upon the decisions of the Tribunal in assessee's own cas....
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....rporation was permitted to involve itself in life insurance business. The actuarial valuation was not undertaken every year but once in three years. Therefore, the rule provides for only average of the surplus to arrive between two inter valuation periods. However, with the enactment of IRDA Act 1999 and Regulations therein not only the private participants were permitted to do business but presentation of accounts and reports were modified.... . " .... The profits and gains of life insurance business shall be taken to be the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation made in accordance with the Insurance Act, 1938,in respect of the last inter-valuation period ending before the commencement of the assessment year,so as to exclude from it any surplus or deficit included therein which was made in any earlier inter-valuation period. " Respectfully following the above ground no. 6 is decided in favour of the assessee. " 7. The learned Commissioner (Appeals) while deciding the issue in favour of assessee has followed the aforesaid decision of the Co-ordinate Bench in assessee's own case. Since, t....
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....ct provides for surplus of valuation to be taxed at lesser rate, we cannot accept the argument that surplus is Total surplus including Transfers from share holder's account. Basically transfers are tax neutral as a credit in one account gets cancelled by debit in other account when accounts are consolidated. What the Rule. 2 prescribed was only 'average surplus' arrived by adjusting the surplus disclosed in the actuarial valuation made with regard to the Insurance Act, 1938 in respect of inter valuation period. Assessee in the course of the assessment proceedings has furnished general balance sheet in Form-A.... .... . In our opinion what assessee has done in reconciling the IRDA format with that of old Insurance Form is correct and accordingly the loss disclosed in the computation of income is according to the actuarial surplus/deficit under the Insurance Act, 1938 prescribed under Rule 2 of the first schedule part-A. In view of this, we are of the opinion that insistence by AO to bring to tax the entire amount shown under the new Regulations including transfer from Share-holders‟ account is not correct. Instead of AO in taking the surplus at Regulation ....
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....olicy holder's account,that the assessee had issued fresh capital to the extent of Rs. 250 crores and transferred funds to the extent of Rs. 233 crores from the Share-holders‟ account to Policy-holders‟ account in that year,that assessee was having only one business of life insurance, that the entire transactions both under the Policy-holders‟ and Share-holders‟ account pertained to the life insurance business only,that the assessee was not permitted to do any other business,that once assessee was in the life insurance business the computation had to be made in accordance with the Rule-2 as per provisions of section 44,that both the Policy-holders‟ and Share holder's account had to be consolidated into one and transfer from one account to another was tax neutral,that the AO had taxed the surplus after the funds had been transferred from Share -holder's account to the Policy-holders‟ account at the gross level while ignoring such transfer in share holder's account,that as per the provisions of section 44 of Act heads of income like income from other sources,capital gains, house property or even interest on securities did not come i....
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.... of its return of income filed for the past years and the income likely to be earned in the impugned assessment year, had a bonafide belief that it was not liable to pay advance tax. Therefore, the Tribunal held that interest is not leviable under section 234B of the Act. Facts in the impugned assessment year are more or less identical. That being the case no interest under section 234B is leviable. This ground is dismissed. 17. In ground no. 11, the Revenue has challenged the decision of the learned Commissioner (Appeals) in holding that negative reserve does not give rise to any surplus or taxable income at the hands of the assessee. 18. Brief facts are, during the assessment proceedings, the Assessing Officer while verifying the accounts found that as per the actuarial valuation in Form-I, as at 31st March 2010, an amount of Rs. 3101,92,92,000, was shown as negative reserve. He also found that negative reserve was not included as part of surplus based on actuarial valuation for the year. In response to querry raised by the Assessing Officer, the assessee submitted, negative reserve reflect the estimated net present value of future probable income based on the actuarial cal....
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....al of the assessee. AO challenged the order of the FAA before the Tribunal. We find that AO has raised the following ground of appeal in the appeal filed by him for AY 2006-07. "On the facts and in the circumstances of the case and in law, the learned CIT(A)erred in not subjecting the negative reserve amounting to Rs. 27. 27 Crores ignoring the facts that negative reserves has impact of reducing the taxable surplus as per From I. " Disposing his appeal,Tribunal held as under: "After considering the rival submissions and examining the method of accounting and the mandate given by regulations to appoint Actuarial on the concept of mathematical reserves we do not see any reason to interfere with the order of the CIT(A). The mathematical reserve is a part of Actuarial valuation and the surplus as discussed in Form-I under Regulation 4 takes in to consideration this mathematical reserve also. Therefore the order of the order of the CIT(A) is approved. Moreover the Assessing Officer has no power to modify the amount after actuarial valuation was done, which was the basis for assessment under Rule 2 of 1st Schedule r. w. s. 44 of the I. T. Act. The principle lai....