TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 480
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....A) has erred in deleting the disallowance u/s 14A of the Income tax Act 1961 amounting to Rs.5,84,063/-. 3. The Ld. CIT(A) has erred in holding that section 14A contemplates an exception for deductions allowable under the Act as contained u/s 28 to 43B of the Act and that Section 44 creates special application of these provisions in the cases of insurance companies which prohibits the Assessing Officer to travel beyond section 44 and First Schedule of the Income-tax Act. 4. The Ld. CIT(A) has erred in not considering that section 44 of the Income-tax Act, 1961 nowhere restricts the applicability of section 14A of the Income-tax Act, 1961. 5. The Ld. CIT(A) has erred in allowing excess provision of tax as the actual tax liability can be ascertained once the books of accounts audited by Auditor/IRDA and the surplus in revenue account is finalised. 6. The Ld. CIT(A) has erred in allowing for provisions for shareholders account even though the vide Insurance (Amendment) Act, 2002 every insurer was required to keep separate accounts relating to funds of shareholders and policyholders, 7. The Ld. CIT(A) has erred in allowing the interest income, income from investment, rental i....
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....plus or deficit disclosed by the actuarial valuation made in accordance with Insurance Act, 1938. Similarly, the Assessing Officer also made addition on provision of tax in case of shareholder account against the profits arrived at Rs.33,10,50,000/-. 6. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A) challenging the very applicability of the provisions of section 14A as well as the addition made on account of excess provisions of Income Tax of Rs.58,35,50,500/- made in the books of account on the ground that the Assessing Officer had not power to tinker with the profits disclosed in view of the non-obstante provisions of section 44 read with Rule 2 of First Schedule of the Income Tax Act. The respondent-assessee also challenged the addition made on account of provision for income-tax in shareholders profits of Rs.33,10,50,000/- made in the Profits & Loss Account on the same lines. The ld. CIT(A) directed the Assessing Officer to delete the addition made u/s 14A following the decision of the Co-ordinate Bench of this Tribunal in the case of Bajaj Allianz General Insurance Co. Ltd.. 7. As regards to the addition made on account of excess provisions....
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....d the material on record. The issue that arises for our consideration in the present ground of appeal nos.2 to 4 is with regard to the applicability of the provisions of section 14A in relation to computation of income of an assessee engaged in the life insurance business. The provisions of section 44 provides that the provisions of Income Tax Act, 1961 relating to the computation of income of an assessee engaged in the life insurance business excludes those provisions contained in sections 28 to 43B of the Act. It is also important to note that section 14A begins the words "for the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of expenditure incurred. . . . . . . . .". The chapter in question is chapter IV. This chapter also contains the provisions relating to computation of profits and gains of business or profession. The identical issue was came before the Hon'ble Delhi High Court the case of Oriental Insurance Co. Ltd. (supra), wherein, it was clearly held that the applicability of provisions of section 14A was excluded in relation to the computation of taxable income of an assessee engaged in the life insurance business by ....
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.... to tax. 15. However, on appeal before the ld. CIT(A), it was held that the taxable profits of the life insurance company should be computed in the manner laid down u/s 44 r.w. Rule 2 of First Schedule of the Income Tax Act. The provisions of section 44 starts with nonobstante clause, therefore, overrides all other provisions of the Income Tax Act. The provisions of Rule 2 of First Schedule of the Income Tax Act provides that the taxable profits of insurance company shall be computed considering the surplus/deficit arrived at after making the adjustments prescribed under the said Rule to the surplus/deficit as disclosed by actuarial valuation. The Hon'ble Supreme Court in the case of Life Insurance Corpn. of India vs. CIT, 51 ITR 773 (SC) had laid down that in computation of profits and gains of the insurance company, the Assessing Officer has to accept the surplus/deficit as disclosed by actuarial valuation and the Assessing Officer had no power to correct the errors in accounts of the assessee or an insurance company. The Assessing Officer has no power to tamper with account of the assessee engaged in life insurance business. The ratio of this judgement was reiterated subsequent....
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....circumstances, it is enumerated in clause (a), (b) and (c) of Rule 5, whereas, no such power has been conferred on the Assessing Officer to make any kind of adjustments as disclosed in the profits and gains prepared in accordance with provisions of the Insurance Act in relation to the life insurance business. Therefore, the ratio laid down by the Hon'ble Supreme Court in the case of Life Insurance Corpn. of India vs. CIT, 51 ITR 773 (SC) that the Assessing Officer had no power to do anything not contained in Rule 2 of First Schedule of the Income Tax Act still holds field. In the light of the above discussions, the Assessing Officer was not justified in making the addition on account of excess provisions of income-tax debited in the books of account. In the circumstances, we do not find any illegality or perversity in the order of the ld. CIT(A) deleting the addition on account of excess provisions of income-tax, and does not warrant interference by us. Accordingly, this ground of appeal no.5 filed by the Revenue stands dismissed. 17. Ground of appeal no.6 challenges the decision of the ld. CIT(A) taxing the income arising on account of shareholders profits. The brief factual back....
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....cel of life insurance business and requires to be integrated and has to be taken into consideration into total surplus as arrived at actuarial valuation and the income from the shareholders account was also to be taxed as part of life insurance business placing reliance on the decision of the Hon'ble Bombay High Court in the case CIT vs. ICICI Prudential Insurance Co. Ltd., 242 Taxma 159 (Bombay) followed by the Hon'ble Karnataka High Court in the case of PCIT vs. Exide Life Insurance Co. Ltd., 444 ITR 518 (Karnataka). 21. We heard the rival submissions and perused the material on record. The issue that arises for consideration in the present ground of appeal no.6 is whether an assessee engaged in the business of life insurance, whether the surplus available in the shareholders account engaged in the life insurance business can be taxed separately from other sources or it should be treated as part and parcel of income from life insurance business by combining the surplus available with the shareholders accounts and with the policy-holders accounts. The issue is no longer res integra as it stands settled by the Hon'ble Bombay High Court in the case of CIT vs. ICICI Prudential Insur....
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....l filed before him claiming exemption of interest income of Rs.1,57,51,109/-. During the course of proceedings before the ld. CIT(A), an additional ground of appeal was filed claiming exemption of interest u/s 10(15) of the Act. The ld. CIT(A) after calling for the remand report from the Assessing Officer allowed the additional ground of appeal following the ratio laid down by the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. vs. CIT, 229 ITR 383 (SC). 24. Being aggrieved, the Revenue is in appeal before us in the present ground of appeal nos.7, 8 and 9. 25. The ld. CIT-DR submits that the ld. CIT(A) ought not to have allowed the additional ground of appeal, inasmuch as, no relief can be granted by the ld. CIT(A) which was not claimed in the return of income placing reliance on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT, 284 ITR 323 (SC). 26. On the other hand, ld. AR submits that there is no embargo on the powers of the ld. CIT(A) to admit an additional ground of appeal which involves pure question of law requiring no investigation or enquiry into the facts placing reliance on the decision of the Hon'ble Supreme Cour....