9911796707
TMI Blog2013 (12) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case, in brief, are that the assessee is a Joint venture between Bajaj Auto Limited and Allianz AG of Germany and is engaged in the General Insurance Business in India. During the course of assessment proceedings the assessee in its submission on 14-11-2008 requested Assessing Officer to allow the disallowance u/s.43B of the I.T. Act. pertaining to Environment Fund liability of Rs.69,76,873/-. In that submission, the assessee also submitted the copy of Public Liability Insurance Act. The Assessing Officer noted that the assessee himself had added back the above amount in the statement of income u/s.43B as the sum during the previous year but not paid on or before the date of furnishing the return of income. The assessee had also quoted the decision in the case of Siddheswar SSK Ltd. Vs. CIT reported in 139 Taxmann 434 (SC). However, the Assessing Officer rejected the contention of the assessee. Distinguishing the decision relied on by the assessee before him and following the decision of the Hon'ble Supreme Court in the case of Goetz (India) Ltd. Vs. CIT reported in 284 ITR 323 according to which claim of deduction by way of application cannot be entertained by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Shareholders Pvt. Ltd. has held that even if a claim is not made before the AO, it can be made before the appellate authorities and the jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Hon'ble Supreme Court. Since the assessee in the revised return has made a claim that the amount of Rs.70,31,561/- collected towards environmental relief fund does not fall under the purview of section 43B and since the Assessing Officer has not entertained the claim for not being claimed through a revised return, therefore, respectfully following the decisions cited (Supra) we hold that the assessee can make the claim before the appellate authorities and the appellate authorities can entertain such a claim. We, therefore admit this ground and restore the matter to the file of the Assessing Officer with a direction to decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. This ground by the assessee is accordingly allowed for statistical purposes." 4.1 Respectfully following the decision of the Tribunal in assessee's own case for A.Y. 2006-07 on identical issue an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des we find identical issued had come up before the Tribunal in assessee's own case for A.Y. 2006-07. We find the Tribunal vide ITA No.119/PN/2011 order dated 06-05-2013 for A.Y. 2006-07 has discussed the issue and following the order of the Tribunal for A.Y. 2003-04 has allowed the claim of the assessee regarding non taxability of profits of sale/redemption of investments by holding as under : "2.5 After hearing both the sides we find the Tribunal in assessee's own case for A.Y. 2003-04 has decided the issue in favour of the assessee by holding as under : "8. A conclusion can be drawn on the basis of the above elaborate discussion that the deletion of sub rule (b) from Rule 5 of the First Schedule was with a specific purpose. This schedule not only prescribe the method of computation of income of Insurance Business in Part (A) but also prescribe the method of computation of other Insurance Business in Part (B). Rule 5 is within Part(B) and earlier it has prescribed the method of taxation of profit on sale of investments which was later on scraped. Even by applying a reverse logic we must arrive at the same conclusion that had the impugned income was earlier taxable under one spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer made addition of Rs.18,14,03,633/- u/s.14A. 8. Before the CIT(A) it was submitted that the Pune Bench of the Tribunal following the decision of the Delhi Bench of the Tribunal in the case of DCIT Vs. Oriental General Insurance Company Ltd. reported in 92 TTJ 300 has held that section 54 of the Act creates a special provision in the case of the assessment of Insurance Companies and therefore section 14A does not apply to profits on sale/redemption of investments. It was further submitted that the Tribunal in assessee's own case for A.Yrs. 2002-03, 2003-04 and 2004-05 has granted relief to the assessee. 8.1 Based on the arguments advanced by the assessee the Ld.CIT(A) allowed the claim of the assessee by holding as under : "5.3 I have carefully considered the facts of the case and the law. The appellant has raised numerous issues relating to disallowance made u/s.14A through Grounds No.2 and 3 as can be seen from the grounds quoted in Para 2 above. However, during the course of appeal it was pointed out that the Hon'ble ITAT has held that Sec.14A will not apply in the case of assessments of the insurance companies made u/s.44 of the I.T. Act and therefore, man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of sec. 14A of I.T. Act in the present situation. 14. Reverting back to the grievance, the issue of the applicability of sec. 44 has already been settled by the Hon'ble Apex Court in the case of General Insurance Corporation of India vs. CIT 240 ITR 139 which says in clear terms that sec. 44 is a special provision governing computation of taxable income earned from business of insurance. For ready reference relevant held portion is reproduced below:- "Section 44 of the Income-tax Act, 1961, is a special provision governing computation of taxable income earned from business of insurance. It opens with a non-obstante clause and thus has an overriding effect over other provisions contained in the Act. It mandates the assessing authorities to compute the taxable income for business of insurance in accordance with the provisions of the First Schedule. A plain reading of rule 5(1) of the First Schedule. There is another approach to the same issue. Section 44 of the Income-tax Act read with the Rules contained in the First Schedule to the Act lays down an artificial mode of computing the profits and gains of insurance business. For the purpose of income-tax, the figures in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. Act. The confusion had cropped up only because of the way a quotation was made within inverted comas but in the very next lines that was not confirmed. The factual position is that while dealing with this issue the respected co ordinate Bench has stated that they had not accepted the argument of applicability of Chapter III of the Act. Rather the Respected Bench has said that there was no conflict between Chapter III and sec. 14A. It was further clarified that the provisions of sec. 14A cannot be considered defunct or redundant for the reason only that these provisions should have been inserted in Chapter III and not in Chapter IV, after all both Chapter III and Chapter IV are integral part of the same enactment. For ready reference para 108 is reproduced verbatim below:- "108. The main provision of s. 14A inserted by the Finance Act, 2001, with retrospective effect from 1st April 1962 reads as under: "14A For the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act:" On a plain reading of the above quoted pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 14A cannot be considered defunct or redundant for the reason only that these provisions should have been inserted in Chapter III and not Chapter IV. After all both Chapter III and Chapter IV are integral part of the same enactment. We also do not agree with the arguments of the assessee that it amounts to artificial enhancement of sale price by the amount of dividend. The case of Revenue is based on disallowance of expenditure (purchase price), not enhancement of sale proceeds. We also do not see proviso to s. 14A having any application. It is not the case of reopening any closed matter. It is, therefore, open to us to take note of the retrospect provisions of s. 14A." Respectfully following the verdict of the Respected Five Member Special Bench we hereby disapprove the argument of Ld. AR that the provisions of sec. 14A are applicable only in respect of income fall within the purview of Chapter III of I. T. Act. 17. Finally the question to be answered is about the applicability of sec. 14A in respect of sale of investment which is not taxed under the special circumstances of deletion of a sub rule from the statute. It is not questioned that the impugned profit was non-taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) in sustaining the action of AO in allowing only 50% of the management expenses by invoking the provisions of Sec. 14A of the Act. The addition is made by the AO on the plea that the provisions of Section 14A was inserted by Finance Act 2001 with effect from 1- 4-1962. It is stated that the investments made by the assessee are both taxable as well as tax free. An estimated disallowance of 50% out of the management expenses incurred and as claimed in the P & L A/c is treated as expenses incurred in connection with the looking after tax free investment. 19. The learned counsel for the assessee vehemently argued that the income of the assessee is to be computed u/s 44 read with Rule 5 of schedule 1 of the IT. Act Section 44 is a non-obstante clause and applies notwithstanding anything to the contrary contained within the provisions of the Income-tax Act relating to computation of income chargeable under different heads, other than the income to be computed under the head "Profit and gains of Business or profession". For computation of profits and gains of business or profession the mandate to the AO is to compute the said income in accordance with the provisions of section 28 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the income u/s 44 of the Act in the case of a insurance company. The income of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished in the Controller of Insurance, The actual computation of profits and gains of insurance business will have to be computed in accordance with Rule 5 of the First Schedule. In the light of these Special provisions coupled with not obstante clause the AO is not permitted to travel beyond these provisions. 24. Section 14A contemplates an exception for deductions as allowable under the Act are those contained u/s 28 to 43B of the Act. Section 44 creates Special application of these provisions in the cases of insurance companies. We therefore, agree with the assessee and delete the act as according to us, it is not permissible to the AO to travel beyond section 44 and First Schedule of the Income-tax Act." 18. It may not be out of place to mention that the Respected co ordinate Bench has duly taken the note of an earlier decision of that very Bench decided in the case of that very assessee vide order dated 29th September 2004 bearing ITA Nos. 7815/Del/1989; 3607 to 3609/De ..... X X X X Extracts X X X X X X X X Extracts X X X X
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