TaxTMI 
TaxTMI 
1962 (12) TMI 94
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....by transferring all such business to a Corporation established for the purpose. This Corporation is the well-known Life Insurance Corporation. Under the Act a distinction was made between 'controlled business' and other insurance business carried on by Insurance Companies. 'Controlled business' meant life insurance business and on and from a date to be fixed by notification in the Official Gazette called the 'appointed day' all the assets and liabilities of appertaining to the controlled business of all insurers were transferred to and vested in the Corporation. This date was September 1, 1956. The National Insurance Company was a composite insurer and its life business therefore stood transferred to and vested in the Life Insurance Corporation from the appointed day. Under s. 16 of the Life Insurance Corporation Act, the National Insurance Company was entitled to receive compensation from the Life Insurance Corporation in accordance with the principles contained in the First Schedule to that Act. To these principles we shall make a detailed reference presently. As the National Insurance Company was carrying on a composite business it was necessary to separa....
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....tion offered to it and requested that the dispute be referred to the Life Insurance Tribunal for decision but asked that the admitted amount might be paid to it without prejudice to the claim of either side. On May 1, 1957, the Life Insurance Corporation replied regretting its inability to pay the admitted amount except in full satisfaction of the claim as required by law. A request for reconsideration of the matter made by the National Insurance Company by a letter dated May 9, 1957, in which a sum of ₹ 27,99,275 was claimed as compensation was turned down by the Life Insurance Corporation and the dispute therefore stood referred to the Tribunal. 5. In making the reference to the Life Insurance Tribunal the Life Insurance Corporation forwarded the entire correspondence and the calculation sheets together with other documents on which the calculation sheets were based. Before the Tribunal, the Company claimed a sum of ₹ 43,29,470 as compensation due to it. The Company also gave its calculation sheets. In addition the Company claimed interest at six per cent per annum from the appointed day (September 1, 1956) or at least from the date the compensation wrongly determine....
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....o the principles contained in the First Schedule. That Schedule is divided into three parts which are marked A, B and C. It was admitted before us that part A alone applied and that part contains principles in two paragraphs called 'Paragraph 1' and 'Paragraph 2' and that Paragraph is to be applied to a particular case which is more advantageous to the insurer. Here Paragraph 1 is applicable. The relevant portions may now be read :- "The compensation to be given by the Corporation to an insurer having a share capital on which dividend or bonus is payable, who has allocated as bonus to policy-holders the whole or any part of the surplus as disclosed in the abstracts prepared in accordance with Part II of the Fourth Schedule to the Insurance Act in respect of the last actuarial investigation relating to his controlled business as at a date earlier than the 1st day of January, 1955, shall be computed in accordance with the provisions contained in paragraph 1 or paragraph 2 whichever is more advantageous to the insurer. 8. Paragraph 1. - Twenty times the annual average of the share of the surplus allocated to share-holders as disclosed in the abstracts aforesaid ....
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....h Parts I and II of the Fourth Schedule to the Insurance Act. The period of five years in s. 13 was altered to three years by the Insurance (Amendment) Act. 1950 (47 of 1950) with effect from June 1, 1950. Fourth Schedule was divided into two parts. First part contained Regulations and the second part laid down the requirements applicable to the abstract in respect of life insurance business which had to be prepared at these investigations. Regulation (1) laid down that all abstracts and statements must be so arranged that the numbers and letters of the paragraphs correspond with those of the paragraphs of Part II of that Schedule. In other words, the abstracts and statements prepared by the actuary were required to follow the same scheme and to supply the particulars in the same order as stated in Part II. Part II prescribed a number of tabular statements which were required to be annexed to every abstract prepared in accordance with Part II. Among them were (i) a Consolidated Revenue Account in form G for the inter-valuation period, and, (ii) a Valuation Balance-Sheet in the Form I. 'Inter-valuation period' was defined to mean :- "as respects any valuation, the per....
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....aid down that for the purpose of sub-s. (1), the actual amount of income-tax deducted at source during the period following the date as at which the last preceding valuation was made and preceding the date as at which the valuation in question was made might be added to such surplus after deducting an estimated amount for income-tax on such surplus, such addition and deduction being shown in paragraph 8(1) of the abstract prepared in accordance with Part II of the 4th Schedule to the Act. 15. One of the disputes between the parties arose over the surplus to be taken into account in calculating the compensation. This dispute was whether it should be the net surplus as shown in Form I annexed to the abstract or should include the income-tax and interim bonus as shown in the abstracts. The Company claimed that it should include interim bonus already paid and income-tax deducted at source less the provision for income-tax on the surplus as stated in the abstracts while the Corporation claimed that these additions should not be made. The figures for the two actuarial investigations were therefore these : ₹ 41,44,686 (1945-50) and ₹ 70,21,280 (1951-53) according to the Corpo....
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....ife Insurance Corporation Act already quoted. Reducing this surplus allocated to the share-holders to five per cent. We get for the years 1946-50 the sum of ₹ 2,81,841 and for the years 1951-53 the sum of ₹ 4,35,182. We may now again state the formula with these figures and the factor introduced in the appropriate places to show the area of controversy left. 19. Now the dispute between the parties is (a) what it the period in which the allocation to the share-holders can be said to be made and (b) what is meant by 'annual average.' In regard to (a) the company claims that the surplus must be taken to be allocated to the period in which the surplus must have been handed out to the share-holders and that can only be the period following the investigations. In this case the first investigation covered a period of five calender years from 1946 to 1950 (both inclusive), and the valuation date was December 31, 1950. The second investigation covered a period of three calender years from 1951 of 1953 (both inclusive) and the valuation date was December 31, 1953. The Company contends that the allocation of ₹ 2,81,841 took place in the triennium between the two val....
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....of account." It rejected formulae A and C above as they involved an average of an average. The Tribunal then followed its own decision in an earlier case and held that the Paragraph I of the Schedule did not warrant the construction sought to be placed by the Company. The Tribunal had observed there as follows :- "The paragraph does not refer to the years during which the amount of dividend in the abstract is actually paid to the share-holders. It refers to the surplus allocated to shareholders as disclosed in the abstract and requires annual average to be taken of the share of such surplus. Therefore, on a plain reading of this paragraph the annual average has to be taken of the share of surplus allocated as shown in the abstract, or in view of Explanation 2, deemed to be allocated to share-holders on calculations now made." 24. It is contended by the Company that the decision of the Tribunal is not correct. In support of the construction which the Company seeks to place upon Paragraph I it is argued that the word is "allocation" and a sum cannot be allocated till it is known. Further it is said the allocation can only be made after the share-holders ge....
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.... the compensation to be given by the Corporation to an insurer having a share capital on which dividend or bonus is payable and who has allocated as bonus to policy-holders the whole or any part of surplus as disclosed in the abstracts, shall be computed in accordance with the provisions contained in one of the two paragraphs that follow. The words of the Schedule to be emphasised are "has allocated as bonus to policy holders the whole or any part of the surplus as disclosed in the abstracts." The abstracts are nothing but a summary of the investigations over a particular period and the allocation of bonus and dividends must also be for the same period. The abstracts contain no reference to any future period and in fact there are no words in the abstracts which show that the allocation must be for the years that follow. In paragraph I the words are "the share of the surplus allocated in respect of the relative actuarial investigations." These words refer to the abstracts and the share of the surplus stated therein. Since that share comes out of the profits which accrue to the Company during the period of investigation the allocation must also be taken to be for ....
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....ferent. When an average of these periods is taken there is no longer an "annual average". The result can only be described as the average of two annual averages. The Tribunal was right when it said that the law contemplates one average and not the average of two averages. Giving the word "annual" its full meaning it is obvious that that system must be adopted which will lead to a result which can be described both as "annual" and as an "average". That can only be when the amount of the surplus as disclosed in the two investigations is aggregated and the result is divided by the total number of years. One finds an average by dividing the aggregate of several quantities by the number of quantities. In this case one can only get the "annual average" by aggregating the surplus related to at least two actuarial investigations covering a period of more than four years and by dividing the result and by the number of years involved. In our judgment formula D alone was applicable to the facts of this case and as that formula has been applied the result reached by the Tribunal was correct. 28. It remains to consider the other two questions w....
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....the money in his pocket, and the seller still has the estate vested in him; but they exchange characters in a Court of Equity, the seller becomes the owner of the money and the purchaser becomes the owner of the estate". 30. On entering possession the purchaser becomes entitled to the rents but if he has not paid the price, interest in equity is deemed payable by him on the purchase price which belongs to the seller. This principle was applied by the House of Lords in cases of compulsory purchases. In Swift & Co. v. Board of Trade [1925] A.C. 520, Viscount Cave L.C. gave the reason that the practice rests upon the principle that the taking of possession is an implied agreement to pay interest which was stated by Sir William Grant M.R. in Fludyer v. Cocker (1805) 33 E.R. 10. This principle was further extended by the Privy Council to the compulsory taking over of a business as a going concern in International Railway Company v. Niagara Parks Commission (1944) A.C. 328. 31. In this Court also the principle was applied to the East Punjab Requisition of Immovable Property Act (Temporary Powers Act) (Pun. 48 of 1948) replaced by the Punjab Requisition and Acquisition of Immovable....