TMI Blog2019 (8) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the income earned on the policy holder s account and income from investments shown in the shareholder s account for computation of the profits and gains of life insurance business for the purposes of taxation. In the considered view of the Court, the only question which would require consideration is about the computation of the actuarial surplus in the non-linked Participating Policyholder s Account (non-technical). The following substantial questions of law are framed for consideration: (1) Whether the ITAT in the facts and circumstances of the case was right in accepting the Assessee s computation of the actuarial surplus, which includes deductions on the ground of future appropriations and allocation of bonus to policy holder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 (Act) read with the First Schedule thereto. This is sacrosanct, particularly since Section 44 opens with a non-obstante clause notwithstanding anything to the contrary . 3. In the present case, life insurance business is being carried on by the Assessee. The question that arose for consideration was whether the actuarial surplus determined in terms of Rule 2 of the First Schedule to the Act should form the basis for tax or, as contended by the Revenue, certain deductions taken into account while arriving at such the actuarial surplus should not be permitted to be claimed as such and be added back? 4. The Court finds that in the present case, consistent with the legal requirement, separate forms were used by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt, and (ii) shareholders' account, which is in the nature of profit and loss account, apart from the balance sheet. This was only a change in the reporting format, so as to ensure transparency. There was no corresponding amendment made to Rule 2 of the First Schedule to the Act which sets out the computation mechanism for determining the profit of an insurance company. This continued to be governed by the actuarial valuation in terms of the Insurance Act, 1938. The IRDA Regulations of 2002 and the said amendment does not have effect of overriding Section 44 read with Rule 2 of the First Schedule to the Act. 7. The ITAT noted that the decision of its Mumbai Bench in ICICI Prudential Insurance Co. Ltd. v. ACIT 140 ITD 14 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. This Court is not persuaded to take a view different from that of the Mumbai Bench of the ITAT which has been affirmed by the Bombay High Court. Indeed on a conjoint reading of Section 44 with Rule 2 of the First Schedule to the Act, the Court is unable to discern any distinction between the income earned on the policy holder s account and income from investments shown in the shareholder s account for computation of the profits and gains of life insurance business for the purposes of taxation. 10. Even as regards applicability of Section 14 A of the Act in the context of exempt income, once it is clear that this Section 44 read with Rule 2 of the First Schedule to the Act alone would apply when it comes to computing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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