TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 1858
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....the CIT(A) deleted the addition/disallowance made under the head - amortization of premium paid on purchase of investments, amortization of pre-operative expenses, profit on sale of investment, dividend income. 3. It was contended by ld. AR that all these grounds are covered by the order of Tribunal in assessee's own case. 4. We have gone through the orders of the Tribunal in assessee's own case for the assessment year 2003-04 dated 22-10-2010, wherein the issue with regard to amortization of premium paid on purchases of investments was allowed in favour of assessee. The precise observation of the Tribunal at page 7 are as under :- "7. On a careful consideration of the facts and the rival contentions, we are of the view that the amortization claim cannot be considered as an expenditure or allowance within the meaning of rule 5(a) of the First Schedule. As held by the Supreme Court in the case of Indian Molasses Co. (Private) Ltd. vs. CIT, West Bengal (1959) 37 ITR 66 (SC), spending in the sense paying out or away of money is the primary meaning of expenditure. Expenditure is what is paid out or away and is something which is gone irretrievably. Expenditure , which is deductible....
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....,33,945/- and allow the first ground." As the facts and circumstances during all the three years under consideration are same, respectfully following the order of the Tribunal, we confirm the action of the CIT(A) for allowing assessee's claim of amortization of premium paid on purchases of investment. 6. The second ground of revenue's appeal pertains to amortization of pre-operative expenses for the assessment year 2006-07. This issue is also covered by the order of the Tribunal for assessment year 2003-04. The precise observations of the Tribunal in this regard are as under :- "11. We have carefully considered the facts and the rival contentions. There is no dispute that the expenditure was incurred between the date of incorporation and the date on which the license to carry on the business was obtained from the Regulatory Authority. Thus it is clear that the expenses were incurred before the actual carrying on of the business. We are concerned with the assessment year 2003-04 for which the relevant previous year was 01.04.2002 to 31.03.2003. The entire pre-operative expenses of Rs. 7,03,38,000/- was incurred earlier, i.e. between 24.08.2000 and 22.01.2001. The question for co....
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....collaborator was claimed as a deduction in the return filed for the assessment year 1966-67 though the payments were made before the business was set up. The facts further show that initially the assessee had claimed only 1/14th of the payment as a deduction but later revised its claim and claimed the entire payment as deduction in the assessment year 1966-67, though no part of the payment either related to the said assessment 'year or was paid in the said assessment year. The Delhi High Court, speaking through Hon'ble Justice S Ranganathan (His Lordship then was) held that entire payment allowable in the assessment year 1966-67 as revenue expenditure without being apportioned between the assessment year 1966-67 and 1967-68. It cannot be argued that the High Court was not aware of the fact that the payment did not relate to the assessment year 1966-67 or that it was not paid in the previous year relevant to the assessment year 1966-67. The payment was nevertheless allowed as revenue expenditure in its entirety in the assessment year 1966-67. 12. A perusal of the details of the total expenses shows that none of the items of expenditure can be stated to be capital in nature....
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....ed by the IRDA (Auditor's Report) Regulations of 2002, for preparation of financial statements, the profit on sale of investments is to be credited to the Profit and Loss Account of the insurance company. There is also no dispute that the assessee has credited the Profit and Loss Account with such profit. The question is whether such profit can be excluded and exemption can be claimed .... Rule 5(b), as it stood before being omitted from 01.04.1989, was as follows: - "any amount either written off or reserved in the account's to meet depreciation of or loss on the realization of investments shall be allowed as a deduction, and any sums taken credit for in the accounts on account of appreciation of or gains on the realization of investments shall be treated as part of the profits and gains; Provided that the Assessing Officer is satisfied about the reasonableness of the amount written off or reserved in the accounts, as the case may be, to meet depreciation of or loss on the realization of investment. The argument on behalf of the assessee primarily is that when the rules for preparation of the final accounts provide that the profit on sale of investments should be sho....
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....nal in its order dated 17.09.2010, in the case - of HDFC ERGO General Insurance Company Ltd., in ITA No: 338IMum/2009 (assessment year 2004-05) as also in its order dated 30.04.2010, in the case of Reliance General Insurance Co. Ltd., in ITA No. 781/Mum/2007 (and 'other appeals). Copies of these orders have also been filed before us. In these orders it has been held that the profit on sale of investment in the case of an assessee carrying on general insurance business cannot be brought to tax after the omission of rule 5(b) and as per the Circular cited above. Since the controversy before us is identical, respectfully following the orders of the Pune and Mumbai Benches of the Tribunal cited above, we direct the Assessing Officer to exclude the profit of Rs. 47,45,699/- on the sale of investments from the assessment." As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in assessee's own case, we confirm the action of the CIT(A). 8. In ground No.5, the revenue is aggrieved for CIT(A)'s action for exempting dividend income. 9. This issue is also covered by the order of the Hon'ble Bombay High Court in the....
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.... Bench decisions of this Court. Moreover, the Assessing Officer in allowing the benefit of the exemption in the order of assessment under Section 143(3) specifically relied upon the, view taken by the CBDT in its communication dated 21 February 2006 to the Chairman of 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 fulfillment of the conditions, if any, under a particular clause of Section 10 under which exemption is sought. It needs to be emphasised that it is not the case of the Assessing Officer that the assessee had failed to fulfill 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 ....
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....es only which are wholly owned enterprises of Govt. of India and the assessee is not entitled to such benefit. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to reduce the dividend from the surplus as per 'Form I' as dividend is exempt u/s.10(34) without appreciating that income of the assessee was computed u/s.44 read with First Schedule of the IT Act on the basis of Actuarial Valuation in which dividend was not included hence there is no question of its exclusion. 5. For these and other grounds that may be urged at the time of hearing the decision of the CIT(A) may be set aside and that of the AO be restored." Respectfully following the above decision of Hon'ble Bombay High Court, we do not find any infirmity in the order of CIT(A) exempting the dividend income. 11. In the result, all appeals of the revenue are dismissed. 12. In the appeals filed by the assessee common grounds have been taken in all the years under consideration. The grounds taken in assessment year 2006-07 read as under :- "The following grounds of appeal are without prejudice to and independent of the other(s). On the facts and circum....
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....he Ld. AR as well as Ld. DR and considered the relevant material on record. The Ld. AR of the assessee has submitted that Rule 14A is not applicable in the case of Insurance Company. She has relied upon the decision of this Tribunal in case of ICICI Prudential Insurance Co. Ltd. Vs ACIT 140 ITD 41. On the other hand, the Ld. DR has submitted that when the income is non-assessable to tax being exempt then the provisions of section 14A shall be applied. This issue has been considered and decided by the Tribunal in case of ICICI Prudential Insurance Co. Ltd. Vs ACIT (supra) in para 46 as under: "46. This issue is already decided by the Coordinate Benches in various cases. For the sake of record, the order in the case of General Insurance Corporation of India (supra) 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 1 4A 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 by the Coordi....
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....on'ble Delhi High Court in asst . yrs. 1986-87 to 1988-89, which is reported as CIT v. Oriental Insurance Co. Ltd. [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 obstante 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. It mandates the tax authorities to compute the taxable income in respect of insurance business in accordance with the ....
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....sion 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 travel beyond s. 44 of First Schedule of IT Act. 18.1 The next common dispute relates to the order of the CIT (A) in sustaining the action of AO in allowing 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.f. 1st April, 1962. It is stated that the investments made by the assessee are both taxable as well as tax free. An estimated disallowance of 50 per cent out of the management expenses incurred and as claimed in the P&L a/c is treated as expenses incur red in c....
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.... 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 consequent thereupon ground No. 2 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." Following the earlier order of this Tribunal we decide this issue in favour of the assessee." 15. Ld. AR also placed on record order of the Pune Bench in the case of Reliance General Insurance Co. Ltd. Vs. DCIT, 130 TTJ 398, wherein at para 17 & 18, the Tribunal held as under :- "17. Finally the question to be answered is about the applicability of s.14A in respect of sale of investment which is not taxed under the special circumstances of deletion of a ....
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....these, their Lordships of Delhi High Court have held that no question of law, much less a substantial question of law survives for their consideration. In other words, order of the Tribunal has been affirmed. Following the same reasoning, addition made by the AO is deleted. 18. The next common dispute relates to the order of the CIT(A) in sustaining the action of AO in allowing 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.f. 1 st April, 1962. It is stated that the investments made by the assessee are both taxable as well as tax free. An estimated disallowance of 50 per cent out of the management expenses incurred and as claimed in the P&L a/c is treated as expenses incurred in connection with the looking after tax-free investment." 16. Reliance was also placed on the decision of Mumbai Tribunal in the case of M/s Birla Sun Life Insurance Co. Ltd., ITA No.602/Mum/2009, dated 9-9-2010, wherein at para 4 to 9, the Tribunal observed as under :- "4. Ground No.1 is against sustenance of disallowance of expenses Rs. 30,18,496/-....
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....0-01 and 2001-02) order dated 27.2.2009. 2) Bajaj Allianz General Insurance Company Limited vs. Addl.CIT and vice versa in ITA No.1447/PN/07 and CO. No.52/PN/2007 order dated 31.8.2009 for the Assessment Year 2003-04. 3) JCIT vs. M/s. Reliance General Insurance Co. and vice versa in ITA Nos.3083, 2950,2951, 3084, 3085 & 3126/M/08 order dated 26.2.2010 for the Assessment Years 2001-02, 2002-03 and 2005-06. 4) M/s. Reliance General Insurance Co. vs. DCIT and vice versa in ITA No.781/M/07 for Assessment Year 2003-04 and ITA Nos.1520 & 6262 and 2144 & 6554/M/2008 order dated 30.4.2010 for Assessment Years 2004-05 and 2006-07. He also placed on record copy of the said orders of the Tribunal. He therefore, submits that in view of the consistent view of the Tribunal, the disallowance of expenses made by the Assessing Officer and sustained by the ld. CIT(A) be deleted. 7. On the other hand the ld. DR while relying on the order of the Assessing Officer further submits that the assessee is claiming exemption u/s.10(33) in respect of dividend income and further claiming expenses related to the said exempted income which is not allowable under the Act. He further submits that since t....
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....milar view was also taken by the coordinate bench in the case of Reliance General Insurance Co.Ltd. Vs. DCIT, 2010-TIOL-ITAT-MUM. 18. Respectfully following the above judicial pronouncements, we do not find any merit in the action of lower authorities for disallowance made u/s.14A, which is not applicable to the Insurance Company. 19. In the assessment years 2006-07 & 2007-08, the AO made disallowance in respect of payment made to Hotel on the plea that tax was liable to be deducted u/s.194C, whereas the assessee has deducted tax u/s.149-I. 20. We have considered rival contentions and found that the payment to Hotel is covered by the provision of Section 194I. Circular No.5 dated 30-7-2002 also supports the contention that while making payment to the Hotel tax is liable to be deducted u/s.194-I. 21. Hon'ble Bombay High Court in the case of East India Hotels Ltd. & Anr., 320 ITR 526, held that in case of payment to Hotels tax is to be deducted at source as per provisions of Section 194-I and not as per the provisions of Section 194C. Respectfully following the decision of the Hon'ble jurisdictional High Court vis-à-vis the CBDT Circular, as discussed above, we do not fin....
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.... by the assessee has been shown. In these circumstances we do not see any reason to interfere with the decision of the CIT(A). We also find that so far as the MS Office software is concerned, for which the assessee has spent Rs. 38,45,379/-, the Delhi High Court in the case of CIT vs. G E Capital Services Ltd. (2008) 300 ITR 420 (Del) has held that it is revenue expenditure. For these reasons and respectfully following the ratio of the Delhi High Court, we confirm the decision of the CIT(A) and dismiss the appeal filed by the Revenue." 26. As the facts and circumstances during the assessment year 2008-09 under consideration are same, respectfully following the order of the Tribunal in assessee's own case, we direct the AO to delete the disallowance made on account of expenditure pertaining to purchase of software, renewal of software licece. 27. The next grievance of the assessee relates to disallowance of co-insurance fees u/s.40(a)(ia) of the Act for non-deduction of TDS. By the impugned order the CIT(A) confirmed the disallowance by observing as under :- "9.3 I have considered the facts of the issue and the submissions made by the AR of the appellant but do not find merit in....