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2015 (2) TMI 1323 - AT - Income TaxProfit on sale of Investments - business income OR capital gains - assessee is an insurance company- HELD THAT:- The computation of taxable profit of an insurance company is governed by specific provision as given in section 44, read First schedule to the Income-Tax Act. Under the said scheme, only such adjustment can be made to the profits as disclosed in the annual accounts drawn under the Insurance Act, 1938, which are specifically provided under Rule 5. As clarified by Finance Act that the amendment will be effective from A.Y. 2011-12 onwards. Thus, it is amply clear from the legislative intent that, prior to 01.04.2011, adjustment of such a gain on realization of investment cannot be added. This aspect of the matter have been dealt extensively and upheld by the Co-ordinate Benches of the Tribunal which have been referred to the learned counsel. Accordingly we hold that profit on sale of investment cannot be taxed. Thus, ground no. 2 as raised by the assessee is allowed. Disallowance u/s 14A on estimated basis - HELD THAT:- On the perusal of various decisions of the Tribunal including that of the assessee, we find that it has been consistently held that, provision of section 14A is not applicable in the cases of Insurance company which are governed by section 44, because it is non obstante provision wherein the income is to be computed as per P&L account prepared under the Insurance Act 1938. Section 14A contemplates exception for deduction allowable under the act, whereas section 44 creates special application of provision of computation of profit as per the Insurance Act. Thus, no disallowance u/s 14A can be made and accordingly, ground no. 3 is allowed in favour of the assessee. Disallowance of amortization of premium - allowable revenue expenses - HELD THAT:- According to the terms of issue of the securities, the assessee was to get only the face value at the time of redemption or maturity. IRDA regulation prescribes, the accounting principle for preparation of financial statement, whereby the assessee is required to prepare the financial statements in the manner provided in the said regulation. The said regulation read with relevant rules given in the schedules therein, provides that debts securities including, Government securities shall be considered as “held to maturity” and shall be measured at historical cost subject to amortization. This IRDA regulation are binding on the insurance companies. we hold that such an amortization claimed by the assessee as revenue expenditure is allowable . As relying on TATA AIG GENERAL INSURANCE CO. LTD. VERSUS ITO [2010 (10) TMI 764 - ITAT, MUMBAI] we hold that such an amortization claimed by the assessee as revenue expenditure is allowable. Applicability of MAT u/s 115JB to the General Insurance Company - HELD THAT:- Since the assessee’s P&L account is prepared in accordance with Insurance Act 1938, as specifically provided in Section 44 read with First schedule, therefore, the provision of section 115JB will not apply in case of assessee. This has been held in the case of General Insurance Corporation Cited Cases GENERAL INSURANCE CORPORATION OF INDIA VERSUS ADDL. CIT RANGE (13) [2012 (2) TMI 522 - ITAT MUMBAI] Applicability of section 69B - HELD THAT:- The assessee has sold the shares and buyers have failed to take the delivery, then in such a case how the provision of 69B gets attracted because here it is not a case that the investment exceeds the amount recorded in the books of account. On these facts alone, the addition cannot be sustained. Accordingly, the same is deleted. Addition on account of taxes paid on foreign dividend - HELD THAT:- We find merit in the reasoning given by the AO as well as Ld. CIT(A) because taxed paid do not qualify as expenditure for the purpose of business and entire gross dividend should have accounted for in the P&L account. Thus Ground no. 5 is treated as dismissed.
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