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2009 (10) TMI 643 - AT - Income TaxComputation of taxable profits of an insurance company - exemption claimed by the assessee on account of “profit on sale of investment” - scope of prospective amendment - whether or not the CIT(A) was justified in holding that the profit on sale of investments, is taxable in the hands of the assessee? - HELD THAT:- The computation of taxable profits of an insurance company is governed by a specific legal provision, i.e., section 44 read with First Schedule to the Income-tax Act. Under the said scheme of things envisaged by these provisions, only such adjustments can be made to the profits disclosed by the annual accounts drawn up under the Insurance Act, 1938, as are specifically provides for under clause 5 of the First Schedule. There was no dispute that the independent code is enacted by the introduction of section 44 which independently prescribed the mode and manner for assessment of Insurance Business. This section since contains non obstante clause, therefore, notwithstanding anything contained in any of the sections of the Act, the profits and gains of Insurance Business including any such business carried on by a Mutual Insurance Company or by an Co-operative Society shall be computed in accordance with the rules contained in First Schedule. Accordingly, there could not be any other income taxable other hand Insurance Business because section 44 overrules all other provisions of the Income-tax Act. We have noted that the Legislature has now brought in a prospective amendment, with effect from assessment year 2011-12, in rule 5(b)(i ) of First Schedule to the Income-tax Act. By the virtue of this amendment, profits on sale of investments, in the case of insurance companies will be taxable with effect from 2011-12. Since the amendment so made in the statute, which cannot be inferred to be a superfluous amendment, is with effect from 2011-12, the conclusion arrived at by the Pune Bench stands further fortified. This further fortifies the stand taken by the co-ordinate Bench in the case of Bajaj Allianz General Insurance Co. Ltd [2009 (8) TMI 810 - ITAT PUNE-A],. In view of discussions (supra), we uphold the grievance of the assessee. The profits on sale of investment in the years before us, which are year prior to the years with effect from which prospective amendment is made, are not taxable in the hands of the assessee. The taxability of income of insurance companies under the head ‘Income from business and profession’ as governed by provisions of section 44, read with First Schedule to the Income-tax Act, does not extend to taxability of profits on sale of investments - So far as the assessment years before us are concerned. Therefore, we direct the AO to exclude profits on sale of investments from income of the assessee liable to be taxed. The assessee gets the relief accordingly.
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