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2010 (9) TMI 1051 - AT - Income TaxTaxability of profit - sale of investment - assessee who is in the general insurance business had earned profit on sale of investments and the same was claimed as exempt in the return of income - insurance business computation under the provisions of section 44 read with rule of 5, Part B of the 1st Schedule. HELD THAT:- The profit of a general insurance company is required to be computed under the provisions of section 44 read with rule 5 of part B of 1st Schedule. The rule 5(b) which was applicable till assessment year 1988-89 specifically provided for taxability of gain on sale of investment. The said rule 5(b) was however deleted w.e.f assessment year 1989-90. The CBDT in circular No.528 dated 16.12.88 has clarified that the amendment of rule 5(b) from assessment year 1989-90 was with a view to provide exemption of the profit earned on sale of investments. We find that impact of amendment of rule 5(b) from assessment year 1989-90 on the taxability of gain on sale of investment has been specifically considered by the Pune Bench of the Tribunal in case of Bajaj Allianz Vs Addl. CIT in ITA [2009 (8) TMI 810 - ITAT PUNE-A] for assessment year 2003-04. The tribunal in the said order observed that till assessment year 1988-89 rule 5(b) provided for taxation of profit on sale of investment which was deleted from assessment year 1989-90 and after deletion no clause was introduced to provide for taxation of such gain. The tribunal therefore concluded that after the deletion of rule 5(b) of the first schedule, profit on sale of investment in case of general insurance companies cannot be taxed u/s 44. Thus we hold that profit on sale of investment in case of the assessee cannot be brought to tax in assessment year 2004-05. Accordingly we set aside the order of CIT(A) and allow the appeal of the assessee.
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