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2023 (10) TMI 616 - AT - Income TaxInsurance Business - Addition on account of Surplus disclosed in Form 1 of Actuarial Report - Netting off of 'surplus' available both in Policy Holders Account and Share Holder's account - Assessee is engaged in the business of life insurance and has obtained license of life insurance business from insurance regulatory and development authority - HELD THAT:- Assessee is maintaining its regular books of accounts in accordance with the directions issued by IRDA which mandate preparation of policy holders account and shareholders account separately and since assessee is into life insurance business, the computation of profit and loss account of insurance / business for the purpose of tax has to be made in accordance with Section 44 r.w.r. 2 of first Rule of the Act. According to the Regulations, Profit and Loss Account (P & L A/C) of Insurance Company is divided into a Technical Account (Policyholder's Account) also called as Revenue Account and Non Technical Account (Shareholder's Account) also called as P & L Account. Technical Account deals with all the transactions relating to the income by way of premium and expenditures and actuarial provisions shown segment wise. All the transactions relating to Shareholder's like funding the deficit, income earned on investment of share capital and reserves are dealt in non technical Shareholder's account. IRDA (Actuarial Report and Abstract) Regulations 2000 prescribes a method of preparation of actuarial report and abstract. As per Regulation 4(2)(d) item no.iv, Form I was prescribed for purpose of valuation result and to indicate surplus of deficit in the life insurance business. This precise question was answered by the Hon’ble Jurisdictional High Court in the case of CIT vs. ICICI Prudential Insurance Ltd. [2015 (7) TMI 972 - BOMBAY HIGH COURT] wherein held that the order of the Tribunal holding that income from shareholders account is also to be taxed as part of life insurance business and cannot be found fault with the view of the clear mandate of Section 44 of the Act. The order of the ld. CIT(A) confirmed - Decided in favor of assessee. Disallowance of profits from pension fund - pension fund scheme was managed by FGILI in A.Y. 2010-11 which was approved by IRDA - assessee had surplus/deficit of Life Insurance business during the relevant year and same has been taken into consideration while computing actuarial appointed by the assessee and AO has disallowed the same stating that he is adding the same in order to keep the issue alive - HELD THAT:- As per the provision of Section 10(23AAB) any income arise from pension scheme is exempt under the Act. Thus, the intention was to bring incentive provided in insurance sector so that terms will be added to the contributors in the insurance industry. In view of the Section 10(23AAB) r.w. First Schedule of Rule 2, assessee had taken into consideration the actuarial valuation report wherein it has considered the total business income/loss without bifurcating into pension / non-pension business. The assessee had surplus from approved pension scheme during the relevant year and since same forms part of the Life Insurance business only, the said amount has been accounted while arriving at the actuarial surplus and that surplus need to be considered for computing profits from life insurance business. Decided against revenue.
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