TMI Blog2022 (12) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act is grossly incorrect and is hereby quashed. In any case, the issue sought to be revised by the ld. PCIT u/s.263 of the Act is also covered in favour of the assessee by the decision of the Hon ble Jurisdictional High Court on merits. Appeal of the assessee is allowed. - ITA No.1285/Mum/2022 - - - Dated:- 31-10-2022 - Shri Amit Shukla, Judicial Member And Shri M.Balaganesh, Accountant Member For the Assessee : Shri Madhur Agarwal For the Revenue : Shri A.B.Koli ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.1285/Mum/2022 for A.Y.2017-18 preferred by the order against the revision order of the ld. Principal Commissioner of Income Tax-8, Mumbai u/s.263 of the Act dated 25/03/2022 for the A.Y.2017-18. 2. The assessee has raised the following grounds of appeal:- Based on the facts and circumstances of the case. Tata AIA Life Insurance Company Limited (hereinafter referred to as TALIC' or 'the Appellant') craves leave to prefer an appeal under section 253 of the Income tax Act, 1961 (hereinafter referred to as the Act) against the order dated 25 March 2022 issued under section 263 of the Act (hereinafter referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore or at, the time of the appeal, so as to enable the Honorable Income-tax Appellate Tribunal to decide this appeal according to law. 3. We have heard rival submissions and perused the materials available on record. The assessee is a joint venture between Tata Sons and the AIA Group and carries on life insurance business in India in accordance with the regulations prescribed by the Insurance Regulatory and Development Authority of India (IRDA). It has obtained a license from the IRDA to carry on life insurance business in India on 12/02/2001 and started operations on 01/04/2001. The assessee filed its original return of income on 29/11/2017 declaring taxable income of Rs.103,85,94,540/-. The taxable income was computed as per Rule 2 of the First Schedule in accordance with the regulations contained in Part-I and Part-ll of the Fourth Schedule of the unamended Insurance Act, 1938 (which was duly in accordance with the order of this Tribunal in assessee's own case for A.Yrs. 2002-03 to AY 2008-09 and AY 2014-15). The surplus/ (deficit) in this regard is disclosed by assessee in the Form ('Old Form 1) in accordance with the Insurance Act, 1938. 3.1. The taxable income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as under:- NOTICE FOR THE HEARING M/s/Mr/Ms Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT, 1961-Assessment Year 2017-18. In this regard, a hearing in the matter is fixed on 09/03/2022 at 11:30 AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in In this case, the ITR for AY 2017-18 was filed by the assessee on 29.11.2017 declaring total income at Rs. 103,85,94,540/-. Subsequently the assessment was completed u/s 143(3) on 26.12.2019 at Rs.599,51,63,804/-. 3. Further, on perusal of the case records, it is noticed that in accordance with the provisions contained in section 115B read with Appendix 1 of First Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enumerated in foregoing paragraphs as above, provisions of Section 263 of the Income Tax Act, 1961 are clearly attracted to the facts of the case. In view of the above, it is proposed to suitably revise the assessment order passed by the AO u/s. 263 of the IT Act, 1961. Accordingly you are hereby requested to make your submission if any by 09.03.2022 11.30 pm and to explain why the said order u/s 143(3) dated 26.12.2019 should not be revised u/s. 263 of the IT Act, 1961. If nothing is heard from you by the said date, the necessary order will be passed exparte on the basis of material available on record without giving further opportunity to you, which may please be noted. Kindly note that the personal appearance is not necessary and you may file your reply on email-mumbai.pcit8@incometax.gov.in. Rahul Karna PCIT, Mumbai-8 3.5. The assessee filed detailed submissions before the ld. PCIT objecting to the proposal of invoking revision jurisdiction u/s.263 of the Act both on merits as well as on invalid assumption of jurisdiction. The assessee in response to the show-cause notice made the following submissions:- (i)Assessee is a life insurance company and carries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in sections 28 to 438, the profits and gains of any business of insurance, Including any such business carried on by a mutual insurance company or by a co-operative society. shall be computed in accordance with the rules contained in the First Schedule. (v) The plain reading of section 44 states as under: The provision applies to the profits and gains of any business of insurance. Such profits and gains are to be computed in accordance with the First Schedule. This provision overrides all other provisions relating to the computation of income under the various heads of income, and also section 199. Hence, it is clear that once any income is found to be the profits and gains of any business of insurance, the First Schedule applies to that income to the exclusion of any other computation provision, and the computation made under the First Schedule is a complete computation of those profits. (vi). Normally, the computation of the profits of any business would be made under the normal computational provisions contained in sections 28 to 438 of the Act. However, the Act provides for a specific exception in the case of the business of insurance whereby not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er are reproduced as under 55. We have heard the rival contentions. As briefly discussed while deciding the issue of taxing surplus, assessee is in life Insurance business and it is not permitted to do any other business. All activities carried out by assessee are for furtherance of Life Insurance business. Maintaining adequate capital is necessary to comply with IRDA (Assets, Liabilities and Solvency margin of insurers) Regulations, 2000. Income earned on capital infused in business is integral part of Life Insurance business. The LD. CIT(A) gives a finding that assessee is exclusively in Life Insurance business. However, since he gave primacy to Form proforma he concluded that other incomes are not of Life Insurance business. We have already considered and decided that assessee was mandated to maintain separate accounts by IRDA Regulations. Just because separate accounts are maintained the incomes in Shareholder's account does not become separate from Life Insurance business. As per Insurance Act 1938 all incomes are part of one business only and these incomes are considered as part of same business. Therefore, the incomes in Shareholder's account are to be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/Mum/2010) HDFC Standard Life Insurance Company Ltd. (ITA/2203/Mum/2012) (xii). Given the above, it is submitted that the entire income of assessee is from life insurance business and would be chargeable to tax at 12.5% in accordance with Section 115B of the Act. We request your goodself to kindly take the above on record and not undertake revision of the Order under section 263 of the Act. 3.6. From the facts narrated above and the submissions made by the assessee, we find that assessee s case is that the shareholders account cannot be treated as a separate activity. The main plea of the assessee is that only for presentation purposes, the assessee prepares policyholders account and shareholders account and that shareholders account cannot be treated as other regular business carried out by the assessee so as to make it liable for taxation @30%. Now the short question that arises for our consideration is as to whether the income from shareholders account is to be treated as part of life insurance business and get taxed @12.5% prescribed u/s.115B of the Act or not. This issue is no longer res integra in view of the decision of the Hon ble Jurisdictional High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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