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2013 (6) TMI 377 - AT - Income TaxEntitlement to the exemption u/s 10(34) - LIC engaged in the business of Life Insurance - Held that:- Rule 5 to Schedule I was for General Insurance, that assessee was engaged in the business of Life Insurance, that rule 2 of Schedule was applicable to the business of the assessee, that the assessee was entitled to exemption u/s. 10(34). See General Insurance Corporation of India (2011 (12) TMI 70 - BOMBAY HIGH COURT) & ICICI Prudential Insurance Co. Ltd. [2012 (11) TMI 13 - ITAT MUMBAI] - In favour of assessee. Addition of Negative Reserve shown in Form - I - Held that:- As decided in case of ICICI Prudentail Insurance Co. [2012 (11) TMI 13 - ITAT MUMBAI] on examining the method of accounting and the mandate given by regulations to appoint Actuarial on the concept of mathematical reserves the mathematical reserve is a part of Actuarial valuation and the surplus as discussed in Form-I under Regualtion 4 takes in to consideration this mathematical reserve also. Therefore the order of the order of the CIT(A) is approved. Moreover AO has no power to modify the amount after actuarial valuation was done, which was the basis for assessment under Rule 2 of 1st Schedule r.w.s.44 of the I.T. Act. The principle laid down in LIC vs.CIT [1963 (12) TMI 5 - SUPREME Court] about the power of the Assessing Officer also restricted the scope and adjustment by the AO. In view of this uphold the order of the CIT(A) and dismiss the Revenue's ground. In favour of assessee. Addition of income from shareholder's funds credited directly to the shareholder's Account - Held that:- There is no doubt that income had accrued to the assessee and same was transferred to the share holders' account. Once income is earned by the assessee and later on it is applied for some specific purpose it cannot be treated as charge on profit. It is application of income. Preparation of books of accounts as per the Insurance account is different from determining the tax liability under income tax. Income transferred to policy holders' a/c. was not application of income-it was charge on income and therefore AO had rightly excluded it from taxation. Income earned by the assessee-corporation on dividend and interest, in a strict sense, cannot be held to be earned from the insurance business. Initial capital contribution was made by the Government of India in 1955 for carrying out insurance business, but income earned by the assessee as dividend and interest in the year under consideration cannot be termed as income of the Sovereign - Against assessee.
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