TaxTMI 
TaxTMI 
2020 (10) TMI 558
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....nd in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the order of the assessee's own case of earlier year, in interpreting section 44 r.w Rule 2 of the first Schedule that the legislature consciously omitted incorporation of the provision for insurance regulatory and development authority Act 1999 and Regulations made there under in Rule 2 of the First Schedule which refer only to unamended insurance Act 1938 and regulations made there under, without appreciating the fact that this decision of the Ld. CIT(A) was not accepted by the department and appeal has been filed in earlier years on similar issue. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the order of the assessee's own case of earlier year, in allowing relief to the assessee by holding that surplus available in share holders account is not to be taxed separately as income from other sources and at normal corporate rate and holding that surplus from share holders account was only part of income insurance business and the net surplus arrived at after combing surplus available in share holders account and the surplus available in pol....
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....assessee Company has filed the revised return of income on 30.06.2014 declaring total income of Rs. Nil after setting off brought forward business losses against surplus from life insurance business of Rs. 109,40,23,000/-.Whereas the A.O has made additions and adjustment of set off of brought forward losses and passed order on28/12/2016 u/s 143(3) r.w.s 144C of the Act determining total income of Rs. 12,85,17,62,813/-. Aggrieved by the order, the assessee has filed an appeal with CIT(A). The Ld. CIT(A) considering the grounds of appeal, findings of the AO, submissions of the Assessee and judicial decisions in assessee's own case has partly allowed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A) the Revenue has filed an appeal with the Tribunal. 3. We heard the rival submissions and perused the material placed on record. The Ld.DR relied on the orders of the Assessing Officer. Whereas, the Ld.AR submitted that the disputed issues in this Revenue appeal are in favour of the assessee and relied on the orders of the Hon'ble Income Tax Appellate Tribunal. We find that, identical grounds of appeal were raised by the revenue for the earlier assessment years. ....
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....red in giving relief to the assessee, following the decision of Hon 'ble ITA T in assessee own case for the earlier years, wherein Hon 'ble Tribunal held that the Legislature consciously omitted incorporation of the provision of Insurance Regulatory and Development Authority Act 1999 and Regulations made thereunder in section 44 of the IT Act r.w.Rule 2 of the First Schedule which 'refers' only to un-amended Insurance Act 1938 and Regulations made there-under; when an appeal against this order of ITA T has been filed & is pending with High Court, Bombay? 5. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in giving relief to the assessee, following the decision of Hon 'ble ITA T in assessee own case for the earlier years, wherein Hon' ble Tribunal failed to take note that Section 28 of Insurance Regulatory and Development Authority Act 1999 clarifies that provisions of IRDA Act are in addition and not in derogation of Insurance Act 1938, which means IRDA Act and its regulation has been adopted in Section 44 of the I. T Act r.w. Rule 2 of the First Schedule by way of "legislation by reference"; and when an app....
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....of A 0 or confirm the order of the A0. 12. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 5. Ground No.1 to 6 regarding interpretation of the provision of section 44 of the Income tax Act r.w. Rule 2 of the 1st Schedule of the Income tax Act, 1938. 5.1 We have heard the id. DR as well as the id. AR and considered the relevant material on record. The issue involved in ground No.1 to 6 of the revenue's appeal have been considered by this Tribunal in assessee 's own case for the assessment year 2005- 06 to 2008-09 in 140 lTD 41 in para nos. 23, 27, 32, 38, 40 and 42 which are as under "27. Respectfully following the above principles and examining the provisions of IT Act, we are of the opinion that the 'actuarial valuation made in accordance with the Insurance Act, 1938' do mean that the actuarial valuation done in accordance with the Insurance Act, 1938. In arriving at the above decision we have also taken into consideration that Rule-5 in Part-B of the first schedule with reference to 'other insurance business' did incorporate the IRDA and its Regulations as amended by ....
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....er's account. Since the insurance business will not yield the required profits in the initial 7 to 10 years, lot of capital has to be infused so as to balance the deficit in the policyholder's account. During the year as already stated assessee has issued fresh capital to the extent of Rs, 250 crores and transferred funds to the extent of Rs. 233 crores from the shareholder's account to policyholder's account. Since assessee is having only one business of life insurance, the entire transactions both under the policyholder's and shareholder's account do pertain to the life insurance business only as it was not permitted to do any other business. Once assessee is in the life insurance business, the computation has to be made in accordance with the Rule-2 as per provisions of section 44. Therefore, there is a valid argument raised by assessee that both the policyholder's & shareholder's account has to be consolidated into one and transfer from one account to another is tax neutral. What AO has done is to tax the surplus after the funds have been transferred from shareholder's account to the policyholder's account at the gross level while ignorin....
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....er years i.e. the correct method as per Rule 2 and Sec 44 of IT ACT In view of the discussion above and after analyzing the Forms, Regulations and Provisions we have no hesitation to hold that the assessee working of actuarial surplus/ deficit is in accordance with Rule 2 of First Schedule. Therefore, assessee grounds on this issue are allowed and AO is directed to modijj' the order accordingly. Ground Nos. I to 3 are considered allowed. 5.2 Following the earlier order of this Tribunal we do not find any error or illegality in the impugned order of the Ld. CIT(A) qua this issue. Accordingly ground Nos. I to 6 are dismissed. 6 Ground No.7 is regarding the taxability of surplus of both policy and share holders account. 6.1 We have heard the Id. DR as well as the ld. AR and considered the relevant material on record. We find that this issue was decided by this Tribunal in assessee 's own case for the assessment year 2005-06 and assessment year 2008-09 in para no. 55 as under . - 55. We have heard the rival contentions. As briefly discussed while deciding the issue of taxing surplus, assessee is in life Insurance business and it is not permit....
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....ddition made on account of claim of 100% depreciation of Rs. 15, 79, 7071-. It was the contention of the Revenue that the UT(A) ignored the actuarial surplus determined on the basis of the total assets if the company and therefore not capitalized in the above assets. The assets of assessee to that extent are not stated, therefore, it has an impact of reducing the total surplus. 61. Before the CIT(A) it was submitted that the assessee prepared its accounts as per the format prescribed by the IRDA in tune with the Insurance Act 1938. The assets were originally capitalized in the books and being eligible for 100% depreciation they are written off The IT(A), after considering the submissions, accepted the contention as under: - 19. The appellant has to prepare its accounts as per the formats prescribed by the IRDA under the Insurance Act, 1938. These accounts have accordingly been prepared by the appellant and have been subject to statutory audit. Further, the accounting policy of claiming 100% depreciation in its financial statements has been consistently followed by the appellant and has also been duly accepted by the IRDA. The appellant has stated that the assets o....