2019 (8) TMI 1796 - AT - Income Tax

Allowance of the claim of the assessee by CIT(A) in connection with the income from shareholder s account - HELD THAT - Since this issue has been adjudicated in favour of the assessee in which the income arising in shareholder s accounts under the head life insurance business has been treated as income from business. The facts are not distinguishable at this stage. No law contrary to the law relied by the Ld. Representative of the assessee has been produced before us. Taking into account all the facts and circumstances we are of the view that the CIT(A) has decided the matter of controversy judiciously. Addition of negative reserves - HELD THAT - As noticed that the CIT(A) has decided the matter of controversy on the basis of decision of Hon ble Supreme Court in case of Life Insurance Corporation of India 1963 (12) TMI 5 - SUPREME COURT The facts are not distinguishable at this stage. The treatment of incremental negative reserve is quite same as held in the previous year 2016 (12) TMI 1741 - ITAT MUMBAI There is no reason to deviate from the finding of the CIT(A). No law contrary to the law relied by the Ld. Representative of the assessee has been produced before us. Taking into account all the facts and circumstances we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Allowance of claim of dividend income u/s 10(34) - Addition raised on account of exemption of the claim u/s 10(23AAB) on account of income from pension scheme - HELD THAT - We noticed that the CIT(A) has decided the issues on the basis of decision of Bombay High Court in case of Life Insurance Corporation of India 1977 (11) TMI 25 - BOMBAY HIGH COURT The facts are not distinguishable at this stage. No law contrary to the law relied by the Ld. Representative of the assessee has been produced before us. Taking into account all the facts and circumstances we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage.

Summary

Issues Involved:
1. Taxability of transfer from Shareholder's account to Policy Account.
2. Consolidation of surplus in Policy Holders Account and Shareholder's account.
3. Treatment of negative reserve.
4. Exemption of dividend income under section 10(34) of the I.T. Act.
5. Consideration of dividend income by the actuary.
6. Exemption of income from pension fund under section 10(23AAB) of the I.T. Act.
7. Applicability of non-obstante clause in section 44 to section 10(23AAB).

Issue-wise Detailed Analysis:

Issue Nos. 1 & 2:
The revenue challenged the CIT(A)'s decision allowing the assessee's claim that income from the shareholder’s account should be treated as part of the insurance business income. The CIT(A) concluded that the transfer from Shareholder's Account (SHA) to Policyholder's Account and the profit in the P&L Account (SHA) should be assessed under the head 'life insurance business' and not 'income from other sources'. This decision was based on previous ITAT rulings for different assessment years and legal provisions indicating that the two accounts are inseparable and must be consolidated to determine the true profit of the insurance business. The tribunal upheld this view, finding no reason to deviate from the CIT(A)'s decision.

Issue No. 3:
The revenue contested the deletion of the addition related to the negative reserve. The CIT(A) referred to the Supreme Court's ruling in Life Insurance Corporation of India v/s CIT, which held that the actuarial valuation, including the treatment of negative reserves, should not be disturbed by the assessing officer. The CIT(A) also noted that similar issues had been decided in favor of the assessee in previous years, and thus, the addition of Rs. 11,76,06,147/- on account of the negative reserve was deleted. The tribunal agreed with the CIT(A), finding no reason to interfere.

Issue Nos. 4 & 5:
The revenue disputed the CIT(A)'s decision to allow the assessee's claim for exemption of dividend income under section 10(34) of the I.T. Act. The CIT(A) held that section 10(34) is independent of section 44 and that the exemption is available while computing taxable income, supported by various judicial precedents, including the Bombay High Court's ruling in Life Insurance Corporation of India vs. CIT. The tribunal upheld the CIT(A)'s decision, noting that the issue had already been adjudicated in favor of the assessee in previous years.

Issue Nos. 6 & 7:
The revenue challenged the deletion of the addition related to the exemption of income from the pension fund under section 10(23AAB). The CIT(A) relied on the Bombay High Court's ruling in Life Insurance Corporation of India vs. CIT and previous ITAT decisions, which held that the exemption under section 10(23AAB) is applicable. The tribunal found that the CIT(A) had correctly decided the issue based on these precedents and upheld the deletion of the addition of Rs. 1,32,59,95,816/-.

Conclusion:
The tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on all issues. The CIT(A)'s findings were based on consistent judicial precedents and the specific facts of the case, which were not distinguishable from those in previous years. The tribunal found no reason to interfere with the CIT(A)'s judicious and correct decisions on the matters of controversy.