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TMI Blog2011 (12) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... sued a notice under Section 142 (1) seeking details of income exempted and of expenditure under Section 14A. The Petitioner, during the course of the assessment proceedings, made a submission before the Assessing Officer in a letter dated 25 October 2007 inter alia in regard to the claim of exemption under Section 10 (38). Reliance was placed on a communication dated 21 February 2006 of the Central Board of Direct Taxes to the Chairman of the Insurance Regulatory & Development Authority (IRDA) to the effect that exemptions available to any other assessee under any clause of Section 10 are also available to a person carrying on nonlife insurance business subject to fulfillment of the conditions under the particular clause under which an exemption is sought. By a further communication dated 22 November 2007 the assesse once again relied upon the aforesaid circular. 4. In the computation of income for the assessment year, the assessee had claimed inter alia an exemption under Section 10 (15) of the interest on tax free bonds; under Section 10 (23G) on interest on investment with infrastructure companies and under Section 10 (33) on dividend income. In the notes forming part of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 10 and specifically disallowed the claim for an exemption under Section 10 (38). The exemptions under the other three clauses were allowed; (ii) The Assessing Officer had no new material and certainly no tangible material on the basis of which the assessment could be reopened even within the period of four years. As a matter of fact, the reasons which have been disclosed to the assessee state that in the assessment under Section 143 (3) exemptions have been wrongly allowed and this is reiterated in the order disposing of the objections which states that the Assessing Officer failed to correctly apply the statutory provisions. There is in the present case, it is urged, only a change of opinion and the Assessing Officer has purported to review his earlier decision, which is not permissible in view of the law laid down by the Supreme Court. 7. On the other hand, learned Counsel appearing on behalf of the Revenue urged that : (i) No case has been made out for exercise of the writ jurisdiction under Article 226 of the Constitution since it would be open to the assesse following the reopening of the assessment to urge all appropriate contentions before the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to a company which carries on general insurance business except the provisions contained in Rule 5 of the First Schedule. On this basis, it has been contended that the claims have been wrongly " allowed". We find merit in the contention of the Petitioner that the reasons which have been set out by the Assessing Officer constitute a mere change of opinion and there was no tangible material on the basis of which the assessment could be reopened. Our reasons for this are now set out. 9. Under Section 147 the Assessing Officer is empowered to reopen an assessment where he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Under clause (3) of Explanation 2 the Legislature has set out cases where income chargeable to tax is deemed to have escaped assessment. Such cases include a case where an assessment is made but (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under the Act; or (iv) excessive loss or depreciation allowance or any other allowance under the Act has been computed. The power of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer." 10. In the present case, it is apparent that the Assessing Officer had applied his mind to the claim of the assessee to exemption under clauses (15), (23G), (33) and (38) of Section 10. The exemption under clause (38) was specifically denied. The reasons for reopening the assessment merely postulate that the exemption under Section 10 was wrongly allowed. This is clearly a situation where there is a change in opinion by the Assessing Officer. There is no tangible material for the Assessing Officer to reopen the assessment. 11. Section 44 of the Income Tax Act, 1961 stipulates as follows : "44. Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head "Interest on securities", "Income from house property", "Capital gains" or "Income from other sources", or in section 199 or in sections 28 to [43B], the profits and gains of any busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includible in the total income were rightly included in the taxable surplus. The Division Bench of this Court held as follows : The question which essentially " falls to be determined in this reference is whether, in view of the provisions in section 44 or rule 2 of the First schedule, the Life Insurance Corporation will not be entitled to claim the deductions which are otherwise admissible in the case of an assessee, computation of whose income is governed by the other provisions of the Act. The argument of Mr. Kolah for the Life Insurance Corporation is that unless there are express provisions which disable the Corporation from claiming the deductions referred to above, the Corporation cannot be deprived of the benefit of the provisions referred to in the questions Nos. 1 to 6. Section 44, which deals with computation of profits and gains of business of insurance, begins with a non-obstante clause, the effect of which is that the provisions of the Act relating to the computation of income chargeable under the head "Interest on securities", Income from house property " ", "Capital gains" or "Income from other sources" do not apply in the case of computation of income from insura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued under Section 60. Section 10 (7) of the Income Tax Act, 1922 provided that notwithstanding anything to the contrary contained in Section 8, 9, 10, 12 or 18, the profits and gains of any business of insurance and the tax payable thereon shall be computed in accordance with the rules contained in the Schedule to the Act. The Division Bench held that upon the language of sub-section (7) of section 10 read along with rule 6 it was impossible to hold that the provisions relating to exemptions stood excluded from operation. In that context the Division Bench held as follows : It is only after the profits and " gains of a business are computed that any question of granting exemptions arises and if the latter stage were intended to be excluded by the law we should have thought that a clearer provision than is made in sub-section (7) of section 10 and in rule 6 would have been made." In the subsequent judgment of the Division Bench in Life Insurance Corporation (Supra) the Division Bench noted that there was a difference in the language of section 10(7) of the Act of 1922 when compared with Section 44 of the Act of 1961 since Section 44 does not refer to the computation of tax but me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of general insurance would be entitled to the benefit of an exemption under clauses (15), (23G) and (33) of Section 10 is directly governed by the decision rendered by the Division Bench in Life Insurance Corporation vs. Commissioner of Income-tax (supra) following the earlier decision in Commissioner of Income-tax vs. New India Assurance Co. Ltd. (supra). The Assessing Officer could not have ignored the binding precedent contained in the two Division Bench decisions of this Court. Moreover, the Assessing Officer in allowing the benefit of the exemption in the order of assessment under Section 143(3) specifically relied upon the view taken by the CBDT in its communication dated 21 February 2006 to the Chairman of IRDA. The communication clarifies that the exemption available to any other assesse under any clauses of Section 10 is also available to a person carrying on nonlife insurance business subject to the fulfilment of the conditions, if any, under a particular clause of Section 10 under which exemption is sought. It needs to be emphasised that it is not the case of the Assessing Officer that the assessee had failed to fulfil the condition which attached to the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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