AI Drafter 
TaxTMI 
TaxTMI 
2020 (12) TMI 434
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....ether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the profit on sale of investments has to be taxed as Income from Capital Gain and not income from other sources. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that income of Rs. 639,06,24,962/- is exempt u/s 10(38) of the I.T Act, 1961. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that the amount of disallowance u/s 14A of the I.T Act, 1961 has to be computed as per Rule 8D of I.T Rules, 1962 when the computation of the assessee was not found to be correct and as held by the order of the Hon'ble High Court in the case of M/s Godrej & Boyce Manufacturing Co. Ltd. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the premium paid by the assessee on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that there is no provision for amortization of such premium in the I.T Act, 1961. 5. Whether on the facts and....
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....fter deliberating on the contentions advanced by the assessee the CIT(A) partly allowed the appeal. 5. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. At the very outset of the hearing of the appeal it was submitted by the ld. Authorized representative (for short "A.R") for the asseseee, that all the issues raised by the revenue in the present appeal were squarely covered in favour of the assessee by the orders of the Hon'ble High Court of Bombay and that of the coordinate benches of the Tribunal in the assessee's own case for the preceding years. In order to drive home his said claim the ld. A.R took us through a 'Chart' wherein the complete details as to how the issues involved in the present appeal were claimed to be covered by the orders passed in its own case for the preceding years was stated. Further, the ld. A.R took us through the copies of the orders of the Hon'ble High Court of Bombay in the assessee's own case for A.Y 2006-07 and A.Y 2005- 06; copies of the orders of the tribunal in its own case for the preceding years viz. A.Y 2011- 12, A.Y 2010-11, A.Y 2009-10, A.Y 2008-09, A.Y 2007-08, A.Y 2006-07 and A.Y 2005-0....
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....issue is squarely covered by the decision of the Hon'ble Bombay High Court in Income Tax Appeal No.1025 of 2015, dated 05.03.2018 wherein the question as to whether the Tribunal was justified in law in allowing the exemption to the assessee u/s. 10 of the Act came up before the Hon'ble Bombay High Court and the Hon'ble High Court held as under: - "2 Revenue urges the only following reframed question of law, for our consideration: "Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in allowing exemption to the assessee u/s. 10 of the I.T. Act, 1961?" 3 The impugned order of the Tribunal dismissed the Revenue's Appeal from the order dated 12th November, 2012 of the Commissioner of Income Tax (Appeals) [CIT(A)], who held that Respondent is entitled to the benefit of Section 10 (38) of the Act in respect of the sale of investments being long term capital gains. The proceedings before the Tribunal leading to the impugned order dated 27th October, 2014 emanated from the reopening notice dated 17th March 2011, seeking to reopen the assessment completed under Section 143(3) of the Act on 31st Dec....
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....stion as formulated be admitted. 8 The issue raised in the above question in GIC [ITX No.201 of 2011 (supra)] is not with regard to the exemption claimed under Section 10(38) of the Act as in the present proceedings. The question on which the above appeal has been admitted, is whether profits on sale of investments are liable to be (included) taxed in the hands of the assessee i.e. profits on sale of investments being liable to be tax. It does not deal with the benefit of exemption under Section 10(38) of the Act. The question as raised herein proceeds on the basis that even if sale of investments is liable to be taxed, yet to the extent it relates to long term capital gain falling under Section 10(38) of the Act, the exemption would be available. Thus, the question arising for our consideration in this appeal is different from the question on which the appeal of the GIC in ITX No. 201 of 2011 (Supra) was admitted. 9. Moreover, we find that this Court in General Insurance Corporation (supra) had also relied upon the communication dated 21st February, 2006 of the CBDT to the Chairman of the Insurance Regulatory and Developing Authority. In the above commun....
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....d claim, the assessee on a proportionate basis attributed an amount of Rs. 2,10,53,225/- i.e part of the expenses incurred by the Investment Department towards earning of the exempt income. However, the A.O rejected the aforesaid claim of the assessee and worked out the disallowance u/s 14A r.w Rule 8D at Rs. 13,05,70,512/-. On appeal, the CIT(A) relying on the orders passed by the Tribunal and also that of his predecessor in the assessee's own case for the preceding years concluded, that the provisions of Sec. 14A were not applicable in the case of the assessee company, as the same being a General Insurance Company was governed by the provisions of Sec. 44 of the Act. As such, the CIT(A) vacated the disallowance of Rs. 13,05,70,512/- worked out by the A.O u/s 14A r.w Rule 8D. 9. The revenue being aggrieved with the deletion of the disallowance u/s 14A r.w Rule 8D of Rs. 13,05,70,512/-, has carried the matter in appeal before us. It was submitted by the ld. A.R that the issue was squarely covered by the order of the Tribunal in the assessee's own case for A.Y 2011-12 in ITA No. ITA 5116/Mum/2016, dated 06.11.2019. Also, it was submitted by the ld. A.R that the issue that the pro....
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....he issue involved in the present ground is covered in favour of the assessee by the decision of the Tribunal in the earlier years. and therefore prayed before the Bench that by following the same, this ground may be decided in favour of the assessee. 17. The Ld. D.R. appeared to be fairly agreed to the contention of the Ld. A.R. 18. We have perused the decisions of the Tribunal in ITA No.3562/M/2007 and ITA No.3180/M/2009 for A.Y. 2006-07 & 2007- 08 wherein the Tribunal has decided the issue in favour of the assessee. The relevant extract is reproduced as under: "11. In Ground no. 3, the assessee has challenged the disallowance of Rs. 16 lakhs made u/s 14A on estimated basis. It has been admitted by both the parties that 7 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd provision of section 14A has no applicability in the cases of General Insurance Company, which are governed by specific provision laid down in section 44, as held by various decisions of the Tribunal including that, in assessee's own case for the A.Y. 2000-01 & 2003-04 and in the case of other General Insurance Corporation of India specifically in ITA No. 3554/Mum/2....
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....d over the residual period of security as per the regulations of IRDA. It was further submitted by the assessee, that wherever the premium of held to maturity securities was amortized over the residual period of such securities, the loss at the time of maturity of such security was not claimed at that time. However, the aforesaid reply of the assessee did not find favour with the A.O. Relying on the view taken by his predecessor while framing the assessments in the case of the assessee for the preceding years viz. A.Y 2005-06, A.Y 2006-07, A.Y 2007-08, A.Y 2009-10, A.Y 2010-11 and A.Y 2011-12 the A.O observed, that the premium paid on the securities would form part of the cost of acquisition and the deduction for the same was to be allowed only on the sale/maturity of the said securities. Accordingly, the A.O treating the amortized premium of Rs. 8,34,44,847/- as being in the nature of a capital expenditure, disallowed the same u/s 37(1) of the Act. On appeal, the CIT(A) referring to the orders passed by the Tribunal in the assessee's own case for the preceding years viz. A.Y 2004-05, A.Y 2005-06, A.Y 2006-07 and A.Y 2007-08 observed, that involving identical facts the issue was de....
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.... down by the Tribunal in favour of the assessee. 22. The Ld. D.R. fairly agreed to the argument of the Ld. A.R. 23. After perusing the decision of the Tribunal in ITA No.3562/M/2007 and ITA No.3180/M/2009, we find that the issue is squarely covered in favour of the assessee in assessee's own case. The operative part thereof is reproduced as under: "16. We have heard the rival submissions and also perused the relevant finding given in the impugned orders. The assessee in the course of carrying of its insurance business, is required to invest its fund in specific debts securities of government or PSU bonds or other securities in accordance with the Insurance Act, 1938 and IRDA regulations. The assessee has purchased securities at a price which was slightly higher than the face value of the security because of accumulated interest on such securities According to the terms of issue of the securities, the assessee was to get only the face value at the time of redemption or maturity. IRDA regulation prescribes, the accounting principle for preparation of financial statement, whereby the assessee is required to prepare the financial statements in the manner prov....
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.... that 10 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd there should be a specific prohibition against the expenditure or allowance in which case alone the Assessing Officer can add back the same to the balance of profits. It is common ground that there is no such specific prohibition against, the allowance of the expenditure in the above sections of the Act. It may be noted that though rule 5(a) of the First Schedule considered by the Supreme Court in the above judgment was slightly different, but the words "any expenditure or allowance which is not admissible under the provisions of section 30 to 43A" were present and the same words being present in the amended sub-rule, they have to be given the same meaning as was given by the Supreme Court. Therefore, even if the debit for amortization is considered as an expenditure or allowance, there being so specific prohibition against the expenditure or allowance in section 30 to 438, the departmental authorities were not justified in adding back the amount of the balance of the profits. The judgment of the Supreme Court in the case of General Insurance Corporation of India (supra) takes care of all the arguments adv....
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....cted the A.O to compute the assessee's income under the normal provisions of the Act. 14. Aggrieved with the aforesaid direction of the CIT(A), the revenue has carried the matter in appeal before us. The ld. A.R submitted that the aforesaid issue had been decided by the Hon'ble High Court of Bombay in the assessee's own case in Pr. Commissioner of Incpome-tax-3 Vs. M/s The New India Assurance Co. Ltd. [ITA No. 1108 of 2015; dated 16.04.2019] (copy placed on record). Further, as submitted by the ld. A.R, the issue was squarely covered by the orders passed by the Tribunal while disposing off the appeals in the assessee's own case for the preceding years viz. A.Y 2004-05 to A.Y 2010-11 (copies placed on record). Apart from that, it was submitted by the ld. A.R that the issue was also recently decided by the Tribunal while disposing off the appeal of the assessee for the immediately preceding year i.e A.Y 2011-12 in ITA No. 5116/Mum/2017, dated 06.11.2019 (copy placed on record). 15. We have perused the order passed by the Tribunal in the assessee's own case for the immediately preceding year i.e A.Y 2011-12 in ITA No. 5116/Mum/2017, dated 06.11.2019 and are in agreement with the....
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....urance Act 1938, as specifically provided in Section 44 read with First schedule, therefore, the provision of section 115JB will not apply in case of assessee. This has been held in the case of General Insurance Corporation in ITA No.3554/Mum/2011 order dated 05.02.2012 and ITA 12 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd No.8824/Mum/2011 order dated 15.01.2014. Thus the additional ground raised by the assessee is allowed." 33. Following the decision of the coordinate, we hold that the accounts of the insurance company are prepared in accordance with the Insurance Act, 1938 as has been provided under section 44A read with First Schedule and therefore, the provisions of section 115JB do not apply to the assessee's case. Accordingly, the ground raised by the Revenue is dismissed." 16. Respectfully following the said decision, we uphold the order of the Ld.CIT(A) in holding that the provisions of section 115JB have no application to the assessee. Ground No.6 of the Revenue's appeal is dismissed." As the facts and the issue involved in the present appeal remains the same as were there before the Tribunal in the aforementioned case, we ther....
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.... 7. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 8. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 19. Briefly stated, the assessee company had e-filed its return of income for A.Y 2013-14 on 28.11.2013, declaring its total income at Rs. Nil. Subsequently, the assessee filed a revised return of income on 09.06.2014 declaring a loss of Rs. 94,06,18,248/-. Thereafter, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 20. The A.O after making certain additions/disallowances assessed the income of the assessee company vide his order passed u/s 143(3), dated 29.02.20116 at Rs. 870,72,56,878/-, as under: Sr. No. Particulars Amount 1. Profit on sale of investments claimed as exempt u/s 10(38) Rs. 907,55,94,005/- 2. Disallowance of expenditure u/s 14A r.w.r 8D(2)(iii). Rs. 14,87,79,556/- 3. Amortization of Premium on Securities Rs. 7,16,49,143/- 4. Deemed Income Rs. 2,69,13,000/- 5. Foreign Dividend Rs. 28,89,154/- 6. Addition on account of ....