TaxTMI 
TaxTMI 
2016 (10) TMI 1356
X X X X Extracts X X X X
X X X X Extracts X X X X
.... proceedings u/s 263 of the Act were quashed by the Tribunal, therefore, the Department appeal will not survive. This claim of the assessee was not controverted by ld. DR, Shri V.C.S. Naik. 2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is in the business of general insurance, declared total income of Rs. 14,70,36,890/- in its return filed on 18/10/2005. The regular assessment u/s 143(3), determining total income at Rs. 46,29,51,572/- was completed on 12/12/2008. The Ld. Commissioner invoked revisional jurisdiction u/s 263 of the Act dated 29/03/2011 directing the Assessing Officer to frame fresh assessment and examined the claim of the assessee with respect to payments made to M/s Odyssey America Reinsurance Corporation, Singapore, amounting to Rs. 16,85,47,839/-, for providing reinsurance business without deducting tax at source u/s 40(a)(ia) of the Act. The Assessing Officer upheld the additions u/s 40(a)(ia) of the Act but the same were deleted by Ld. Commissioner of Income Tax (Appeal) relying upon ITAT decision in assessee's own case for Assessment year 2004-05 in ITA No.2769/Mum/2011; 15....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to accrue or arise in India and provisions of Sec. 9 of the Act are not applicable. It was further explained that the said payment was exempt under Article 7 of the Double Taxation Avoidance Agreement between India and Singapore. It was further explained that the payment to associated enterprise was made in accordance with the CBDT Circular No. 759 dt. 18.11.1997 and CBDT Circular No. 10 dt. 9.10.2002. It was brought to the notice of the CIT that the assessee has obtained a declaration from M/s. Odyssey America Reinsurance Corporation, Singapore that it is a non resident engaged in the business of reinsurance outside India and it does not have an office or permanent establishment or a fixed base in India. For this, the assessee drew support from the decision of the Hon'ble Supreme Court in the case of Toshuka Ltd. 126 ITR 525 wherein it has been held by the Hon'ble Supreme Court that if no operations are carried out in taxable territories, it follows that income accruing or arising abroad through or form any business connection in India cannot be deemed to accrue or arise in India. 3.3. The submissions made by the assessee did not find any favour with the CIT. Relying upon cert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nly when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous" 8. Now, let us see in the light of the above ratio whether the assessment has been made on an incorrect assumption of facts or an incorrect application of law. The first observation of the CIT that the assessee had made payment of Rs. 16.85 crores to its associated enterprises M/s. Odyssey America Reinsurance Corporation, Singapore without deducting tax at source is hit by the provisions of Sec. 40(a)(i) of the Act. On identical issue in the immediately preceding assessment year i.e. 2004-05, the matter travelled upto the Tribunal and the Tribunal decided the issue against the Revenue and in favour of the assessee vide ITA No. 2769/M/2011 dt. 30.8.2013. At para 2.3 of its order the Tribunal inter alia held as under: "The assessee in this case had obtained reinsurance covered from Singapore Company which was engaged in the business of reinsurance outside India. The payment made by the assessee to the Singapore Company was not for obtaining any technical/managerial services or for use of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fficer is unsustainable in law. 10.11. The Bombay High Court in CIT Vs Gabrial India Ltd., (1993) 203 ITR 108 has held that "the decision of the Income Tax Officer could not be held to be erroneous simply because in his order, he did not make an elaborate discussion in that regard". Considering the facts in totality in the light of the judicial decisions discussed hereinabove, in our understanding of law, the assessment order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore, set aside the impugned order passed by the Ld. Commissioner u/s. 263 and restore that of the Assessing Officer passed u/s. 143(3) of the Act. 12. In the result, the appeal filed by the assessee is allowed." 2.3. Thus, the Tribunal by the aforesaid order held that invocation of revisional jurisdiction was not valid. In view of this uncontroverted factual matrix, the appeal of the Revenue is dismissed as in-fructuous. 3. So far as, ITA No.6832/Mum/2014, Assessment year 2009-10 is concerned, the only ground raised by the Revenue pertains to exemption claimed u/s 10(15), 10(34) and 10(38) of the Act. The ld. counsel for the assessee claimed that this issue is already covered ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecial section 44 of the Income Tax Act r.w.Rule 5 contained in the First Schedule. ii) in not appreciating that the provisions of sec. 10(15), 10(34) and 10(38) were not applicable in the case of assessee company. 2. (i) Deleting the disallowance of AO made on account of interest Rs. 14,11,04,910/ - claimed by assessee company as exempt u/s. 10(15) and dividend Rs. 5,87,77,006/- exempt u/s. 10(34/35) of the Act ignoring the fact that the assessee company is engaged in the insurance business and that Computation of its Income from insurance business is to be governed as per special section 44 of the Income Tax Act r.w.Rule 5 contained in the First Schedule. ii) in not appreciating that the provisions of sec. 10(15) , 10(34) and 10(38) were not applicable in the case of assessee company. xxxxxxxxxxxxxxxxxxxxxxxx 4. The issue raised by the Revenue in Ground of appeal no. 1 arises from the action of CIT(A) in holding that assessee was eligible for claim of exemption u/s 10(38) of the Act with respect to gain/loss on sale of investments aggregating to Rs. 54,18,03,880/-. On this aspect, it was a common point between the parties that such issue had come up before the Tribunal in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Rule made there under or the provisions of IRDA Act. There is no dispute that the assessee before us has included the profit on sale of investments in the profit and gain as declared in the accounts prepared in accordance with the provisions of Insurance Act 1938. It is also not the case of the assessee that the profits/gains on sale of investments is not required to be included in the P&L Account prepared in accordance with the provisions of Insurance Act. Therefore, once the profit on sale of investment is required to be included in the P& L account in accordance with the provisions of Insurance Act, then as per the Rule 5 of First Schedule of the I T Act, no adjustment is required to be made on account of the amount of profits on sale of investment already included in the P&L Account. Thus, we find force and substance in the contention of the ld DR that once the assessee has included the gain on sale of investments in the P&L account prepared as per the provisions of the Insurance Act, 1938, then the said amount cannot be reduced while computing the income as per provisions of sec. 44 r.w First Schedule of the I T Act. 5.2 However, in the series of decisions of the Tribu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stand excluded. The effect of the omission of the rule was considered by the Pune Bench of the Tribunal in its order dated 31 August 2009, in the case of Bajaj Allianz General Insurance Company, in ITA No: 1447/PN/2007 and CO No:521PN12007 (assessment year 2003-04). A copy of the said order has been filed before us. The Tribunal has also considered the Circular No.528 dated 16.12.1988. After analyzing the impact of the omission of rule 5(b) and the Circular, the Tribunal held as under. - '8. A conclusion can be drawn on the basis of the above elaborate discussion that the deletion of sub rule (b) from Rule 5 of the First Schedule was with a specific purpose. This Schedule not only prescribes the method of computation of income of Insurance Business in part (A) but also prescribe the method of computation of other Insurance Business in Part (B). Rule 5 is within Part (B) and earlier it has prescribed the method of taxation of profit on sale of investments which was later on scraped. Even by applying a reverse logic we must arrive at the same conclusion that had the impugned income' was earlier taxable under one specific clause but even on its deletion no clause was Introduced or r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ground No.4 is allowed." 5.4 Since the Tribunal has been taking a consistent view on this issue in a series of decisions as relied upon by the ld AR of the assessee; therefore, to maintain the rule of consistency and uniformity on this aspect, we decide this issue in favour of the assessee and against the revenue." 5. It is pointed out that in Assessment Year 2004-05 also the Tribunal vide its order dated 18.09.2013 in ITA No. 4287/Mum/2009 followed its earlier decision dated 10.10.2012 (supra) and allowed the claim of the assessee. Similarly, in Assessment Years 2005-06 and 2006-07, the Tribunal has upheld its earlier decisions vide order dated 05.06.2014 in ITA Nos. 1714 & 1715/Mum/2011. It has also been pointed out that in Assessment Year 2007-08 also, the Tribunal vide its order dated 12.02.2015 in ITA Nos. 7844 & 7619/Mum/2011 has decided the issue in favour of the assessee. Apart therefrom, the learned representative for the assessee pointed out that the view of the Tribunal is also in consonance with the clarification issued by CBDT vide Circular dated 21.02.2006, which has indeed been referred by the CIT(A) in the impugned order. 6. For all the above reasons, and in the....