TMI Blog2012 (2) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and in law the learned CIT (A) erred in affirming the order of the Assessing Officer disallowing the exemption claimed by the appellant on a/c of profit on sale of investments of ₹ 819,26,24,325/- and the reasons assigned for doing so are wrong and contrary to the facts of the case and the provisions of the Income Tax Act, 1961 ( the Act ) and the rules made there under. 1.2 On the facts and in the circumstances of the case and in law the learned CIT (A) ought to have allowed the appellant s claim for deduction in respect of investments written off which was without prejudice to the appellant s claim for exemption of the profit on sale of investments and not doing so is wrong and contrary to the facts of the case and the provisions of the Income Tax Act, 1961 and rules made there under. 1.3 On the facts and in the circumstances of the case and in law the learned CIT (A) ought to have allowed the appellant s claim for deduction in respect of amortization of premium on investment debited to the Profit Loss A/c and not doing so is wrong and contrary to the facts of the case and provisions of the Income Tax Act, 1961 and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of ₹ 25,21,95,669/- being the amount of expense disallowed by the learned Assessing Officer under section 14A, to the book profit under section 115JB of the Income Tax Act, 1961 shall stand justified if the provisions of section 115JB are held to be applicable to appellant by any appellate authority and the reasons assigned for doing so are wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act 1961 and Rules made there under. 4. On the facts and in the circumstances of the case and in law the learned CIT (A) having held that the provisions of section 115JB are not applicable to the appellant ought to have not restricted the relief to the extent the assessed income is not reduced below the total income offered under section 115JB in the return of income and the reasons assigned for doing so are wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961 and Rules made there under. 5. On the facts and in the circumstances of the case and in law the learned CIT (A) erred in not appreciating that the interest of ₹ 6,95,54,985/- under section 234C has been wrongly charged as against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide order dated 31-8-2009, by which similar issue was decided in favour of the assessee, allowed the appeals of the present assessee for the three 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, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee claimed that this amount is not to be added in the computation of income which was not accepted by the Assessing Officer and the CIT (A). At the outset this ground of appeal was raised as an alternate ground to Ground No.1.1. It was fairly submitted that this ground will become infructuous if ground No.1.1 is allowed. As Ground No.1.1 is allowed and profit on sale of shares/securities was considered exempt, the assessee s action in adding back the amount claimed towards value of investment written off does not require any modification. Therefore, the ground is rejected as infructuous. 5. Issue No.3: Deduction for amortization of Premium on Investment debited to Profit Loss A/c. (Modified Ground of Appeal No.1.3 Original Ground of Appeal No.1.6, 1.7 and 1.8). An amount of ₹ 34,95,85,335/- was similarly added back to the net profit while offering income in the computation of total income consequent to assessee s decision in claiming exemption on profit on sale of shares. As stated in issue No.2 above, consequent to the bringing to tax the profit on sale of investments by the Assessing Officer, the assessee made alternate claim for deduction of amortization of amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First Schedule of the Income Tax Rules, which was omitted by the Finance Act with effect from 1.4.1989, the amount either written off or reserved in the account to meet depreciation or loss or realization of the investment was allowed as deduction and any sum taken credit for in the accounts of appreciation of or gain on the realization of investment was to be treated as part of the profit and gain. After the omission of this clause (b) of Rule 5, this Tribunal has held that the profit on sale of investment cannot be added to the total income of the assessee who is in the insurance other than life insurance. Therefore, on the similar analogy any provision or written off the amount on account of depreciation or loss on the realization of investment shall not be allowed as deduction. Accordingly, grounds of appeal no.2 and 3 are decided against the assessee . Respectfully following the same, we are of the opinion that claims for deduction for amortization of premium on investment cannot be allowed as a deduction. Accordingly modified ground No.1.3 is rejected. 6. Issue No.4: Benefit of Exemption under section 10(38) in respect of Profit on sale of investments, Rebate under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged the issue by way of writ petition. The Hon'ble Bombay High Court not only disapproved the reopening of the assessment but gave the findings on merit also which are as under:- 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 business of insurance, including any such business carried on by a mutual insurance company or by a cooperative society, shall be computed in accordance with the rules contained in the First Schedule . Section 44 provides that the profits and gains of any business of insurance of a mutual insurance company shall be computed in accordance with the rules in the First Schedule. Part A of the First Schedule containing Rules 1 to 4 deals with profits of life insurance business while Part B consisting of Rule 5 deals with computation of profits and gains of other insurance business. Rule 5 provides as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions 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 nonobstante 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 insurance business. The effect of the non-obstante clause so far as the earlier part of section 44 is concerned, therefore, is that the provisions of section 44 will prevail notwithstanding the fact that there are contrary provisions in the Act relating to computation of income chargeable under the four heads mentioned in section 44. The only other overriding effect of section 44 is that its provisions operate notwithstanding the provisions of section 191 and of section 28 to 43A. Thus, the only effect of section 44 is that the operation of the provisions referred to therein is excluded in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 merely to the computation of profits and gains in the business of insurance. The Division Bench held that this would however not make any difference to the principle laid down by the Court in the earlier decision in the case of New India Assurance Co. Ltd. Accordingly, the decision of Life Insurance Corporation (Supra) could not have been ignored by the Assessing Officer on the supposition that the decision was rendered in the context of an assessee who carried on life insurance business and was, therefore, not available to an assessee which carries on general insurance business. 12. In General Insurance C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 assessee under any clauses of section 10 is also available to a person carrying on non-life insurance business subject to the fulfillment of the conditions, if any, under a particular clause of section 10 under which exemption is sought. It needs to be emphasized that it is not the case of the Assessing Officer that the assessee had failed to fulfill the condition which attached to the provisions of the relevant clauses of section 10 in respect of which the exemption was allowed. This of course is apart from clause (38) of section 10 where the Assessing Officer had rejected the claim for exemption in the original order of assessment under section 143(3). The Assessing Officer above all was bound by the communication of the CBDT. Having followed that in the order under section 143(3) he could not have taken a different view while purporting to reopen the assessment. Having applied his mind specifically to the issue an having taken a view on the basis of the communication noted earlier, the act of reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at rest by a decision of Tribunal , Delhi Bench verdict in the case of Oriental Insurance Co. Ltd. (ITA Nos. 5462 5463/Del /2003) asst. yrs. 2000-01 and 2001-02 order dt. 27th Feb. 2009 [reported as Oriental Insurance Co. Ltd. v. Asst t . CIT [2010] 130 TTJ (Delhi)388 : [2010] 38 DTR (Delhi ) 225-Ed. ] . Therefore considering the vehement reliance of learned Authorized Representative it is worth to mention at the outset itself that the issue now stood resolved by this latest decision of Delhi, Tribunal in the case of Oriental Insurance Co. Ltd. (supra), the relevant portion reproduced below: 17. We have heard rival submissions of the parties and have gone through the material available on record. Identical issue arose in assessee's own case for asst. yr. 1985-86. The Tribunal accepted the plea of the assessee and in fact the issue went up to the Hon'ble Delhi High Court in asst . yrs. 1986-87 to 1988-89, which is reported as CIT v. Oriental Insurance Co. Ltd. [2003] 179 CTR (Delhi ) 85 : [2002] 125 Taxman 1094 (Delhi ), decided the issue in favour of the assessee by holding that s. 44 of the Act is a special provision dealing with the computation of profits and gif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 r. 5 of the First Schedule. In the light of these special provisions coupled with non obstante clause the AO is not permitted to t ravel beyond these provisions. 24. Sec. 14A contemplates an exception for deductions as allowable under the Act are those contained under ss. 28 to 43B of the Act. Sec. 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 s. 44 and First Schedule of the IT Act . 18. I t 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 dt . 29th Sept . 2004 bearing ITA Nos. 7815/Del/1989, 3607 to 3609/Del /1990; 5035/Del / 1998 and 3910/Del /2000 named as Dy. CIT v. Oriental General Insurance Co. Ltd. [2005] 92 TTJ (Delhi ) 300. As seen from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents there under. The adjustments do not refer to disallowance under s. 14A of the Act. (b) Profits and gains of business as refer red to in (a) above have only to be computed in accordance with r. 5 of the First Schedule. 22. Sec. 44 creates a specific except ion to the applicability of ss. 28 to 43B. Therefore, the purpose, object and purview of s. 14A has no applicability to the profits and gains of an insurance business. 21. The learned Departmental Representative strongly justified the act ion of the AO and that of the CIT(A) in the light of the clear provisions of s. 14A of the Act . Since the view has al ready been expressed by respected Co-ordinate Bench therefore, we have no reason to take any other view except to follow the same. With the result we hereby accept the argument of learned Authorized Representative to the extent that in the present situation the provisions of s. 14A need not to apply while granting exempt ion to an income earned on sale of investment primarily because of the reason of the withdrawal or deletion of sub- r. 5(b) to First Schedule of s. 44 of IT Act. Once we have taken this view therefore the enhancement as proposed by learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JB 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 ₹ 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. The additional ground of appeal is decided accordingly . ( emphasis provided) Even though there was a finding that provisions of section 115JB cannot be invoked in the case of the assessee, the finding of which was not contested by the Revenue since there is no cros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13. Issue No.8 Higher Interest charged under section 234C. (Modified Ground of Appeal No.5 Original Ground of appeal No.5) As seen from the assessment order as against ₹ 6,50,54,986/- offered by the assessee under section 234C the Assessing Officer levied interest at Rs. .6,95,54,985/-. There is no working or calculation of said interest. The assessee raised a ground before the CIT (A) which the CIT (A) did not adjudicate holding that it was consequential in nature. Before us, the assessee s Counsel submitted that the assessee was p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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