TMI Blog2014 (5) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... matter has been decided in favour of Assessee. Addition on account of premium deficiency – Computation of book profits u/s 115JB of the Act – Held that:- Following ICICI LOMBARD GENERAL INSURANCE CO. LTD. Versus ASSTT COMMISSIONER OF INCOME TAX, RANGE-10(1), MUMBAI [2012 (11) TMI 587 - ITAT MUMBAI] - even if an Insurance Company does not disclose any matter in the Balance Sheet and P&L account because the same is not required to be disclosed by the Insurance Act shall not be treated non-disclosure of a true and fair view of the state of affairs of the company as the condition has been relaxed by sub sec 5 of sec 211 of the Companies Act - when the insurance companies, banking companies and electricity generation and distributions companies are treated in the same class as per the provisions of sec. 211 of the Companies Act in preparing their final accounts, then these companies cannot be treated differently for the purpose of sec. 115JB and accordingly, the provisions of sec. 115JB are not applicable in the case of the assessee – Decided in favour of Assessee. - ITA No. 4286/Mum/2009, ITA No. 4273/Mum/2009 - - - Dated:- 10-10-2012 - Shri Rajendra Singh, AM And Shri Vijay P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 44 of the I T Act and the same shall be computed in accordance with the Rule containing in first schedule of the Act. The profits and gains of business of insurance other than the life insurance shall be computed as per Rule 5 of First Schedule as under: 5. The profits and gains of any business of insurance other than life insurance shall be taken to be the profit before tax and appropriations as disclosed in the profit and loss account prepared in accordance with the provisions of the Insurance Act, 1938 (4 of 1938) or the rules made thereunder or the provisions of the Insurance Regulatory and Development Authority Act, 1999 (4 of 1999) or the regulations made thereunder, subject to the following adjustments; a. Subject to the other provisions of this rule, any expenditure or allowance including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed which is not admissible under the provisions of sections 30 to 43B in computing the profits and gains of a business shall be added back; b. (i) any gain or loss on realisation of investments shall be added or deducted, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010, this Tribunal in the case of Tata AIG General Insurance Co Ltd vs ACIT in ITA No.2597/Mum/2009 after considering the earlier decisions of the Tribunal has held in paras 18 to 20 as under: 18. We have carefully considered the rival contentions. There is no dispute that under the guidelines issued by the IRDA (Auditors Report) Regulations of 2002, for preparation of financial statements, the profit on sale of investments is to be credited to the Profit and Loss Account of the insurance company. There is also no dispute that the assessee has credited the Profit and Loss Account with such profit the question is whether such profit can be excluded and exemption can be claimed. Rule 5(b), as it stood before being omitted from 01 .04.1989, was as follows: - any amount either written off or reserved in the accounts to meet depredation of or loss on the realization of investments shall be allowed as a deduction, and any sums taken credit for in the accounts on account of appreciation of or gains on the realization of investments shall be treated as part of the profits and gains; Provided that the Assessing Officer is satisfied about the reasonableness of the amount written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed u/s 44 of I T Act. After expressing this view we hereby dismiss the cross objection V f the revenue . 19: The aforesaid order of the Pune Bench, which was in the case of a company carrying on general insurance business, was followed by the Mumbai Bench Of the Tribunal in its order dated 17.09.2010, in the case :of HDFC ERGO General Insurance Company Ltd., in ITA No: 338/Mum12009 (assessment year 2004- 05) as also in its Order dated 30.04.2010, in the case of Reliance General Insurance Co. Ltd., in :ITA No. 781/Mum12007 (and other appeals). Copies of these orders have also been filed before us. In these orders it has been held that the profit on sale of investment in the case of an assessee carrying on general insurance business cannot be brought to tax after the omission of rule 5(b) and as per the Circular cited above. Since the controversy before us is identical, respectfully following the orders Of the Puns and Mumbal Benches of the Tribunal cited above, we direct the Assessing Officer to exclude the profit of Z47,45,699/- on the sale of investments from the assessment V 20. The learned CIT DR, however, argued that the effect of the omission of rule 5(b) is ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso to sub. Sec (2) of sec. 211 of the Companies Act creates an exemption of applicability of sub. Sec. (2) inter-alia in respect of Insurance companies or banking companies or any other companies engaged in generation and supply of electricity for which a form of profit and loss account has been specified in or under the Act governing such class of company. Even if an Insurance Company does not disclose any matter in the Balance Sheet and P L account because the same is not required to be disclosed by the Insurance Act shall not be treated un-discloser of a true and fair view of the state of affairs of the company as the said condition has been relaxed by sub.,sec 5 of sec 211 of the Companies Act. 9.1 It is to be noted that in order to align the provisions of the I T Act with the Companies Act , an amendment has been brought into the statute by the Finance Act 2012 whereby sec 115JB has been amended w.e.f 2013 and therefore, prior to 1.4.2013, the provisions of sec. 115JB cannot be applied in case of Insurance, banking, electricity, generation and distribution companies and other class of companies, which are not required to prepare their accounts and particularly Balance S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he electricity accounts if followed for the preparation of Companies Act account will not disclose true and fair view and will not be in accordance with part II and III of Schedule VI of the Companies Act. The ratio of the decisions of the Hon ble Supreme Court and the ratio of the decision of the Tribunal discussed above are in support of the contentions of the assessee. We further found that the issue of applicability of sec. 115J came before the Tribunal for AY 88-89. Taking into consideration the preparation of accounts under the Electricity Act and other contentions the assessee including the decisions of the Supreme Court in the case of B.C.Srinivasa Setty (supra), the Tribunal has held that the provisions of sec. 115J are not attracted on the facts of the present case. 29 As discussed above, the assessee is following the accounting policies under the Electricity Supply act and prepared its accounts in view of those very policies. Following those very policies, the accounts in accordance with part II III of Schedule VI of the Companies Act are not applicable at all. Once there is no possibility for preparing the accounts in accordance with the part II II of Schedule VI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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