TaxTMI 
TaxTMI 
2018 (12) TMI 1938
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....section 14A of the Act read with rule 8D of the Rules, amounting to Rs. 2,23,32,095/-. For this Revenue has raised the following grounds: - "1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the deduction claimed on dividend income u/s 10(34) of the income tax act. 1961 without appreciating the fact that dividend income forms part of actuarial valuation for calculating the surplus or deficit in accordance with the schedule I of the Income tax Act. 1961 which is considered as business income? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowance u/s 14A without appreciating the fact that once dividend is considered exempt u/s 10(34) of the Income tax Act, 1961. the disallowance of expenses related to this exempt income as per sec. 14A becomes necessary?" 3. During the course of assessment proceedings AO observed that during the year assessee has earned total dividend income of Rs. 1,82,48,362/- which was claimed as exempt income under section 10(34) of the Act. The AO was of the view that the income earned on investment made by a Life Insurance company is inc....
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.... the IT Act. In arriving at the deficit from the insurance business, assessee claimed certain exempt incomes under section 10(23AAB) with reference to Pension Business and dividend under section 10(34). AO did not allow the amounts on the reason that these incomes are part of income of life insurance business and it is included as income by the actuary, therefore, they cannot be exempted. This issue is covered in favour of assessee and against the Revenue by the orders of the General Insurance Company of India in ITA No.3554/Mum/2011 wherein the issue of deduction under section 10 have been considered and allowed following the Hon'ble Bombay High Court judgment in writ petition No.2560 of 2011 dated 1.12.2011. The order in the case of GIC of India in ITA No.3554/Mum 2011vide Para 7 to 8 is as under: 7."Issue No.5: Availability of Section 10 Exemption (Modified Ground of Appeal No.2 - Original Ground of Appeal No.2.1 & 2.2) -. The issue arises in a peculiar manner in this assessment year. While dealing with the issue of profit on sale of investments, the Assessing Officer proposed to differ from assessee stand and bring to tax the profit on sale of investment. The assessee a....
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.... of any business of insurance, including any such business carried on by a mutual insurance company or by a cooperative society, shall be computed in accordance with the rules contained in the First Schedule". Section 44 provides that the profits and gains of any business of insurance of a mutual insurance company shall be computed in accordance with the rules in the First Schedule. Part 'A' of the First Schedule containing Rules 1 to 4 deals with profits of life insurance business while Part B consisting of Rule 5 deals with computation of profits and gains of other insurance business. Rule 5 provides as follows: "5. The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the Insurance Act, 1938 (4 of 1938), to be furnished to the Controller of Insurance subject to the following adjustments: (a) Subject to the other provisions of this rule, any expenditure or allowance (including any amount debited t....
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....bstante clause, the effect of which is that the provisions of the Act relating to the computation of income chargeable under the head "Interest on securities", "Income from house property", "Capital gains" or "Income from other sources", do not apply in the case of computation of income from insurance business. The effect of the non-obstante clause so far as the earlier part of section 44 is concerned, therefore, is that the provisions of section 44 will prevail notwithstanding the fact that there are contrary provisions in the Act relating to computation of income chargeable under the four heads mentioned in section 44. The only other overriding effect of section 44 is that its provisions operate notwithstanding the provisions of section 191 and of section 28 to 43A. Thus, the only effect of section 44 is that the operation of the provisions referred to therein is excluded in the case of an assessee who carried on insurance business and in whose case the provisions of rule 2 of the First Schedule are attracted. If the deductions which are claimed by the assessee do not fall within the provisions which are referred to in section 44, it will have to be held that the applicability of....
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.... and in rule 6 would have been made". In the subsequent judgment of the Division Bench in Life Insurance Corporation (supra), the Division Bench noted that there was a difference in the language of ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench section 10(7) of the Act of 1922 when compared with section 44 of the Act of 1961 since section 44 does not refer to the computation of tax but merely to the computation of profits and gains in the business of insurance. The Division Bench held that this would however not make any difference to the principle laid down by the Court in the earlier decision in the case of New India Assurance Co. Ltd. Accordingly, the decision of Life Insurance Corporation (Supra) could not have been ignored by the Assessing Officer on the supposition that the decision was rendered in the context of an assessee who carried on life insurance business and was, therefore, not available to an assessee which carries on general insurance business. 12. In General Insurance Corporation of India v. Commissioner of Income-Tax, the Supreme Court considered in an appeal arising out of a judgment of the High Court the issue as to whether a s....
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....IRDA. The communication clarifies that the exemption available to any other assessee under any clauses of section 10 is also available to a person carrying on non-life insurance business subject to the fulfilment of the conditions, if any, under a particular clause of section 10 under which exemption is sought. It needs to be emphasized that it is not the case of the Assessing Officer that the assessee had failed to fulfil the condition which attached to the provisions of the relevant clauses of section 10 in respect of which the exemption was allowed. This of course is apart from clause (38) of section 10 where the Assessing Officer had rejected the claim for exemption in the original order of assessment under section 143(3). The Assessing Officer above all was bound by the communication of the CBDT. Having followed that in the order under section 143(3) he could not have taken a different view while purporting to reopen the assessment. Having applied his mind specifically to the issue an having taken a view on the basis of the communication noted earlier, the act of reopening the assessment would have to be regarded as a mere change of opinion which has also not been based on any....
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.....3554/Mum/2011 vide Para 9 is as under: 9. "Issue No.6 Non applicability of provisions of section 14A. (Modified Ground of Appeal No.3.1 to 3.4 - Original Ground of Appeal No.3.1 to 3.5) . The issue is with reference to the applicability of section 14A and disallowance of expenditure in respect of sale of investment which are not taxed. We have heard the rival contentions. We also note that this issue is also considered ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench by the Coordinate Bench in assessee's own case for 2006- 07 vide Para 7 to 9: 7. Grounds of appeal no.4 regarding the expenditure under section 14A. 8. We have heard the rival contentions and perused the relevant record. We note that this issue has been considered and decided by the Pune Bench of this Tribunal in the case of Bajaj Allianz General Insurance Company limited V/s Add. CIT in ITA No.1447/PN/2007 for t....
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..... [2003] 179 CTR (Delhi ) 85 : [2002] 125 Taxman 1094 (Delhi ), decided the issue in favour of the assessee by holding that s. 44 of the Act is a special provision dealing with the computation of profits and gifts of business of insurance. It being a non obstinate provision has to prevail over other provisions in the Act. It clearly provides that income from insurance business has to be computed in accordance with the rule contained in the First Schedule. It is not the case of the Revenue that the assessee has not computed the profits and gains of its insurance business in accordance with the said rules. Reliance was placed on the scope of s. 144, as held in the case of General Insurance Corporation of India v. CIT [1999] 156 CTR (SC) 425 : [1999] 240 ITR 139 (SC), wherein their Lordships of the apex Court have categorically held that the provisions of s. 44 being a special provision govern computation of taxable income earned from business of insurance. I t mandates the tax authorities to compute the taxable income in respect of insurance business in accordance with the provisions of the First Schedule to the Act. In the light of these, their Lordships of Delhi High Court have hel....
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....vel beyond s. 44 and First Schedule of the IT Act ." 18. I t may not be out of place to mention that the respected Co-ordinate Bench has duly taken the note of an earlier decision of that very Bench decided in the case of that very assessee vide order dt . 29th Sept. 2004 bearing ITA Nos. 7815/Del/1989, 3607 to 3609/Del /1990; 5035/Del / 1998 and 3910/Del /2000 named as Dy. CIT v.Oriental General Insurance Co. Ltd. [2005] 92 TTJ (Delhi ) 300. As seen from the Paras reproduced above on due consideration of the relevant provisions as applicable to resolve this issue a conclusion was drawn that since the Courts have held, s. 44 creates a special provision in the cases of assessment of insurance companies therefore it was not permissible to the AO to ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench travel beyond s. 44 of First Schedule of IT Act . 18. The next common dispute relates to the order of the CIT (A) in sustaining the act ion of AO in al lowing only 50 per cent of the management expenses by invoking the provisions of s. 14A of the Act . The addition is made by the AO on the plea that the provisions of s.14A was inserted by Finance Act, 2001 w.e....
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....ct . Since the view has already been expressed by respected Co-ordinate Bench therefore, we have no reason to take any other view except to follow the same. With the result we hereby accept the argument of learned Authorized Representative to the extent that in the present situation the provisions of s. 14A need not to apply while granting exempt ion to an income earned on sale of investment primarily because of the reason of the withdrawal or deletion of sub- r. 5(b) to First Schedule of s. 44 of IT Act. Once we have taken this view therefore the enhancement as proposed by learned CIT(A) is reversed and the directions in this regard are set aside. Resultantly ground No. 1 is allowed automatically goes in favour of the assessee". Accordingly, by following the orders of this Tribunal, we decide this issue in favour of the assessee. Therefore, the ground is allowed". Respectfully following the same, we modify the order of the CIT (A) and delete the addition made by AO. The ground and additional grounds are considered as allowed." 4. Ld. Senior DR could not point out any adverse precedent and accordingly we are of the view that this issue is squarely covered in favour of ass....
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....ade to arrive at "taxable surplus? Ld. Counsel stated that Hon'ble High Court has answered this question in its judgment vide para 4 as under: 4. So far as Question No. 6 is concerned, the grievance of the revenue is that the Tribunal after having taken total surplus as arrived by Actuarial valuation ought to have reduced negative reserve amount of Rs. 27.27 crores while determining respondent assesse's income under Section 44 of the Act. The impugned order records that the mathematical reserves is a part of the Actuarial valuation and the surplus takes into account the mathematical reserve also Besides the impugned order follows the decision of the Apex Court in LIC Vs. CIT 51 ITR 773, wherein the Apex court has held that the Assessing Officer has no power to modify the account after Actuarial valuation is done. It is also pertinent to note that for the Assessment Year 2007-08, the Assessing Officer had raised an identical issue during the assessment proceedings and thereafter by the assessment order dated 30 December 2009 held that no adjustment of the Actuarial valuation is to be done by following the d....
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....surance Co. Ltd Vs. ACIT (2012) 28 taxmann.com 257 (Mum.), wherein the tribunal followed the order in the case of General Insurance Corporation of India vs. Addl. CIT in ITA No.3554/Mum/2011 dated 15/02/2012. The ld. counsel for the assessee also stated that the decision of the tribunal was affirmed by the Hon'ble Jurisdictional Bombay High Court in the case of CIT Vs. LIC of India ltd. [2011] 12 taxmann.com 388 (Bom), wherein following question was answered by the Hon'ble High Court: - "C. Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the addition made by the Assessing officer on account of loss from Jeevan Suraksha Fund ignoring the settled position of law that income includes loss and that the income from Jeevan Suraksha fund does not form part of the total income of the Assessee Corporation under section 10(23AAB) of the Income-tax Act, 1961? Ld. Counsel referred to para 15 to 18 vide which Hon'ble High Court has answered the issue in favour of the assessee by observing as under: 15. As regard questions(c) and (d) are concerned, the dispute is whether the loss incurred by th....