TMI Blog2016 (9) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... file/loss in the policy holders account for determining the profile/loss of the assessee u/s 44, and such aggregation would results in a loss of ₹ 34,45,94,000/- as per the impugned order, the view of setting off of losses against income u/s 70,72 would be academic and hence not decided. - ITA No.1508/Bang/2015 - - - Dated:- 22-9-2016 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER SHRI S JAYARAMAN, ACCOUNTANT MEMBER Appellant by : Shri KP Kumar, Sr. Counsel Respondent by : Shri GR Reddy, CIT O R D E R PER A SHA VIJAYARAGHAVAN, JUDICIAL MEMBER : This appeal by the assessee is directed against the order of Commissioner of Income-tax (Appeals) -5, Bangalore dated 4.11.2015 and it pertains to the assessment year 2011-12. 2. The assessee has filed its return of income , declaring a total loss of ₹ 34,45,94,000/-, which was computed by aggregating its reporting under the shareholders account policy holders account, as prescribed under IRDA. The AO completed the assessment u/s 143(3), increasing the loss from life insurance business from ₹ 34,45,94,000/- to ₹ 58,61,84,000/- and considered ₹ 24,15,90,000/- reported under shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the assessee and against the revenue is not followed bymeas the facts are different and distinguishable. Further the Apex Court and the Hon'ble Bombay High Court have not given any clear cut finding on the issue on hand. In this view of the matters, after considering carefully the facts of the case, and also the written submissions filed by the appellant, I am of the opinion that there is no substantial merit in the argument of the appellant. The computation of profit/loss from the business of life insurance is, since governed by special provisions of section 44 of the Income Tax Act 1961 and is distinct from the income earned from the share holder's account. Therefore, these grounds of appeal are dismissed. 4. Further the CIT(A) held as under:- 9.2 . I am of the opinion that the income under different sources have to be separately taxed and if any losses arise of any segments of the business has to be necessarily carried forward and set off against the profits derived under the same head as per provisions u/s 71, 72 73 of the Income Tax Act. Therefore, since the losses reported are only under the policy holders account, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited (3800, 3801 of 2008 and 1501, 5670 of 2009) and DCIT vs Mls Kotak Mahindra Old Mutual Life Insurance Ltd (ITA No. 41791 Muml 2010), relied upon by the Appellant; 7. The learned CIT(A) has erred in observing and stating that the case of ICICI Prudential Insurance Company Limited (ITA No 6855,6855,6856 and 6059 of 2010) of Hon'ble Mumbai Tribunal is distinguishable on facts and therefore the ratio of the decision cannot be applied to the Appellant's case; 8. The learned CIT(A) has failed to appreciate that the principles laid down by the Hon'ble Mumbai Tribunal in the above case squarely applies to the present case; Set-off of losses under Section 70 of the Act and 72 of the Act 9. Without prejudice to ground 2, 3, 4, 5, 6, 7 and 8, since income from shareholders' account was held to be taxable at normal rate, not at concessional rate under Section 44 of the Act, the learned CIT(A) has erred in not allowing set-off of losses under policyholders' account in accordance with the provisions of Section 70 of the Act, while computing the total income of the Appellant; 10. The learned CIT(A) has grossly erred in law in drawing parallel and applying analo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and when there is a deficit in policyholder s account. As rightly noted by the Hon'ble Bombay High Court, as a policy, company is transferring funds/assets from shareholder s account to policyholder s account even during the year periodically as and when the actuarial valuation was arrived at n policyholder s account. Most of the companies are required to submit quarterly accounts under the Company Law, there is requirement of actuarial valuation report periodically and accordingly assessee was transferring funds-from the shareholder account to policyholder s account. Since the insurance business will not yield the required profits in the initial 7 to 10 years, lot- of capital has to be infused so as to balance the deficit in the policyholder s account. During the year as already stated assessee has issued fresh capital to the extent of 250 crores and transferred funds to the extent of 233 crores from the shareholder s account to policyholders account. Since assessee is having only one business of life insurance, the entire transactions both under the policy holders account do pertain to the life insurance business only as it was not permitted to do any other business. Once a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is allowed 7. Respectfully following the decision of the ITAT in the assessee s own case, we allow the grounds from 1 to 8. 8. As regards the grounds 9 to 13, we find that they are alternate grounds. If the deficits in the policy holders account is to be set off against the surplus as per shareholders account in computing the taxable income of the assessee u/s 44 of the IT Act, the assessee contends (i) deficit in the policy holders account should be set off against the surplus as per shareholders account u/s 70 of the IT Act as both constitutes a single business and sec. 70 permits inter unit set off and (ii) the loss of the business of assessee as determined at ₹ 1745.61 croes for earlier years of the current year. As we have held that surplus/deficit as per shareholders account should be aggregated with surplus/deficit in the policy holders account for determining the profile/loss in the policy holders account for determining the profile/loss of the assessee u/s 44, and such aggregation would results in a loss of ₹ 34,45,94,000/- as per the impugned order, the view of setting off of losses against income u/s 70,72 would be academic and hence n ..... 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