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2016 (8) TMI 1571 - AT - Income TaxDeduction u/s.10(38) for gains/loss on sale of investment - assessee company is engaged in the insurance business and that Computation of its Income from insurance business is to be governed as per special section 44 of the Income Tax Act r.w.Rule 5 contained in the First Schedule - HELD THAT:- It is pointed out that in Assessment Year 2004-05 the Tribunal [2013 (10) TMI 1130 - ITAT MUMBAI] followed its earlier decision [2012 (11) TMI 587 - ITAT MUMBAI] and allowed the claim of the assessee. Similarly, in Assessment Years 2005-06 and 2006- 07, the Tribunal has upheld its earlier decisions vide order. It has also been pointed out that in Assessment Year 2007-08 also, the Tribunal [2015 (2) TMI 1372 - ITAT MUMBAI] has decided the issue in favour of the assessee. Apart therefrom, the learned representative for the assessee pointed out that the view of the Tribunal is also in consonance with the clarification issued by CBDT vide Circular dated 21.02.2006, which has indeed been referred by the CIT(A) in the impugned order. - Decided in favour of assessee. Exemption u/s 10(15) and 10(34/35) - CIT(A) allowed the plea of assessee by referring to the clarification issued by CBDT dated 21.02.2006 whereby it is clarified that exemption available to any other assessee under any of the clauses of Sec. 10 of the Act shall also be made available to a person carrying on non-life insurance business - HELD THAT:- As decision of Tribunal in the case of assessee for Assessment Year 2007-08 [2015 (2) TMI 1372 - ITAT MUMBAI] wherein similar issue has been decided in favour of the assessee following precedents in the case of ICICI Prudential Insurance Co. Ltd. [2012 (11) TMI 13 - ITAT MUMBAI] and New India Assurance Co. Ltd. [1967 (10) TMI 16 - BOMBAY HIGH COURT] Disallowance of expenses incurred on performance linked incentive for employees, operating expenses like advertisement, legal and professional fees, courier charges, repairs and maintenance, etc. - According to the Assessing Officer, assessee was following mercantile system of accounting and since the impugned claim was merely a provision for expenses, the same was not allowable - AO also noticed that out of the aforesaid total expenditure, tax has not been deducted at source with respect to expenditure and, therefore, the said amount was also hit by Sec. 40(a)(ia) - HELD THAT:- We find that before the CIT(A), assessee pointed out that expenses representing items of communication expenses, employees remuneration & welfare benefits, interest and bank charges, printing & stationery and travel & conveyance expenses are not liable for deduction of tax at source except employee’s remuneration & welfare benefits, which have been duly subjected to deduction of tax at source. Additionally, it was pointed out that on the balance of expenditure assessee had deducted tax at source and paid by the due date, i.e., 31.5.2008. In this manner, assessee sought to point out that there was no justification for invoking Sec. 40(a)(ia) of the Act with respect to the entirety of expenditure of ₹ 39,71,60,000/-. In this context, we find that the CIT(A) has confirmed the disallowance with respect to Miscellaneous expenses and Rent, Rates & Taxes amounting to ₹ 6,27,01,000/-. We find that the said finding of CIT(A) is quite contrary to the plea of assessee that the requisite tax has been deducted and paid by 31.5.2008. At the time of hearing, the learned representative pointed out that the expenses which were required to be subjected to tax at source, the aforesaid plea of the assessee holds good and that even if the dates of deposit of TDS are required to be verified by the Assessing Officer, it may be so directed. We find no reason to interfere with the decision of CIT(A) so far as it involves the deletion of the addition to the extent of ₹ 33,45,59,000/-. Insofar as the sustenance of disallowance of ₹ 6,27,01,000/- is concerned, we deem it fit and proper to direct the Assessing Officer to verify the plea of assessee that the corresponding tax deductible on such expenses have been deducted and paid by 31.5.2008, as contended by the assessee. For the limited purpose of verifying the aforesaid aspect, the matter is being remanded back to the file of Assessing Officer. The Assessing Officer shall examine the details put forth by assessee in this regard and thereafter re-determine the disallowance u/s 40(a)(ia) of the Act, if any, in the context of claim of expenses of ₹ 6,27,01,000/- as per law. Disallowance u/s 14A - As per assessee, the disallowance envisaged u/s 14A of the Act is not applicable in the case of an assessee carrying on insurance business - HELD THAT:- It is also brought on record that the decision of Tribunal of Assessment Year 2004-05 [2013 (10) TMI 1130 - ITAT MUMBAI] has been further followed by the Tribunal in the case of assessee for Assessment Years 2005-06 and 2006-07 vide order dated .Subsequently, in Assessment Year 2007-08 also [2015 (2) TMI 1372 - ITAT MUMBAI] similar view has been affirmed by the Tribunal. Following the aforesaid precedents, we approve stand of the assessee that provisions of Sec. 14A of the Act are not applicable to an assessment made in terms of Sec. 44 of the Act read with First Schedule of the Act in relation to income of non-life insurance business. Thus, on this aspect, assessee succeeds.
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