TMI Blog1935 (11) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... me tax for the financial year ending on March 31, 1932. 3. The facts are set out in the letter of reference and may be summarised as follows:-The company is limited by guarantee and has no share capital, the liability of each member being limited to the nominal sum of 1. Every person who insures his life with the company under a participating policy is deemed to have agreed to become a member of the company. There are no shareholders and all the surplus profit is divided amongst the members, who are the persons who take out participating policies. The company also does business in annuities, loans on the security of policies, etc. 4. Under Article 85 of the articles of association a triennial actuarial valuation is made by the actuary of the company for all its business, and the surplus profit for the three years thus ascertained is distributed amongst the participating policy-holders. As originally framed, this article provided for a separate valuation for each branch or class of the company's business, but this has now been altered and only a consolidated valuation report is drawn up including all the company's business. The articles do not provide for a separate v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains shall be computed for the purposes of Sections 10, 11 and 12 in accordance with the method of accounting regularly employed by the assessee: Provided that, if no method of accounting has been regularly employed, or if the method employed is such that, in the opinion of the Income tax Officer the income, profits and gains cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Income tax Officer may determine. 22. (1) The principal officer of every company shall prepare, and, on or before the fifteenth day of June in each year, furnish to the Income Tax Officer a return in the prescribed form and verified in the prescribed manner, of the total income of the company during the previous year: Provided that the Income tax Officer may, in his discretion, extend the date for the delivery of the return in the case of any company or class of companies. (4) The Income Tax Officer may serve on the principal Officer of any company or on any person upon whom a notice has been served under sub-Section (2) a notice requiring him, on a date to be therein specified, to produce or cause to be produced such accounts or documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules may- (a) prescribe the manner in which, and the procedure by which, the income, profits and gains shall be arrived at in the case of :- . (ii) insurance companies; (3) In cases coming under Clause (a) of sub-Section (2) where the income, profits and gains liable to tax cannot be definitely ascertained or can be ascertained only with an amount of trouble and expense to the assessee which, in the opinion of the Central Board of Revenue, is unreasonable, the rules made under the sub-section may- (a) prescribe methods by which an estimate of such income, profits and gains may be made, and (b) in cases coming under sub-Clause (i) of Clause (a ) of sub-Section (2), prescribe the proportion of the income which shall be deemed to be income, profits and gains liable to tax, and an assessment based on such estimate or proportion shall be deemed to be duly made in accordance with the provisions of this Act. Rule 25.-In the case of life assurance companies incorporated in British India whose profits are periodically ascertained by actuarial valuation, the income, profits and gains of the life assurance business shall be the average annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make a return, with the result that the assessment was made by the Income Tax Officer under sub-Section (4) of Section 23, and the appeal to the Assistant Commissioner was incompetent. Accordingly, as the matter was of importance, he made the reference on his own motion under Section 66 (1). While the point does not directly concern the questions of law referred, their Lordships feel some doubt as to the Commissioner's view that the Company had failed to make a return within the meaning of Section 22 (4). 7. The two questions of law referred to the Court are as follows:- (1) Whether the Income Tax Officer, Companies Circle, Bombay, was justified in law in resorting to Rule 35 of the Income Tax Rules for the purpose of assessing the company to income tax for the year 1931-32 having regard to the data furnished by it to that Officer. (2) Whether the assessment of the company to income tax for the year 1931-32 is a legal assessment and binding upon it in view of the opinion expressed by this Honourable Court in Civil Reference No. 5 of 1928 . 8. The first question involves the appellant company's challenge of the Income Tax Officer's right to have recour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The view taken by the Income Tax Officer, which was concurred in by the Assistant Commissioner, and is maintained in this case, was that in the case of a life insurance company, the only reliable data to arrive at its profits was by a valuation report, and he asked for a separate valuation report of the Indian business for a triennial period. The company declined to give this, but offered-though stating that they were under no obligation to do so-to send him a separate valuation of their Indian business as at September 30, 1930. A single valuation report as at the end of the year of account would obviously not have been sufficient for the ascertainment of profits; it would be necessary to have a valuation as the terminus a quo, and this would be afforded either by a valuation as at September 30, 1929, or, in accordance with the practice of the company, a valuation for a triennial period, under which the ascertained profits might be divided equally between the three years. If a valuation report as at September 30, 1930, can be compiled, there can be no obstacle as Counsel for the company admitted, to the compilation of a similar valuation report as at an earlier date a valuation rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of interest earned on investments, though it is an element in the ascertainment of the income, profits or gains, is not by itself a reliable datum for such ascertainment. 15. Their Lordships are, therefore, of opinion that the Income Tax Officer was justified in resorting to Rule 35. 16. Applying Rule 35, the Income Tax Officer assessed the company as follows: (1) Premiums of the company as a whole for the year ended September 30, 1930 . 3,244,476 (2) Premiums of the company in British India for the same period... 87,942 (3) Net assessable profit of the company as a whole based on the triennial investigations as at September 30,1928... 1,405,027 Proportionately profit of British India ... 38,083 or, at Is. 25/32d.-Rs. 5,14,020 As regards (1) and (2) if their Lordships assume without deciding that under Section 35 in its application to the present case the premium income should include the premiums received in respect of p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
