TMI Blog2010 (9) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of gains on realization of investment is reproduced below as under : 5(b) any amount either written off or reserved in the accounts to meet depreciation 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 or gains on the realization of investments shall be treated as part of the profits and gains. 3. The said Rule 5(b) was however deleted w.e.f. 1.4.89. The CBDT vide circular No.528 dated 16.12.88 had clarified the effect of said deletion of Rule 5(b) on taxability of profit on sale of investment in para 45.1 which is reproduced below as a ready reference : 45.1 Under the existing provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investment was not taxable in case of general insurance business. The AO however did not accept the explanation given. It was observed by him that the assessee had two distinct activities i.e. general insurance business and activities as public financial institution. The rule 5(b) which was deleted related to general insurance business and therefore even after deletion of rule 5(b) the profit on sale of investment which was the income from the other activities has to be taxed. The AO also observed that the circular No.528 of CBDT related to public sector insurance companies. Accordingly he held that profit on sale of investment was taxable. The assessee disputed the decision of AO and submitted before CIT(A) that it was not correct to sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R fairly conceded that the issue was covered by the decision of the tribunal aforesaid. 6. We have perused the records and considered the rival contentions carefully. The dispute is regarding taxability of gain on sale of investment in case of the assessee which is in the business of general insurance. 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 which has been reproduced in para 3 earlier has c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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