TMI Blog2011 (9) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... o not include incomes otherwise exempt u/s.10 (34). Therefore the dividend income of ₹ 6,78,13,292 is treated as exempt u/s.10 (34) of the Act has to be excluded from the computation of total income of the assessee Disallowance in accordance with Rule 8D 2 Sec.14A - Held that:- We delete the entire disallowance made under 14A as no expenditure is incurred for earning exemption dividend income. - ITA No.2901/Mum/2010 - - - Dated:- 30-9-2011 - SHRI PRAMOD KUMAR (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) For the Petitioner : Shri Farrokh Irani For the Respondent : Shri Usha S. Nair ORDER PER ASHA VIJAYARAGHAVAN (JM) This appeal preferred by the assessee is directed against the order dated 29.01.2010 passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act will have to be first taken outside the accounts of appellant and treated as exempt income. It has been further contended that once this is done, credit for reduction of this income will have to be given in the computation of surplus or deficit as computed u/s.44 of the Income-tax Act. 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A) and reiterated contention made before the AO. 5. The Ld. CIT(A) held that anything being income which by the intention of the legislature is specified in Chapter III of the Income-tax Act and is accordingly treated as not forming part of total income cannot be considered at all for taxability and charge of income tax cannot be put upon such income. To this extent contention of Learned R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot exclude from exemption, incomes otherwise exempt u/s.10(34). 3. The Appellant prays that the dividend income of ₹ 6,78,13,292/- be treated as exempt u/s.10(34) of the Act. 4. WITHOUT PREJUDICE to the above, if it be held that the dividend of ₹ 6,78,13,292 is taxable then the AO be directed that no disallowance of ₹ 2,77,69,215 is warranted u/s.14A. 7. The learned counsel for the assessee appeared before us and submitted that the issue is governed by various decisions which are as follows: S. No. Name of the case Citation 1 Life Insurance Corporation of India vs CIT 115 ITR 45 (Bom) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther modification is to be made to the basis of computation of profits. His reasoning was that the income that is assessed in the case of life insurance business is neither the actual income nor the total income of the previous year, but what is charged to tax under s.10(7) and the Schedule to the Act is a notional or conventional income, that as actual income is not to be brought under tax, the question of exclusion of the interest on the securities of the Mysore Darbar does not arise, that in cases where r.2 (b) of the Schedule is applicable, the Schedule provides a method of finding out the amount which is to be the subject of tax in respect of profits of insurance business, and that the exemption granted by notification under s. 60 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utation of total income of the assessee. 11. Ground no.2 is with regard to disallowance of sum of ₹ 2,77,69,215/- in accordance with Rule 8D 2 Sec.14A is expenditure incurred for earning dividend income. The CIT(A) held as follows: At the outset it is clarified that the activity of annuity business is permitted business activity which can be undertaken separately and independently of insurance business and the disallowance being considered is only in respect of exempt income of this annuity business. The only objection taken against the disallowance made by Assessing Officer is that Rule 8D goes beyond the authority given to CBDT by Section 14 A of the Income-tax Act. It is contended that the rule only determines the notional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lea of the Ld. Counsel for the assessee that the Assessing Officer after examining the relevant details as discussed in para 5.16 and 5.17 of the assessment order has disallowed the expenses of ₹ 30,18,496/- for earning dividend income, therefore, the plea taken by the Ld. DR that the issue may be set aside to the file of the Assessing Officer is devoid of any merit. This being so, and keeping in view that the Tribunal in Oriental Insurance Co Ltd vs. ACIT (2009) TIOL 172 ITAT DEL after discussing the identical issue at length has held that Sec.44 provides for application of special provisions for computation of profits and gains of insurance business in accordance with Rule 5 of Schedule 1 and, therefore, it is not permissible to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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