2019 (8) TMI 574

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....business is concerned is that for determining the profits and gains of the insurance business, which would be liable to tax, the statutory scheme put in place is contained in Section 44 of the Income Tax Act, 1961 (Act) read with the First Schedule thereto. This is sacrosanct, particularly since Section 44 opens with a non-obstante clause 'notwithstanding anything to the contrary'. 3. In the present case, life insurance business is being carried on by the Assessee. The question that arose for consideration was whether the actuarial surplus determined in terms of Rule 2 of the First Schedule to the Act should form the basis for tax or, as contended by the Revenue, certain deductions taken into account while arriving at such the actuarial su....

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.... noted the submission of the Assessee that the IRDA Regulations of 2002 required every insurer to prepare (i) policyholders' account which is in the nature of revenue account, and (ii) shareholders' account, which is in the nature of profit and loss account, apart from the balance sheet. This was only a change in the reporting format, so as to ensure transparency. There was no corresponding amendment made to Rule 2 of the First Schedule to the Act which sets out the computation mechanism for determining the profit of an insurance company. This continued to be governed by the actuarial valuation in terms of the Insurance Act, 1938. The IRDA Regulations of 2002 and the said amendment does not have effect of overriding Section 44 read ....

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....Court against the said decision of the Bombay High Court in the case of CIT vs. ICICI Prudential Life Insurance Co. Ltd. 242 Taxman159." 9. This Court is not persuaded to take a view different from that of the Mumbai Bench of the ITAT which has been affirmed by the Bombay High Court. Indeed on a conjoint reading of Section 44 with Rule 2 of the First Schedule to the Act, the Court is unable to discern any distinction between the income earned on the policy holder's account and income from investments shown in the shareholder's account for computation of the profits and gains of life insurance business for the purposes of taxation. 10. Even as regards applicability of Section 14 A of the Act in the context of exempt income, once it is clea....