TMI Blog2014 (1) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with the Insurance Act and not in accordance with Schedule VI of the Companies Act - As per the proviso to sub- section 1 to section 211 - The provisions of section 211 shall not be applicable for an insurance or banking company - The proviso to sub-section 2 of this section relating to the profit and loss account also specifies that schedules VI part II shall not be applicable to any insurance or banking company - The basic premise of applicability of section 115JB does not stand and consequently this section does not apply to appellant company - Decided in favour of assessee. - ITA No.8824/M/2011 - - - Dated:- 15-1-2014 - Shri P. M. Jagtap And Shri Sanjay Garg,JJ. For the Petitioner : Shri Farrokh V. Irani, A. R. For the Respondent : Shri Santosh Kumar, D.R. ORDER Per Sanjay Garg, Judicial Member: The present appeal has been filed by the assessee against the order of the CIT(A) dated 01.11.11 relevant to assessment year 2008-09. The grounds of appeal taken by the assessee read as under: "1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in affirming the order of the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as the amortization of premium on investment would result in corresponding higher profit at the time of sale of the investment. 1.8 On the facts and in the circumstances of the case and in law the learned CIT(A) failed to appreciate that the amortization of premium was added back to the profit as per Profit Loss Account as the entire profit on sale of investment was claimed as exempt and hence this ground was raised without prejudice to the ground relating to deduction of profit on sale of investment. 1.9 Without prejudice to the above Ground and on the facts and in the circumstances of the case and in law, the authorities below ought to have given the benefit of exemption u/s. 10(38) in respect of profit on sale of investments, and rebate u/s. 88E and the concessional rate of tax under section 111 A of the Income Tax Act, 1961 and not doing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961, and Rules made thereunder . 2.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in affirming the order of the A.O disallowing the exemption claimed by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to add, amend, alter, modify and/or delete any of the above grounds of appeal on or before the date of hearing." 2. The ld. representative of the assessee at the outset has submitted a chart to show that the various grounds raised by the assessee in its appeal have been covered by the earlier orders of the Tribunal/Hon'ble High Court in the own cases of the assessee for preceding assessment years. The issues raised vide above grounds of appeal are discussed as herein under: Ground No.1.1 1.2 : Addition on account of profits on sale of investments 3. Through the chart, the ld. representative of the assessee has demonstrated that the issue raised in the above grounds of appeal is relating to addition on account of profit on sale of investments. The assessee company claimed profit on sale of investment of Rs.9,26,67,16,815/- as exempt. However, the AO did not accept the contention of the assessee and treated the same as taxable income of the assessee's insurance business u/s 44 and rule 5 of First Schedule to Income Tax Act, 1961. The ld. CIT(A), following the order of his predecessor on the issue for assessment year 2007-08, confirmed the additions made by the AO on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment years. The final findings of the Tribunal have been recorded in paragraphs 8, 9 10 of its order dated 22-10-2009 , which are as under : "8. We have also noticed 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 w e f 2011-12.Since the amendment so made in the statute, which cannot be infer red to be a superfluous amendment, is with effect from 2011-12, the conclusion arrived at by the Pune Bench stands further fortified. This fortifies the stand taken by the co ordinate bench in the case of Bajaj Allianz General Insurance Co. Ltd. (supra), we uphold the grievance of the assessee. 9. In view of these discussions, as also following the coordinate bench decision in the case of Bajaj Allianz General Insurance Company 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es raised vide above grounds do not survive and the same are dismissed being rendered infructuous. Ground No.2.1 2.2 : Addition on account of interest on tax free bonds and dividend income 6. The assessee company claimed a sum of Rs.3,71,64,388/- and Rs.2,31,44,10,397/- on account of interest on tax free bonds and dividend income, claimed as exempt income u/s.10(15) and 10(34) respectively. The ld. AO, in pursuance of directions issued u/s. 144A by the Additional Commissioner of Income Tax, made an addition by holding that the said income formed as part of the profit and loss account was taxable under section 44 and rule 5 of the First Schedule of the Income Tax Act, 1961 which finding was further confirmed by the CIT(A). 7. The ld. A.R. has brought our attention to the fact that the identical issue raised in the own case of the assessee for assessment year 2006-07 has been decided in favour of the assessee by the Hon'ble Jurisdictional High Court vide order dated 01.12.2011. He has further brought our attention to the fact that for assessment year 2007-08, the similar issue has been decided by the Tribunal in favour of the assessee vide order dated 25.02.12 passed in ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n would have, therefore, to be allowed." 8. The Hon'ble High Court, thus, categorically held that not only the exemption under section 10 of the Act was available to the assessee but also the reopening on the basis of mere change of opinion was bad in law. Following the above findings given by the Hon'ble Bombay High Court, the identical issue for assessment year 2007-08 in the case of the assessee, has been decided in favour of the assessee by the co-ordinate bench of the Tribunal vide order dated 25.02.12 passed in ITA No.3554/M/11. So respectfully following the above findings of the Hon'ble Jurisdictional High Court and further followed by the co-ordinate bench of the Tribunal, it is held that the assessee is entitled for exemption under section 10 of the I.T. Act. This ground of the appeal is accordingly allowed. Ground No.3.1 to 3.3: Non applicability of provision of Section 115AB 9. The ld. A.R. has contended that the assessee is an insurance company and computation of its profits and gains of business were governed by the provisions of Section 44 read with Rule 5 of the First Schedule to the Income Tax Act, 1961, hence, the provisions of Section 115JB of the Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I and Part III of Schedule VI of the Companies Act. 15.3 I have perused the facts of the case. I find that Hon'ble Tribunal have given a categorical finding that if accounts are not required to be prepared under Part II and Part III of Schedule VI of the Companies Act, section 115JB cannot be invoked. A similar decision was delivered in the case of Maharashtra State Electricity Board (82 ITD 422) and in the unreported decision of Reliance Energy Ltd. The issue involved is identical and therefore, the ratio laid down by Hon'ble ITAT has to be followed. It is therefore held that section 115JB cannot be invoked in the case of appellant. However, it is noticed that in the return of income appellant had on its own offered income under provisions of section 115JB of the Income Tax Act to the extent of Rs. 15,13,60,66,509/-. To this extent, appellant cannot be granted relief since assessed income cannot be below the returned income. Reliance is placed upon the decision of Hon'ble Supreme Court in the case of Goetze India Ltd reported in 284 ITR 323. To the extent of this declared income therefore, relief cannot be granted. However, any further additions to this income cannot be upheld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t stop the assessee from contending that its income is not liable to tax. Similar propositions were also considered by the Coordinate Bench in the case of Chicago Pneumatic India Limited (15 SOT 252). The Hon'ble Supreme Court also in the case of National Thermal Power Corporation vs. CIT 229 ITR 383 considered the power of ITAT to adjudicate the issue even it was raised for the first time before the ITAT. Since the issue has already came up before the CIT (A) and having given a finding that provisions of section 115 JB are not applicable to the assessee, it is appropriate on the part of the CIT (A) to grant relief. Having not done so, we direct the Assessing Officer to exempt the assessee from the applicability of provisions of section 115JB, following the provisions laid down by the Coordinate Bench in the case of Krung Thai Bank PCL vs. Jt. DIT. Accordingly, the ground is allowed." Respectfully following the findings of the Tribunal given on the identical issue in the immediate preceding year in the own case of the assessee, this issue, for the assessment year under consideration also, is accordingly allowed and the AO is directed to exempt the assessee from the applicability ..... X X X X Extracts X X X X X X X X Extracts X X X X
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