TaxTMI 
TaxTMI 
2015 (11) TMI 1858
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.... software licence etc. By the impugned order 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 ....
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.... Revenue. We, therefore, delete the addition of Rs. 1,91,33,945/- 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 e....
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....lly supports the assessee's claim. The facts of that case show that the entire amount paid to the 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 de....
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....is regard is as under :- "18. We have carefully considered the rival contentions. There is no dispute that under the guidelines issued 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 argu....
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....e", 19: The aforesaid-order of the Pune Bench, which was in the case of a company carrying on general insurance business, was followed by the Mumbai Bench of the Tribunal 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). ....
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....pra) following the earlier decision in Commissioner of Income-tax v. New India Assurance Co. Ltd. (supra). The Assessing Officer could not have ignored the binding precedent contained in the two Division 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 Secti....
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....CIT(A) erred in holding that profit of Rs. 6,37,88,000/- on sale of investment is exempt in view of CBDT Circular No. 528 dt. 16-12-1988 without appreciating that the said Circular was specifically for General Insurance Corpn. Of India and its subsidiaries 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 appea....
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....ase of ICICI Lombard General Insurance Co. Ltd. Vs. ACIT, ITA No.4287 & 4374/M/2009, dated 18-9-2013. 14. We have gone through the order of the Tribunal in the case of ICICI Lombard General Insurance Co. Ltd (supra), wherein the Tribunal observed as under :- 5. Ground No. 2 regarding disallowance u/s 14A. We have heard the 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....
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...., Tribunal in the case of Oriental Insurance Co. Ltd. (supra), the relevant portion reproduced below: "17. We have heard rival submissions of the parties and have gone through the material available on record. Identical issue arose in assessee's own case for asst. yr. 1985-86. The Tribunal accepted the plea of the assessee and in fact the issue went up to the Hon'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 o....
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....8 to 43B of the Act, Sec. 44 creates special application of these provisions in the cases of insurance companies. We therefore, agree with the assessee and delete the Act as according to us, it is not permissible to the AO to travel beyond s. 44 and First Schedule of the IT Act." 18. It 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 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 ....
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....the action of the AO and that of the CIT(A) in the light of the clear provisions of s. 14A of the Act. 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 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." F....
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....ase of General Insurance Corporation of India v . CIT [1999] 156 eTR (Se) 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 provisions of the First Schedule to the Act In the light of 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 dis....
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....g on the decision of the Special Bench of the Tribunal in ITO vs. Daga Capital Management(P) Ltd. in ITA No.8057/Mum/2003 dated 20.10.2008 upheld the addition made by the Assessing Officer. 6. At the time of hearing the ld. Counsel for the assessee at the outset submits, that this issue is directly covered in favour of the assessee by the following orders of the Tribunal : 1) M/s. Oriental Insurance Co. Ltd. vs. ACIT 2009-TIOL-172-ITAT- Del (ITA No.5462 & 5463/del/03 for Assessment Year 2000-01 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 rec....
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....he Tribunal in the above three cases relied on by the ld. Counsel for the assessee. In the absence of any distinguishing feature brought on record by the ld. DR we respectfully, following the consistent view of the Tribunal hold that it is not permissible to the Assessing Officer to travel beyond sec.44 and Schedule-I and make disallowance by applying sec.14A of the Actand accordingly the disallowance of Rs. 30,18,496/- made by the Assessing Officer and sustained by the ld. CIT(A) is deleted. The ground taken by the assessee is therefore, allowed." 17. Similar 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 ....
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....ffice, WIN for office application 38,45,379 Etrust Innoculate (Anti Virus Software) 8,07,433 Others 2,77,887 Total 49,30,699 In paragraph 12 the CIT(A) has noted that the assessee itself has capitalized software expenditure of the tune of Rs. 71,98,000/-. He has also noted that some of the software expenditure are with regard to virus prevention, MS office, etc. which are not long lasting and do not result in any benefit of enduring nature. According to him the expenses are allowable as revenue expenditure. The findings of the CIT(A) are not disputed. No enduring benefit obtained 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 duri....