TMI Blog2018 (12) TMI 1938X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of inserting section 10(23AAB) as per the Board Circular No. 762, dated 18/02/1998 was to enable the assessee to offer attractive terms to the contributors. Thus, the object of inserting section 10(23AAB) was not with a view to treat the pension fund like jeevan Suraksha Fund outside the purview of insurance business but to promote insurance business by exempting the income from such fund. Therefore, in the facts of the present case, the decision of the Income-tax Appellate Tribunal in holding that even after insertion of section 10(23AAB), the loss incurred from the insurance business under section 44 of the Income-tax Act, 1961 cannot be faulted. - Decided against revenue. - ITA No. 6336/Mum/2016 (Assessment Year 2011-12) - - - Dated:- 19-12-2018 - SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM Appellant by : Shri Anadi Varma, CIT DR Respondent by : Shri D. Sheth, AR O R D E R PER MAHAVIR SINGH, JM: This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-8, Mumbai [in short CIT(A)], in appeal No. CIT(A)-8/IT-294/14-15 vide order dated 25.07.2016. The Assessment was framed by the Asst. Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted above, I find no reason to differ from the decision of my predecessor. Accordingly, disallowance of ₹ 1,82,48,362/- is deleted. This ground of appeal is allowed. Aggrieved, now Revenue is in appeal before us. 4. We have heard rival contentions and gone through the facts and circumstances of the case. In this regard, the ld. counsel for the assessee argued that this issue is squarely covered in favour of the assessee by the following the assessee s own case in ITAs No. 4110/Mum/2014 4130/Mum/2014 vide order dated 12.09.2016, wherein Tribunal reads as under: - 5. As regards to Revenue s issue of claim of deduction by assessee u/s 10(34) of the Act allowed by the CIT (A), Ld. Counsel for the assessee stated that the similar issue was raised before Hon ble Jurisdictional High Court in the case of CIT Vs. ICICI Prudential Insurance Co. Ltd. in ITA No. 711 688/2014 dated 20/07/2015 has adjudicated the following question no. 5 : Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in allowing the dividend income of assessee as exempt u/s 10(34) of the I.T. Act, 1961, ignoring the fact that dividend income is considered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome to an extent of ₹ 274,11,65,844/- the amount which was allowed by the Assessing Officer as exempt under section 10. The contention of the CIT (A) was that the assessee was not eligible for deduction under section 10, once the incomes are brought to tax under section 44 r.w. Rule 5 of First Schedule to the Income Tax Act, 1961. 8. There is no need to consider the arguments of the CIT (A) and how he has arrived at that conclusion in this order as this issue was decided by the Hon'ble Bombay High Court in favour of the assessee in writ petition No.2560 of 2011 in the assessee's own case dated 1.12.2011. Consequent to the findings of the CIT(A) in AY 2007-08 (impugned AY ) the Assessing Officer seems to have issued notice under section 148 for reopening the assessment for the AY 2006-07 on the reason that the assessee was not eligible for claiming income as exempt under sub-sections 15, 23G, 34 and 38 of Section 10 and assessee challenged the issue by way of writ petition. The Hon'ble Bombay High Court not only disapproved the reopening of the assessment but gave the findings on merit also which are as under:- 11. Section 44 of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax Bombay City-III, a Division Bench of this Court construed the provisions of section 44 and of the First Schedule. The assessee in ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench that case which carried on life insurance business had made a claim to exemption under section 10(15) and section 19(1). In a reference before the Court, the questions referred included whether in computing the profits and gains of the business of insurance under section 44 read with the First Schedule certain items which were ordinarily not includible in the total income were rightly included in the taxable surplus. The Division Bench of this Court held as follows: The question which essentially falls to be determined in this reference is whether, in view of the provisions in section 44 or rule 2 of the first Schedule, the Life Insurance Corporation will not be entitled to claim the deductions which are otherwise admissible in the case of an assessee, computation of whose income is governed by the other provisions of the Act. The argument of Mr. Kolah for the Life Insurance Corporation is that unless there are express provisions which disable the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered in the context of an assessee which carries on life insurance business, followed an earlier decision of a Division Bench of this Court in Commissioner of Income-Tax v. New India Assurance Co Ltd . That was a case of an assessee which carried on non life insurance business. In New India Assurance Co. Ltd. the Division Bench dealt inter alia with the provisions of section 19(7) of the Income Tax Act, 1922. The questions referred to this Court included whether the assessee was entitled to claim an exemption from tax under section 15B and15C (4) and in respect of interest on a government loan under a notification issued under section 60. Section 10(7) of the Income Tax Act, 1922 provided that notwithstanding anything to the contrary contained in section 8,9,10,12 or 18, the profits and gains of any business of insurance and the tax payable thereon shall be computed in accordance with the rules contained in the Schedule to the Act. The Division Bench held that upon the language of sub-section (7) of section 10 read along with rule 6 it was impossible to hold that the provisions relating to exemptions stood excluded from operation. In that context the Division Bench held as foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial mode of computing the profits and gains of insurance business. For the purpose of income-tax, the figures in the accounts of the assessee drawn up in accordance with the provisions of the First Schedule to the Income-tax Act and satisfying the requirements of the Insurance Act are binding on the Assessing Officer under the Income-tax Act and he has no general power to correct the errors in the accounts of an insurance business and undo the entries made therein . ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench The question whether an assessee who carries on general insurance business would be entitled to avail of an exemption under section 10 did not arise. The issue as to whether the assessee which carries on the business of general insurance would be entitled to the benefit of an exemption under clauses (15), (23G) and (33) of section 10 is directly governed by the decision rendered by the Division Bench in Life Insurance Corporation vs. Commissioner of Income-tax (Supra) following the earlier decision in Commissioner of Income-tax vs. New India Assurance Co. Ltd(supra). The Assessing Officer could not have ignored the binding precedent conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cedent, hence respectfully following Jurisdictional High Court as well as coordinate bench of this Tribunal in the case of ICICI Prudential Insurance Co. Ltd. (supra), we dismiss this issue of Revenue s appeal. 5. As regards to disallowance of expenses relatable to exempt income under section 14A of the Act, Tribunal following the assessee s own case in ITAs No. 4110/Mum/2014 4130/Mum/2014 vide order dated 12.09.2016, wherein Tribunal has considered the issue as under: - In regard to ground no.1 of assessee s appeal, the ld. counsel for the assessee argued that this issue is squarely covered in favour of the assessee by the decision of the co-ordinate bench of this tribunal ITAT, Mumbai in the case of ICICI Prudential Insurance Co. Ltd. Vs. ACIT [2012] 28 Taxmann.com 257(Mum), dated 14/09/2012, has decided the issue by following the Pune Bench decision in the case of Bajaj Allianz General Insurance Co. Ltd. Vs. Addl. CIT in ITA No. 1447/PN/2007 for AY 2003-04 dated 31/08/2009 wherein it has been held that in view of non obstante clause of Section 44 of the Act read with Rule 5 of Schedule 1 of the Act, provisions of Section 14A of the Act, as no application to the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Tribunal , Delhi Bench verdict in the case of Oriental Insurance Co. Ltd. (ITA Nos. 5462 5463/Del /2003) asst. y₹ 2000-01 and 2001-02 order dt. 27th Feb. 2009 [reported as Oriental Insurance Co. Ltd. v. Asst t . CIT [2010] 130 TTJ (Delhi)388 : [2010] 38 DTR (Delhi ) 225--Ed. ] . Therefore considering the vehement reliance of learned Authorized Representative it is worth to mention at the outset itself that the issue now stood resolved by this latest decision of Delhi, Tribunal in the case of Oriental Insurance Co. Ltd. (supra), the relevant portion reproduced below: 17. We have heard rival submissions of the parties and have gone through the material available on record. Identical issue arose in assessee's own case for asst. yr. 1985-86. The Tribunal accepted the plea of the assessee and in fact the issue went up to ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench the Hon'ble Delhi High Court in asst . y₹ 1986-87 to 1988-89, which is reported as CIT v. Oriental Insurance Co. Ltd. [2003] 179 CTR (Delhi ) 85 : [2002] 125 Taxman 1094 (Delhi ), decided the issue in favour of the assessee by holding that s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se bifurcation called for while computing the income under s. 44 of the Act in the case of an insurance company. The income of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished in the Controller of Insurance. The actual computation of profits and gains of insurance business will have to be computed in accordance with r. 5 of the First Schedule. In the light of these special provisions coupled with non obstante clause the AO is not permitted to t ravel beyond these provisions. 24. Sec. 14A contemplates an exception for deductions as allowable under the Act are those contained under ss. 28 to 43B of the Act. Sec. 44 creates special application of these provisions in the cases of insurance companies. We therefore, agree with the assessee and delete the act as according to us, it is not permissible to the AO to travel beyond s. 44 and First Schedule of the IT Act . 18. I t may not be out of place to mention that the respected Co-ordinate Bench has duly taken the note of an earlier decision of that very Bench decided in the case of that very assessee vide order dt . 29th Sept. 2004 bearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished to the ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench Controller of Insurance under the Insurance Act, 1938. The said balance of profits is subject only to adjustments there under. The adjustments do not refer to disallowance under s. 14A of the Act. (b) Profits and gains of business as refer red to in (a) above have only to be computed in accordance with r. 5 of the First Schedule. 22. Sec. 44 creates a specific except ion to the applicability of ss. 28 to 43B. Therefore, the purpose, object and purview of s. 14A has no applicability to the profits and gains of an insurance business. 21. The learned Departmental Representative strongly justified the act ion of the AO and that of the CIT(A) in the light of the clear provisions of s. 14A of the Act . Since the view has already been expressed by respected Co-ordinate Bench therefore, we have no reason to take any other view except to follow the same. With the result we hereby accept the argument of learned Authorized Representative to the extent that in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reserve at zero, surplus has been made less than the real actuarial valuation? 8. At the outset Ld. Counsel for the assessee stated this issue is squarely covered in favour of the assessee by the following the assessee s own case in ITAs No. 4110/Mum/2014 4130/Mum/2014 vide order dated 12.09.2016, wherein Tribunal held as under: - 9. At the outset Ld. Counsel for the assessee stated that the similar issue was raised before Hon‟ble Jurisdictional High Court in the case of CIT Vs. ICICI Prudential Insurance Co. Ltd. in ITA No. 711 688/2014 dated 20/07/2015 and Hon‟ble High Court has adjudicated the following question no. 6: 6. Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in failing to appreciate that negative reserve has an impact of reducing the taxable surplus‟ as per Form-I and therefore corresponding adjustment for negative reserve need to be made to arrive at taxable surplus? Ld. Counsel stated that Hon ble High Court has answered this question in its judgment vide para 4 as under: 4. So far as Question No. 6 is concerned, the grievance of the revenue is that the Tribunal aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law, the CIT(A) erred in allowing assessee benefit of carry forward of losses from pension business as per sec. 10(23AAB) of the Income tax Act, 1961 without appreciating the fact that sec. 10(23AAB) has been placed under exemption chapter and hence any income or loss u/s 10(23AAB) has to be excluded from the computation of total income thus not allowing set off of the losses exempt u/s 10(23AAB)?. 11. At the outset, the learned Counsel for the assessee argued that this issue is squarely covered in favour of the assessee by the following the assessee s own case in ITAs No. 4110/Mum/2014 4130/Mum/2014 vide order dated 12.09.2016, wherein Tribunal reads as under: - At the outset, the ld. counsel for the assessee stated that this issue is squarely covered in favour of the assessee by the order of the co-ordinate bench of this Tribunal ITAT Mumbai in the case of ICICI Prudential Insurance Co. Ltd Vs. ACIT (2012) 28 taxmann.com 257 (Mum.), wherein the tribunal followed the order in the case of General Insurance Corporation of India vs. Addl. CIT in ITA No.3554/Mum/2011 dated 15/02/2012. The ld. counsel for the assessee also stated that the decision of the tribunal was affirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ha Fund would continue to be governed by the provisions of section 44 of the Income-tax Act 1961 irrespective of the fact that the income from such fund are exempted, or not. Therefore, while determining the surplus from the insurance business, the actuary was justified in taking into consideration the loss incurred under Jeevan Suraksha Fund. 18. The object of inserting section 10(23AAB) as per the Board Circular No. 762, dated 18/02/1998 was to enable the assessee to offer attractive terms to the contributors. Thus, the object of inserting section 10(23AAB) was not with a view to treat the pension fund like jeevan Suraksha Fund outside the purview of insurance business but to promote insurance business by exempting the income from such fund. Therefore, in the facts of the present case, the decision of the Income-tax Appellate Tribunal in holding that even after insertion of section 10(23AAB), the loss incurred from the insurance business under section 44 of the Income-tax Act, 1961 cannot be faulted. Accordingly, questions(c) and (d) are answered in the affirmative, that is, in favour of the assessee and against the revenue. In the case of General Insurance Corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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