TMI Blog1961 (11) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act in respect of the rental income. The Commissioner of Income-tax, taking the view that the Income-tax Officer had acted erroneously (not only in respect of the rental income from the building but in respect of other allowances such as depreciation), issued a notice under section 33B of the Act. After hearing the assessee, the Commissioner set aside the order of the Income-tax Officer granting exemptions and allowances and directed that the computation of the income of the assessee company should be made on the basis of the rules contained in the schedule. This resulted in bringing to tax those amounts wrongly allowed by the Income-tax Officer. A similar result followed in respect of the assessment for the year 1951-52. Thereafter the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der each of these different heads set out in section 6 is contained in the succeeding sections, sections 7, 8, 9, 10 and 12. In the case of a company doing business, obviously there would be no head of income of salaries . Such a company might be in receipt of income from securities, from property, from business and income from other sources. While sections 8, 9, 10 and 12 embody a set of rules for the determination of the income under each of these heads in general, in so far as the assessee doing the business of insurance is concerned, such an assessee is regarded as in receipt of income, profits and gains only under the head of business, and despite the fact that such an assessee might be in receipt of income, the computation of which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e insurance. This is the only rule which deals with the determination of the profits and gains of the assessee's business. It is noteworthy that while the balance of the profits disclosed by the annual accounts is taken as the basis, there is the further limitation that such a business would not be entitled to the allowance of any items of expenditure over and above what is laid down in section 10 of the Act which are to be allowed in the computation of the profits and gains of any business. There is a special rule for the computation of profits and losses on the realisation and depreciation and appreciation of investments. The effect of this rule so framed is that the income from whatever kind of source it may be derived by a busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is to say, if in the annual income accounts of the assessee credit is taken for expenditures of various kinds, such items of expenditure, or quantum thereof which would be beyond the scope of the provisions of section 10 have to be excluded, and the balance of the profits disclosed by the annual accounts has to be adjusted accordingly. The special reference to the expenditure allowed under section 10 has clearly the effect of treating the entirety of the profits and gains of the business of insurance as only business income, notwithstanding that in the annual accounts the income from various sources might have been taken. The argument that the income computed under rule 6 still retains the character of its source, such as income from hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that that income is only business income. In Commissioner of Income-tax v. B.B. and C.I. Railway Cooperative Society [1949] 17 ITR 509 , 512 Chagla C.J. observed : ...it will be noticed that, instead of an insurance company making its return of income under the various heads as laid down in section 6, it has got to submit one unit of income, a sort of notional or artificial income, as provided in the Schedule to the Act. Again in Commissioner of Income-tax v. Crown Life Insurance Co. [1956] 30 ITR 365 it was held that where the assessee derived income from securities as profits or gains from the insurance business and not of any other business, and as the profits or gains from insurance business could only be computed in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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