TaxTMI 
TaxTMI 
TaxTMI 
2017 (9) TMI 1994
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.... of the Act. 2. During hearing of these appeals, the ld. counsel for the assessee, Shri F.V. Irani, contended that the impugned issue is covered in favour of the assessee in its own case by the decision of Hon'ble Bombay High Court in Income Tax Appeal Nos.3693, 3623, 3691, 3692 and 5001 of 2010 for the Assessment Years 2002-03 to 2006-07, vide order dated 02/08/2011 and also by the decision of the Tribunal in ITA No.4874/Mum/2014, vide order dated 24/02/2016. The Ld. CIT-DR, Shri R.P. Meena, though defended the addition but did not controvert the assertions made by the assessee to the effect that the impugned issue is covered by the aforesaid decisions. 2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing the relevant para from the aforesaid order of Hon'ble High Court for ready reference and analysis:- "18. The object of inserting Section 10(23AAB) as per the Board Circular No.762 dated 18th February 1998 was to enable the assessee to offer attractive terms to the contributors. Thus, the object of inserting Section 10(23AAB) was not with a view to treat the pension fund like Jeevan Suraksh....
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....see, claimed that this issue is covered in favour of the assessee in its own case by the decision of the Tribunal in ITA No.6221, 3702 & 3703/Mum/2012 vide order dated 03/04/2013 and also by Hon'ble Bombay High Court in Income Tax Appeal Nos.1759 of 2013, 116 of 2014 and 2162 of 2013 vide order dated 15/09/2015, wherein, the appeal of the Revenue was dismissed against the aforesaid order of the Tribunal. 3.1. In view of the above, we are reproducing the relevant paras of the order of the Tribunal for ready reference and analysis:- 3.4. We find that the issue of admissibility of provisions of Section 10(34) has been considered by the 'F' Bench of Mumbai Tribunal while deciding the appeals filed by the AO in the cases of ICICI Prudential Insurance (ITA No. 7765/Mum/2010 AY. 2005-06 dt. 14- 09-2012). Ground No.3 filed by the AO reads as under: "On the facts and in the circumstances of the case and in law, the learned CIT(A)erred in allowing the dividend income of the assessee of Rs.1,56,09,222/-as exempted under section 10(34)of the Income-tax Act,1961 ignoring the facts that dividend income is considered as part of Income of Life Insurance Business and is included as an inc....
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....e 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 to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed) which is not admissible under the provisions of section 30 to (43B) in computing the profits and gains of a business shall be added back; (b)(.........) (c) Such amount carried over to a reserve for unexpired risks as may be prescribed in this behalf shall be allowed as a deduction". The Assessing Officer has in the reasons for reopening the assessment proceeded on the premise that in computing the profits and gains of business for an assessee who carries on general insurance business no other section of the Act would apply and that the computation could be carried out only in accordance with section 44 read with Rule 5 of the First Schedule. In Life Insurance Corporation of India, v. Commissioner of Income Tax Bombay City-III a Division Bench of this Court construed the provisions of section 44 and of the First Schedule. The assessee in that case which ....
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.... have to be held that the applicability of those provisions in the case of an assessee whose assessment is governed by section 44 read with rule 2 in the First Schedule- is not excluded". This judgment is sought to be distinguished by the Assessing Officer while disposing of the objections on the ground that the decision was rendered in the context of an assessee which- carried on life insurance business to whom Rules 1 to 4 of the First Schedule applied whereas in the case of the assessee in this case which carries on general insurance business Rule 5 could apply. According to the Assessing Officer, Rule 5 would not permit any adjustment to the balance of profit as per annual accounts prepared under the Insurance Act, and hence the judgment would not be applicable. The Assessing Officer has clearly not noticed that the decision in Life Insurance Corporation (supra) though rendered in the context of an assessee which carries on life insurance business, followed an earlier decision of a Division Bench of this Court in Commissioner of Income-Tax v. New India Assurance Co Ltd. That was a case of an assessee which carried on non life insurance business. In New India Assurance Co. Lt....
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.... be added back in the total income of the assessee for AY 1977-78?. The Supreme Court held that a plain reading of rule 5(a) of the First Schedule made it clear that in order to attract the applicability of the provision the amount should firstly be an expenditure or allowance and secondly it should be one not admissible under the provisions of section 30 to 43A.The Supreme Court held that the sum of Rs.3 crores in that case which was set apart as a provision for redemption of preference shares could not have been treated as an expenditure and hence could not have been added back under rule 5(a). In that context- the Supreme Court held as follows "There is another approach to the same issue. Section 44 of the Income-tax Act read with the rules contained in the First Schedule to the Act lays down an artificial mode of computing the profits and gains of insurance business. For the purpose of income-tax, the figures in the accounts of the assessee drawn up in accordance with the provisions of the First Schedule to the Income-tax Act and satisfying the requirements of the Insurance Act are binding on the Assessing Officer under the Income-tax Act and he has no general power to corre....
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....wing the above, we hold that the assessee is entitled for exemption under section 10.." Respectfully following the order of the Hon'ble jurisdictional High Court and taking note of the decision of the coordinating bench (F Bench in the case of ICICI Prudentail Insurance Co.), we reverse the order of the FAA and decide Ground No.1 in favour of the assessee. 3.2. It is also noted that the Hon'ble High Court dismissed the appeal of the Revenue by observing/holding as under:- "5. Mr.Suresh Kumar learned counsel for the revenue very fairly states that the revenue's appeal on this issue from the order of ITAT in ICICI Prudential Insurance Co.Ltd (supra) to this Court being Income Tax Appeal Nos.710 of 2013 relating to Assessment year 2005-06 was dismissed on 20th July 2015 in view of the above, question (A) does not raise any substantial question of law and accordingly dismissed." We find that before the Hon'ble High Court, the ld. counsel for the Revenue fairly agreed that identical issued is covered by the decision in the case of ICICI Prudential Insurance Co. Ltd. as discussed in the para above, therefore, we find no infirmity in the conclusion of the Ld. Commissio....
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....s ground." Respectfully following the above order of the Coordinating Bench we decide Ground No.2 in favour of the assessee." 4.3. Similarly, the Hon'ble High Court vide order dated 15/09/2015 dismissed the appeal of the Revenue. The relevant portion from the order is reproduced hereunder:- "6. In so far as question (B) is concerned, we find that the order of the ITAT has allowed the respondent-assessee's appeal by following its decision in ICICI Prudential Insurance Co. Ltd rendered in respect of Assessment year 2006-07. Mr.Suresh Kumar learned counsel appearing for the revenue very fairly states that the revenue's appeal on this issue from the order of the Tribunal in ICICI Prudential Insurance Co. Ltd being Income Tax Appeal No.711 of 2013 for Assessment year 2006-07 was dismissed on 20th July 2015 by this Court. This inter alia on the ground that the issue stands covered in favour of the respondent-assessee by the decision of the Apex Court in LIC of India vs CIT 51 ITR 773 wherein it has inter alia been held that the Assessing Officer had no power to modify its accounts after Actuarial valuation is done. Accordingly, question (B) also does not give rise to any....
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....and in such manner as that Government may determine.] [28A. Profits from any business (other than life insurance business) how to be utilized.-- If for any financial year profits accrue from any business (other than life insurance business) carried on by the Corporation, then, after making provision for reserves and other matters for which provision is necessary or expedient, the balance of such profits shall be paid to the Central Government.] If section 28 is analyzed, with respect to surplus from life insurance business and its utilization, it is clear that 95% of such surplus or such higher percentage thereof, as the central government may approve shall be allocated to or reserve for life insurance policy holders of the corporation and after meeting the liability of corporation, if any, which may arise u/s 9, the reminder shall be paid to the Central Government or if the Central Government so direct, shall be utilized for such purposes and in such manner as the government may determine. Considering the clear language of the section, we direct the Assessing Officer to examine the factual matrix/utilization of the surplus and decide in accordance with law. The assessee be giv....
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....-O as well as the ITAT Order dt. 18.12.2006. The facts of the case under reference are similar to those of A.Y. 1998-99 and 2004-05. While deciding the appeal for AY. 2004-05 vide my order in appeal No. CIT(A)-I/IT/170/2004-05 dt. 14.3.2007, the appeal for AY 2004-05 has been allowed, following the order of Hon'ble ITAT, Mumbai holding that the capital of the company is not divided into shares and therefore Central Government cannot be said to be a share holder. The position of Central Government is akin to the sole proprietor of business concern. The finding of the CIT(A) that the Central Government cannot be called a shareholder has also been upheld by the ITAT. The payment made by the assessee to the Central Government could not be treated as dividend within the ambit of definition clause (22) of Sec.2 of I.T. Act. For the reasons as given above and the detailed reasons given in my order for A.Y. 2004-05 (supra), the appellant was not liable for payment of dividend distributed tax u/s 115-O. Accordingly, it was not deemed to be in default u/s 115Q as well as u/s 115P of I.T. Act, 1961. 4. At the outset, the Learned AR submitted that the issue is covered by the order of the IT....
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....s correct in law in holding that provision of 115O read with section-Q of the Act are not applicable in the case of Assessee." 2. Briefly stated, it is the case of the AO that the assessee corporation declared its income on the basis of actuarial valuation surplus. The assessee claimed set off of deficit of Rs.98,95,87,89,023/- from Jeevan Suraksha Fund. The AO has taken a stand that the income from Jeevan Suraksha Fund does not form part of the total income as per section 10(23AAB) of the Income tax Act. Since surplus or profit from the scheme was exempt from taxation, as a corollary the loss or deficit from any such scheme should not be adjusted against taxable surplus arrived at by the assessee. This issue was originally decided by the ITAT in assessment year 2002-03 to 2006-07 vide order in ITA No. 389/Mum/2007 dated 28.10.2009 in favour of the assessee. The ld. CIT(A), after noticing that this issue was also decided by the Hon'ble Bombay High Court in ITA No.3693, 3623, 3691, 5001 of 2000 dated 02.08.2011 in favour of the assessee confirming the order of ITAT, relied on the above decisions vide para-2.3 and directed the AO to delete the addition on the issue. Since the ....
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....or Assessment year 2008-09: 6. Similar issues were raised in ground No.1 and 2 in this year also. The ld. CIT(A) following the order in assessment year 2007-08 deleted the additions. Since these two issues are decided in the other appeal in ITA No.3938/Mum/12, for the reasons stated therein, there is no merit in the grounds raised by the Revenue. Accordingly, they are dismissed. 7. In the result, both the appeals of Revenue are dismissed." 6.3. In the aforesaid orders, the Tribunal duly examined the factual matrix/provisions of the Act and thereafter dismissed the appeal of the Revenue. The Tribunal in a later decision dated 10/07/2013 also followed the decision of Assessment Year 2006-07. No contrary decision was brought to our notice by the Revenue, thus, we find no infirmity, in the order of the First Appellate Authority, on this issue also, therefore, this ground is dismissed, resultantly, the appeal of the Revenue is partly allowed for statistical purposes. 7. Now, we shall take up the appeal of the assessee for Assessment Year 2011-12 (ITA No.4528/Mum/2015), wherein, the only ground pertains to confirming the addition made on account of income from shareholders funds cr....
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....ncome respect of shareholders' account should be taxed in the hands of the assessee or not? The undisputed facts relevant for deciding the issue can be summarised as under: i) LIC was established by the LIC Act,1956, ii) In that year Government of India had contributed Rs. 5 Crores towards capital of the Corporation. iii) No shares were issued by the LIC to Government of India. iv) Assessee corporation had prepared its accounts as per the guidelines issued by competent authorities. v) AO did not tax the sum appearing in the policy-holders' a/c., whereas amount appearing in the shareholders a/c. was treated as income of the assessee by him and taxed accordingly. 2) We find that the basis for allocation for profit between the shareholder and the Government of India is the provisions of section 28 of the LIC Act. From Page no. 313 and 114 of the paper book it becomes clearly that profit was allocated by the assessee on the basis of a particular formula. There is no doubt that income had accrued to the assessee and same was transferred to the share holders' account. In our opinion once income is earned by the assessee and later on it is applied for some specific purpo....