TMI Blog2009 (10) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... iness. 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] ,. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) was justified in holding that the profit on sale of investments, is taxable in the hands of the assessee. The assessment years involved are 2002-03, 2003-04 and 2004-05 and the impugned order dated 17-3- 2005 is common order passed by the CIT(A) for these three years. 3. Learned representatives agree that the issue is covered, in favour of the assessee, by Pune Bench decision dated 31-8-2009 in the case of Bajaj Allianz General Insurance Co. Ltd. v. Addl. CIT [IT Appeal 1447 (Pune) of 2007 and CO No.57 (Pune) of 2007]. Learned Departmental Representative/however, vehemently relies upon the orders of the authorities below and submits that, in the absence of a specific provision, exemptions cannot be inferred. Learned Departmental Representative has also filed a written submission which is reproduced below for ready reference : During the course of appellate proceedings before your Honours the learned Counsel of the appellant produced an appellate order in the case of M/s. Bajaj Allianz General Insurance Co. Ltd. ITA No. 1447/PN/07 for assessment year 2003-04. The issue involved in this case is similar to the issue involved in the present case. Before departing wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive Society shall be computed in accordance with the rules contained in First Schedule. Accordingly, there could not be any other income taxable other than Insurance Business because section 44 overrules all other provisions of the Income-tax Act. 3. The provisions of rule 5 of First Schedule of the Income-tax Act, 1961 clearly specified that profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profit disclosed by annual account copies of which are required under the Insurance Act, 1938 (4 of 1938) to be furnished to the Controller of Insurance. The Rules therein further provides for the adjustment specifically given in the rule 5. Nowhere in the rule 5 of the First Schedule it is mentioned that the profit on sale of investment is to be reduced from the balance of profit disclosed by annual accounts. It is relevant to note that clause ( b ) which was earlier referring to adjustment in respect of right of reserve or any appreciation or any gain on realisation have been omitted by the Finance Act, 1988 with effect from 1-4-1989. It is also equally clear after going through the amended accounting principles of financial s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all within the ambit of the rules of the First Schedule and the Income-tax Officer has no power to do anything not contained in rule 5 of the First Schedule in computing the income from the business of insurance other than life insurance. The appellant s contention that at least the appreciation of assets in Burma and Ceylon should be excluded from the computation of profits was not accepted, inter alia, because once certain amounts had been shown as profits in the annual accounts furnished to the Controller of Insurance it was not open to the ITO to go behind those figures. A similar view was taken in CIT v. United India Fire General Insurance Co. Ltd. 140 ITR 994 (Mad.). The Hon ble Supreme Court in General Insurance Corpn. of India v. CIT 240 ITR 139(SC) (relevant paras 8 12) has also held that for the purpose of income-tax, the figures in the accounts of the assessee drawn up in accordance with the provisions of the First Schedule to the Income-tax Act and satisfying the requirements of the Insurance Act are binding on the Assessing Officer under the Income-tax Act and he has no general power to correct the errors in the accounts of an insurance business and undo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Court can merely interpret the section it cannot re-write, recast or redesign the section. In interpreting the provision the exercise undertaken by the Court is to make explicit the intention of the Legislature which enacted the legislation. It is not for the Court to reframe the legislation for the very good reason that the powers to legislate have not been conferred on the Court. In Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests Palghat 1990 (Supp.) SCC 785, the Court rightly observed that in seeking legislative intention Judges not only listen to the voice of the Legislature but also listen attentively to what the Legislature does not say. It has also been held in House of Lords in Pinner v. Evertt [1969] 3 All ER 257 (HL) aptly observed that we have been warned again and again that it is wrong and dangerous to proceed by substituting some other words for the words of the statute. Therefore, the legal position seems to be clear and consistent that it is the bounden duty and obligation of the Court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute which the Legislature in its wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held that no words can be read into the Constitution which do not exist. It is, ordinarily, not the function of the Court to read words into a statute. The Court must proceed on the assumption that the Legislature did not make a mistake and it intended to say what it said. 12. It has been held in M.H. Daryani v. CIT 202 ITR 731 , 735 (Bom.) that the principle of beneficial interpretation has no application in a case where the words of statute are plain, precise and unambiguous. In such a case, the well-settled principle of interpretation is that the statutory provision should be construed according to the plain natural meaning of its language. When the language of a particular provision is clear and, according to the plain natural meaning thereof, the assessee is not entitled to any rebate, relief or allowance, it is not for the Court to strain and stretch the language of the statutory provision to enable the assessee to get such relief. Such an approach will be against all accepted principles of interpretation. With regard to section 80HHC of the Act, the Hon ble Supreme Court in IPCA Laboratory Ltd. 266 ITR 521 has stated that even though a liberal interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific provisions for making an adjustment on account of profits on sale of investment after removal of clause 5( b ) with effect from 1-4-1989 and till clause 5( b )( ii ) was inserted with effect from 1-4-2011. Accordingly, there is no occasion to make an adjustment of profit on sale of investments in the profit disclosed by the annual accounts drawn up as per the Insurance Act, 1938. It is important to bear in mind the legal position that the taxability of income in the case of the insurance companies is not on commercial profits but on such profits as are computed in accordance with the provisions of the Insurance Act, subject to, of course, permissible adjustments under the Income-tax Act. It is, therefore, futile to suggest, as has been suggested by the learned Departmental Representative, that the profits on sale of investments are taxable in the hands of the assessee unless there is a specific provision for exemption of such profits. The question of exemption only arises when something is taxable, but, as we have noted above, the taxability of profits in the hands of the insurance companies is confined to profits as per annual accounts of such insurance companies drawn up in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany of India 240 ITR 139 and Pandyne Insurance Company 55 ITR 716. ( c )The allegation of the Assessing Officer was that any part of the profits and gains not attributable to the Insurance Business could qualify for exemption and liable to be taxed. The contention of the assessee was that firstly, the financial statements of an Insurance Company has to be finalized in accordance with the Insurance Regulatory and Development Authority. As per the said regulation profits earned by a General Insurance Company on sale of redemption of investment has to be credited to the profit and loss account and not to be shifted to the balance sheet directly. It was wrong on the part of the Assessing Officer through a suggestion that had the assessee ever intended to claim the exemption then he could have reflected the profit on sale of investment in the balance sheet directly instead of crediting in P L account. The contention of the assessee was that such a method has not been prescribed by the designated regulatory authority. ( d )The applicability of provisions of section 43(D) and section 36(1)( viia ) have also been denied. The contention of the assessee was that these provisions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue 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. ( supra ). 9. In view of these discussions, as also following the co-ordinate Bench decision in the case of Bajaj Allianz General Insurance Company Ltd. ( 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. 10. For the reasons set out a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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