AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 905
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.... The CIT(Appeals) ought to have reversed the action of the AO, of disallowing the payments of Rs. 183,11,32,413/- by the Appellant to Auto Dealers and ought to have held that the entire sum of Rs. 183,11,32,413/-was allowable to the Appellant." Revenue's Appeal 1. Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) was justified in holding that the profit on sale of investments has to be taxed as Income from Capital Gain and not Income from Business. 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) erred in holding that income of Rs. 954,56,33,686/- is exempt u/s 10(38) of the I.T. Act, 1961. 3. Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) has erred in not appreciating the fact that the amount of disallowance u/s 14A of the I.T. Act, 1961 has to be computed as per Rule 8D of I.T. Rules, 1962 when the computation of the assessee was not found to be correct and as held in the order of the Hon'ble High Court in the case of M/s. Godrej & Boyce Manufacturing Co. Ltd. 4. Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) ha....
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....income. The AO held that the dividend income has to be offered on gross basis and accordingly made the addition of Rs. 22,20,699 to the total income of the assessee. On further appeal the CIT(A) confirmed the addition. 4. We heard the parties and perused the material on record. The ld AR during the course of hearing fairly conceded that the impugned issue is already considered by the coordinate bench in assessee's own case in ITA No. 3562/Mum/2007 for AY 2006-07 where it is decided against the assessee. We notice that the coordinate bench while considering the identical issue for AY 2016-17 has observed that - 28. After hearing both the parties, we find merit in the reasoning given by the AO as well as Ld. CIT(A) because taxed paid do not qualify as expenditure for the purpose of business and entire gross dividend should have accounted for in the P&L account. Thus Ground no. 5 is treated as dismissed. 5. There is no change to the facts pertaining to the issue for the year under consideration. Therefore respectfully following the above decision we see no reason to interfere with the decision of the CIT(A) in this regard. The ground raised by the assessee is dismis....
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....cture such as laptops, printers, data services and man power to carry out the outsourced service and the auto dealers therefore claim reimbursement towards the cost incurred in this regard. The ld AR drew our attention to the copies of invoices raised towards the services rendered by the auto dealers (page 7 to 27 of PB). The ld. AR argued that the contention of the Revenue that the assessee has incurred the expenses against the IRDA regulations is not correct. The ld AR further argued that as per the IRDA guidelines dated 1st February 2011, the IRDA has specifically sanctioned outsourcing of non-core activities and that the services rendered by the auto dealers fall within the purview of non-core activities. The ld AR also argued that as per the IRDA regulations, the non-core activities are to be reported periodically and that the assessee has been submitting reports to IRDA (page 25 of PB) which contain the details of payments made to auto dealers towards the services rendered. It is submitted by the ld AR that the sole basis for making the disallowance is the allegations made against the assessee by the service tax authorities and the statement recorded by the service tax from t....
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....uidelines and that the auto dealers are actually receiving commission for soliciting business. In this regard, we notice that, Guidelines on Outsourcing of Activities by Insurance Companies issued by IRDA dated 1st February 2011, wherein it is stated that certain activities which support the core activities may be outsourced as per risk management principles outlined in the said guidelines. The relevant extract of the guidelines are as given below: "2. CORE ACTIVITIES 2.1 All activities relating to:- i. Underwriting, ii. Product design and all Actuarial functions and Enterprise wide Risk Management iii. Investment and related functions iv. Fund Accounting including NAV calculations v. Admitting or Repudiation of all Claims vi. Bank Reconciliation vii. Policyholder Grievances Redressal viii. Approving Advertisements ix. Market Conduct issues x. Appointment of Surveyors and Loss Assessors xi. Compliance with AML, KYC etc. xii. All integral components of the above activities shall be treated as Core Activities 2.2 Policy Servicing and related activitie....
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.... Data collection of prospect/insured details, Submission of proposals Data Entry Data analysis Medical examination Risk management service at policyholders' / insured premises Reinsurance Admitting and repudiation of Claims Legal 1 expert professional opinion Investigation Forensic analysis Salvage / sue and labour Average adjustors Recovery agents Third party claims negotiators Claims document aggregator Accident 1 road assistance International travel and medical assistance services Global repricing Refer 4.1 of the Circular Refer 4.2 of the Circular 2. Premium Collection Printing of receipt Dispatch Data entry of details Issuance of receipt Collection by RBI approved banks, institutions, business correspondents of banks Government, private partnerships like AP Online, e-mitra, e-seva, MP Online etc. Government offices like Post office Payment aggregators eg VISA, Mastercard, Bill desk, payments through RBI approved gateway RBI Cleared Payment Collectors, e.g ECS Licensed Insurance Intermediaries, which includes agent / micro insurance agent/ corporate agent/Broker who are authorized and who himself procured the polic....
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....nd. Further the submissions of the assessee that the payments are towards outsourced activities as per the IRDA guidelines which gets periodically reported is well substantiated. Therefore we are of the considered view that the expenses claimed towards reimbursement of expenses for the outsourced activities as per the IRDA guidelines, cannot be disallowed. Accordingly we direct the AO to delete the disallowance made in this regard. The ground raised by the assessee is allowed. 12. In result the appeal of the assessee is partly allowed. ITA 3150/MUM/2018 - Revenue's appeal Ground No.2 - Profit on Sale of Investment of Rs. 954,56,33,686/- exempt under section 10(38) 13. The assessee during the year has earned long term capital gain (LTCG) of Rs. 954,56,33,686 and the same is claimed as exempt under section 10(38) of the Act. The AO denied exemption under section 10(38) of the Act on the ground that the assessee's income is computed under section 44 of the Act read with First Schedule which is special regime applicable to the insurance companies for computation of total income and that entire income earned by insurance companies, including income taxable under Hous....
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....38) of the Act, the exemption would be available. Thus, the question arising for our consideration in this appeal is different from the question on which the appeal of the GIC in ITX No. 201 of 2011 (Supra) was admitted. 9. Moreover, we find that this Court in General Insurance Corporation (supra) had also relied upon the communication dated 21st February, 2006 of the CBDT to the Chairman of the Insurance Regulatory and Developing Authority. In the above communication, it has been clarified that exemption available to any other assessee under clause 10(38) relating to long term capital would also be available to a person carrying on non-life Insurance business. Mr. Suresh Kumar very fairly states that the CBDT communication dated 21 February, 2006 addressed by the CBDT to the Chairman IRTA as well as the decision of this Court in GIC (supra) would be binding upon the Revenue. 10. In view of the above, the question as framed does not give rise to any substantial question of law." 16. We also notice that the coordinate bench while considering the similar issue in assessee's own case for AY 2007-08 has held that - "9. We have heard the rival submissio....
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....xemption of the profits earned by them on the sale investments. As corollary, it is proposed to provide that the losses incurred by General Insurance Corporation on the realization of investment shall not be allowed as deduction in computing the profits chargeable to tax. To achieve this object clause (b) of rule 5 of the First Schedule to the Income-tax Act is proposed to deleted." 10. Now again by Finance Act 2009, clause (b) have been introduced w.e.f. 01.04.2011 which reads as under:- "(b) (i) any gain or loss on realization of investments shall be added or deducted, as the case may be, if such gain or loss is not credited or debited to the profit and loss account; (ii) any provision for diminution in the value of investment debited to the profit and loss account, shall be added back;" This has been clarified by Finance Act that the amendment will be effective from A.Y. 2011-12 onwards. Thus, it is amply clear from the legislative intent that, prior to 01.04.2011, adjustment of such a gain on realization of investment cannot be added. This aspect of the matter have been dealt extensively and upheld by the Co-ordinate Benches of the Tribunal w....
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....that the provisions of Sec. 14A has no applicability in the cases of General Insurance Companies, which are governed by the special provisions laid down in Sec. 44 of the Act. It was observed by the Tribunal in context of the issue under consideration, as under: 7. Coming to the Ground No.3 of the grounds of appeal the Ld. Counsel for the assessee submits that this issue also decided by the Tribunal in assessee's own case in the earlier Assessment Years right from A.Y 2000-01 to 2010-11 wherein it has been held that the provisions of section 14A r.w. Rule 8D have no application to the assessee an insurance company. Referring to the order passed by the Tribunal for the A.Y. 2010-11 in ITA. No 5013/Mum/2015 dated 28.03.2018. Ld. Counsel for the assessee submits that identical issue came up before the and the Tribunal dismissed the appeal of the Revenue following the earlier year's orders of the Tribunal wherein it has been held that no disallowance u/s. 14A of Act can be made. 8. Ld DR fairly submitted that this issue has been decided in assessee's favour in earlier years. However, he supports the order of the Assessing Officer. 9. Heard both si....
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.... u/s 14A can be made and accordingly, ground no. 3 is allowed in favour of the assessee." 19. We, therefore, following the above decision of the Tribunal, dismiss the ground raised by the Revenue. 10. Respectfully following the said decision, we uphold the order of the Ld.CIT(A) and reject Ground No.3 of the Revenue's appeal" As the facts and the issue in context of the aforesaid issue under consideration had not witnessed any change during the year before us, we thus respectfully follow the aforesaid view taken by the Tribunal in the assessee's own case for A.Y 2010-11 in ITA No. 5116/Mum/2016, dated 06.11.2019. Accordingly, finding no infirmity in the order of the CIT(A), who in our considered view had rightly vacated the disallowance of Rs 13,05,70,512/- made by the A.O u/s 14A r.w Rule 8D, uphold his order to the said extent. The Ground of appeal No. 3 is dismissed." 20. For the year under consideration, the revenue did not bring any new material on record for us to controvert the above decision of the coordinate bench. Accordingly we see no reason to interfere with the decision of the CIT(A). The grounds the revenue is hereby dismissed. ....
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....s Report) Regulations, 2002, which prescribes the accounting principles for preparation of financial statements in Part I thereof, the assessee was required to prepare the financial statements in the manner laid down in the said Schedule. We are concerned only with the manner in which the debt securities purchased by the assessee was to be disclosed in the Balance Sheet. Rule 6 of the Schedule prescribes the procedure to determine the value of investments. Clause (b) of Rule 6 provided that "Debt securities, including Government securities and redeemable preference shares, shall be considered as "held to maturity" securities and shall be measured at historical cost subject to amortization". Following this Rule, and taking the example given above further, the assessee was required to show the value of the security in its Balance Sheet at 1,003/- which was the historical cost and the difference between the face value of 1,000/- and the historical cost of Rs. 1,003/-, namely, 3/- was to be amortized. The amortization naturally was to be for a period from the date of purchase of the security and the date of maturity. For example, if the debt security was to mature in five years and the....
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....held 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 01 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 our or away and is something which is gone irretrievably Expenditure, which is deductible for income tax, is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure. If this meaning is to be given to the word "expenditure" occurring in rule 5(a)- the amortization claim cannot be considered as expenditure and, therefore, cannot be added back to the balance of the profits. In General Insurance Corporation (of India vs. CIT (1999) 240 ITR 139 (SC). the Supreme Court held that even if an item of debit is considered as an expenditure, it should further be such an expenditure contempl....