TaxTMI 
TaxTMI 
2024 (2) TMI 1622
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.... findings are applicable. The assessee has raised the following grounds before us: ITA No. 3551/M/2023 for A.Y. 2016-17 (Assessee's appeal) "1) The Ld. CIT(A) has erred in upholding the disallowance of Rs. 4,32,65,607/- u/s. 14A of the Act. The Ld. CIT(A) has erred in confirming the disallowance merely on the ground that the orders of the Hon'ble Tribunal in the case of the assessee for earlier assessment years has not been accepted by the Department. 2) The Ld. CIT(A) has erred in upholding the disallowance of Rs. 587,65,76,190/- being provision for insurance claim. The Ld. CIT(A) has erred in confirming the disallowance merely on the ground that the orders of the Hon'ble Tribunal in the case of the assessee for earlier assessment years has not been accepted by the Department. 3) The Ld. CIT(A) has erred in confirming the levy of interest u/s. 234B and 234C of the Act. 4) The Ld. CIT(A) ought to have held that the assessment order passed by the Assessing Officer is invalid and bad in law. 5) The appellant craves to add, modify or amend the above grounds anytime during the course of the appeal." ITA No.3544/M/2023 for A....
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....ant craves to add, modify or amend the above grounds anytime during the course of the appeal." ITA No.3542/M/2023 for A.Y. 2020-21 (Assessee's appeal) "1) The Ld. CIT(A) has erred in upholding the disallowance of Rs. 17,73,31,233/- u/s. 14A of the Act. The Ld. CIT(A) has erred in confirming the disallowance merely on the ground that the orders of the Hon'ble Tribunal in the case of the assessee for earlier assessment years has not been accepted by the Department. 2) The Ld. CIT(A) has erred in upholding the disallowance of Rs. 796,44,07,670/- being provision for insurance claim. The Ld. CIT(A) has erred in confirming the disallowance merely on the ground that the orders of the Hon'ble Tribunal in the case of the assessee for earlier assessment years has not been accepted by the Department. 3) The Ld. CIT(A) has erred in confirming the disallowance of Rs. 3,16,91,008/- u/s. 40(a)(ii) of the Act in respect of health and education cess. 4) The Ld. CIT(A) has erred in confirming the levy of interest u/s 234A of the Act. 5) The Ld. CIT(A) ought to have held that the assessment order passed by the Assessing Officer is invalid an....
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....explanation 1 to section 115JB (2) of the Income Tax Act 1961 permits the book profit to be increased with the expenditure relatable to any income to which section 10 (other than section 10(38) of the Act, Section 11 or 12 of the Act applies)?" ITA No.3551/M/2023 for A.Y. 2016-17 (Assessee's appeal) 3. Fact in brief is that return of income declaring total income of Rs. 4,57,69,00,560/- was filed on 05.10.2016. The case was subjected to scrutiny assessment and notice under section 143(2) of the Act was issued on 05.07.2017. The assessee company is engaged in the business of export credit insurance for exporters and bankers. Further facts of the case are discussed while adjudicating the different grounds of appeal filed by the assessee. Ground No.1 : Disallowance under section 14A 4. During the course of assessment the AO noticed that the assessee has earned exempt income to the amount of Rs. 46,39,84,619/- and claimed the same as exempt under section 10 of the Act. On query the assessee submitted that being an insurance company its income is to be computed only under section 44 of the Act read with first schedule to the said Act. The assessee submitted that any expe....
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....ITAT for the assessment year 2007-08 is reproduced as under: "20. We have heard the rival contentions and also the relevant finding given in the impugned orders. As stated earlier, the assessee company is engaged in the business of General Insurance and under the specific provisions given in the Income-tax Act, its income has to be computed strongly in accordance with section 44 r.w. First Schedule. It is a non obstante clause having overriding effect over the other provisions contained in the Act. For making a disallowance of any expenditure or allowance, which falls under the provisions of sections 30 to 43B. It should be firstly, be an expenditure or allowance and secondly, it should not be admissible under sections 30 to 43B. Otherwise no other disallowance can be made. For the purpose of the Income-tax, first of all the figures of the income of the assessee is to be drawn-up in accordance with the provisions of First Schedule to the Income-tax Act and satisfying the requirement of Insurance Act and such a determination of income is binding on the AO and there is no power to tinker with such an account. This proposition has been upheld by the Hon'ble Supreme Court ....
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....sessee company is required to estimate anticipated losses on account of claims incurred but not reported (IBNR) as well as claims incurred but not enough reported (IBNER). The assessee also submitted that account of the assessee company was audited by the Statutory Auditors appointed by the office of the Controller and Audit General of India and in the audit report they have not made any adverse observation in respect of the amount of insurance claim. He further submitted that audited accounts have also been furnished to the Insurance Regulatory Development Authority (IRDA). The assessee also submitted that similar issue on identical facts has been adjudicated by the ITAT, Mumbai in the case of the assessee itself for assessment year 2010-11 vide ITA No. 7657/M/2014 vide order dated 11.10.2017 in favour of the assessee. However, the AO has not agreed with the submissions of the assessee and stated that provisions made for claims received during the years were nothing but unascertained liability which was not admissible under section 30 to section 43B of the Act. Therefore, the amount of Rs. 5,87,65,76,190/- was disallowed and added to the total income of the assessee. 10. The as....
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....claim made by the assessee under the heads IBNR and IBNER(Pg. 172-73 of the PB.), that both the items were based on actuary valuation report. In our opinion, provisions made on the basis of an actuarial valuation cannot be considered a contingent liability. The basic thing to be remembered is that unlike other businesses, life insurance business is being regulated by IRDA. Regulatory body issues instructions time to time. One of the instructions was about follow actuarial valuation while preparing the accounts. The actuarial method of valuation has been recoginsed an approved method for valuing liabilities by various courts. So, we hold that method followed by the assessee for valuing its liabilities cannot be rejected. Besides Rule 5(a)of the First Schedule deals with provisions pertaining to expenditure or allowance or other prescribed liabilities and not in respect of income. In short the AO is not authorised to disturb any income reflected in the P&L account. Here, we would like to reproduce the relevant portion of the judgment in the case of General insurance Corporation of India (supra)and it reads as under: "Section 44 of the Income-tax Act, 1961, is a special provi....
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....ce Act. They are checked by him. He has power to see that various provisions of the Insurance Act are complied with by an insurer so that the persons who have insured with it are not made to suffer by mismanagement. A tampering with the accounts of an insurer by an Income-tax Officer may seriously affect the working of insurance companies. But apart from this consideration, we feel no doubt that the language of section 10(7) and the Schedule to the Income-tax Act makes it perfectly certain that the Income-tax Officer could not make the adjustment that he did in these cases." M. Hidayatullah J., (as His Lordship then was), observed (page 788): " ... Income-tax Act contemplates that the assessment of insurance companies should be carried out not according to the ordinary principles applicable to business concerns as laid down in section 10, but in quite a different manner." The view so token has been followed by this court in Pandyan Insurance Company Ltd. v. CIT [1965] 55 ITR 716 and CIT v. Calcutta Hospital and Nursing Home Benefits Association Lid. [1965] 57 ITR 313 (SC). In the later case, their Lordships have also observed (page 320). " .... t....
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....ails of provisions for claim are analysed it becomes clear that the working of the assessee is based on net of reinsurance(Pg.63 of the PB)and thus the observation made by the AO is contrary to the facts. 3.3.4. We find that the AO had not raised any objection about non filing of bifurcation of data which was made available to the Actuary, therefore, in our opinion the DR cannot make a totally fresh case before us at this stage about non filing of bifurcation, Neither the AO nor the FAA had dealt with the issue. The DR has a definite role in helping the bench to decide the matters. But, there are limitation of representation. In any case the assessee had followed Rule 5 in respect of IBNR and IBNER, as mentioned earlier. Therefore, we do not find any force in the argument advanced by the DR in that regard. Considering the above, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. So upholding the same, we decide ground no.2 against the AO." 12. Since the issue on hand being squarely covered, following the decision of the ITAT as referred above on similar issue and identical facts this ground of appeal of the asse....
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....he assessee was asked why such amount should not be added to its income as the income of the General Insurance Companies as governed by schedule 5 of the Income Tax Act wherein amendment w.e.f A.Y. 2011-12 does not allow claim of such exemption. On query the assessee explained that section 44 of the Act in the case of insurance business provision of section 44 have an overriding effect. The relevant submission of the assessee made before the AO is reproduced as under: "Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head "Interest on securities", "Income from house property", "Capital gains" or "Income from other sources" or in section 199 or in sections 28 to [43B], the profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or by a co-operative society, shall be computed in accordance with the rules contained in the First Schedule.". 1. The opening words of the above section begin with the non-obstante phrase "Notwithstanding anything to the contrary contained in the provisions of this Act, --- ". Consequently, ....
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.... 1631 of 2022. He also referred the decision of Hon'ble Bombay High Court and ITAT, Mumbai in the following cases: i. Decision of the Hon'ble Bombay High Court in assessee's own case for A.Y. 2013-14 (W.P. No. 1631 of 2022), ii. Order of Tribunal in the case of M/s. General Insurance Corporation v. ACIT (ITA No. 1080/Mum/2019), iii. Decision of the Hon'ble Bombay High Court in the case of PCIT v. New India Assurance Co. Ltd. (254 Taxman 238), iv. Decision of the Hon'ble Bombay High Court in the case of General Insurance Corporation of India v. DCIT and Anr. (342 ITR 27). 22. On the other hand, Ld. D.R. supported the order passed by the lower authorities. 23. With the assistance of the Ld. Representatives we have perused the decision of Hon'ble Bombay High Court in the case of the assessee as cited by the Ld. Counsel vide writ petition No.1631 of 2022 the relevant extract of the decision is reproduced as under: "5. Moreover, during the assessment proceedings query regarding how the income from these bonus/dividend etc. was raised and petitioner gave detailed explanation as to the provisions of Section 44 of t....
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.... would be entitled to avail of an exemption under section 10 did not arise. The issue as to whether the assessee which carries on the business of general insurance would be entitled to the benefit of an exemption under clauses (15), (23G) and (33) of section 10 is directly governed by the decision rendered by the Division Bench in Life Insurance Corporation of India v. CIT [1978] 115 ITR 45 (Bom) following the earlier decision in CIT v. New India Assurance Co. Ltd. [1969] 71 ITR 761 (Bom). 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 Central Board of Direct Taxes in its communication dated February 21, 2006, to the Chair- man of the 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 fulfilment of the conditions, if any, under a particular clause of section 10 under which exemption is s....
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....the assessee vide ITA No. 3551/M/2023 for A.Y. 2016-17 as above in this order. Applying the findings of the same mutatis mutandis to this ground of appeal of the assessee, this ground No.1 is allowed. Ground No.2 : Disallowance of provision for insurance claim 30. We have adjudicated the identical issue on similar facts for the assessment year 2016-17 while adjudicating the ground No. 2 in the case of the assessee vide ITA No. 3551/M/2023 for A.Y. 2016-17 as above in this order. Applying the findings of the same mutatis mutandis to this ground of appeal of the assessee, this ground No. 2 is allowed. Ground No.3 : Claim of exemption under section 10(38) 31. We have adjudicated the identical issue on similar facts for the assessment year 2017-18 while adjudicating the ground No. 3 in the case of the assessee vide ITA No. 3544/M/2023 for A.Y. 2017-18 as above in this order. Applying the findings of the same mutatis mutandis to this ground of appeal of the assessee, this ground No. 1 is allowed. Ground No.4 : Levy of interest under section 234B & 234C of the Act 32. This ground of the assessee is consequential in nature which does not require any adjudication, hence t....