TMI Blog2020 (10) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to tax - as per the provisions of law only those adjustments which are expressly not prohibited under section 44 of the Act could be made. Consequently depreciation which has been debited in the audited accounts as per the consistently followed and accepted accounting policy need not be disallowed. After considering the rival submissions, we are of the opinion that the action of the CIT(A) in deleting the amount is consistent with the accounting principles followed and the provisions of section 44 read with Rule 2 of the 1st Schedule, Therefore we uphold the order of the CIT(A) and dismiss the ground raised by the Revenue Claim of 100% depreciation on fixed assets - HELD THAT:- Action of the CIT(A) in deleting the amount is consistent with the accounting principles followed and the provisions of section 44 read with Rule 2 of the 1st Schedule, Therefore we uphold the order of the CIT(A) and dismiss the ground raised by the Revenue. - ITA No. 2235/Mum/2018 - - - Dated:- 8-10-2020 - Shri Shamim Yahya, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Appellant : Shri Lalit Dehiya, CIT DR For the Respondent : Shri Aarti Vissanji, AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of claim of 100% depreciation, ignoring the fact that Actuarial surplus is determined on the basis of the total Assets of the company and therefore by not under stated in the books and thereby it has an impact of reducing the surplus or increasing the deficit and therefore, the assets so written off are also required to be considered in determining the surplus taxable u/s 44 of the Act, without appreciating the fact that this decision of the Ld. CIT(A) was not accepted by the department and appeal has been filed in earlier years on similar issue. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the order of the assessee s own case of earlier year, in deciding that negative reserve has no impact of reducing the taxable surplus as per form- I and therefore corresponding adjustment for negative reserve need to be made to arrive at taxable surplus without appreciating the fact that this decision of Ld. CIT(A) was not accepted by the department and appeal has been filed in earlier years on similar issue. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Coordinate Bench of ITAT for AY 2005-06 to 2008-09, 2009-10, 2010-11 2011-12 in assessee s own case on merits. The operative portion of the order of ITAT for AY for AY 2010-11 to 2011-12 is contained in para no. 4 to 7.2 of its order and in the same is reproduced below: - 4. The revenue has raised common grounds in both the appeals. The grounds raised for the assessment year 2010- 1! are as under - 1. Whether on the J2zcts and in the circumstances of the case and in law, the Ld Cl T(A) erred in interpreting the Provisions of Sec. 44 of the Act read with Rule 2 of the First Schedule alongwith provisions of Insurance Act 1938, Insurance Regulatory and Development Authority Act 1999 and regulations there under and accordingly allowing adjustment from the surplus worked as per 'actuarial valuation [and as shown by the assessee in Form- I] in violation of the ratio of the Apex Court in the case of LIC vs CIT 51 ITR 778? 2. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing the relief to the assessee by holding that 'surplus available both in Policy Holders Account and Share Holders Account is to be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case and in law, the Ld CIT(A) erred in concluding that transfer between Share Holders Account and policy Holder's Account is tax neutral and not taxable u/s 44 of the Act r. w Rule 2 of the first Schedule. 8. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition made on account of claim of 100% depreciation ignoring the facts that Actuarial surplus is determined on the basis of the total assets of the company and therefore by not capitalizing the above assets, the assets of the assessee company are under-stated in the books and thereby it has an impact of reducing the surplus or increase in the deficit and therefore, the assets so written off are also accordingly required to be considered as part of the surplus and taxable under section 44 of the IT Act? 9. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing the dividend income of assessee as exempt u/s. 10(34) of the I. T. Act, 1961, ignoring the fact that dividend income is considered as part of income of Life Insurance Business and is included as an income by the actuary? 10. Whether on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment Authority Act, 1999 ('4 of 1999) or the Regulations made thereunder subject to the following adjustments.- (a) subject to the other provisions of this rule, any expenditure or allowance including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed which is not admissible under the provisions of section 30 to 43B in computing the prof its and gains of a business shall be added back: (b,) ( I) any gain or loss on realization of investments shall be added or deducted, as the case may be, if such gain or loss is not credited or debited to the Profit Loss A/c, (c) such amount carried over to a reserve for unexpired risks as may be prescribed in this behalf shall be allowed as a deduction . (emphasis supplied) This indicates that the legislature consciously omitted incorporating the provisions of IRDA or the Regulations made there under in Rule 2 which still refers to the Insurance Act 1938 only. 32. IRDA Regulations specifically require to maintain the policyholder's account and the shareholder's account separately and permits transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 44 of IT Act are invoked anything contained in the heads of income like income from other sources, capital gains, house property or even interest on securities does not come into play and only first schedule has to be invoked to arrive at the profit. Therefore, in our opinion both the policyholder's and shareholders account has to be consolidated for the purpose of arriving at the deficit or surplus..... 38. The above statement furnished is in accordance with the Insurance Act, 1938, therefore, it cannot be stated that assessee returned income is not in accordance with the Insurance Act, 1938. There is no basis for AO to take Form- I 'total surplus' as surplus of the Life insurance business ignoring transfer from shareholder's account..... 40. In our opinion what assessee has done in reconciling the IRDA format with that of old Insurance Form is correct and accordingly the loss disclosed in the computation of income is according to the actuarial surplus/deficit under the Insurance Act, 1938 prescribed under Rule 2 of the first schedule part-A. In view of this, we are of the opinion that insistence by AO to bring to tax the entire amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered and decided that assessee was mandated to maintain separate accounts by IRDA Regulations. Just because separate accounts are maintained the incomes in Shareholder's account does not become separate from Life insurance business. As per Insurance Act 1938 all incomes are part of one business only and these incomes are considered as part of same business. Therefore, the incomes in Shareholder's account are to be considered as arising out of Life insurance business only. More over Sec 44 mandates that only First Schedule will apply for computing incomes and excludes other heads of income like, Interest on Securities, income from house property, Capital gains or Income from other sources. Being non-obstante clause, sec. 44 mandates that the prof its and gains of insurance business shall be computed in accordance with the rules contained in First Schedule. Therefore, the incomes in Shareholder account are to be taxed as part of life insurance business only, as they are part of same business and investments are made as part of solvency ratio of same business. The grounds are allowed. A 0 is directed to treat them as part of Life Insurance Business and tax them u/s 1 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the rival submissions, we are of the opinion that the action of the CIT(A) in deleting the amount is consistent with the accounting principles followed and the provisions of section 44 read with Rule 2 of the 1st Schedule, Therefore we uphold the order of the CIT(A) and dismiss the ground raised by the Revenue. 7.2 Following the earlier order of this Tribunal we do not find any error or illegality in the impugned order of the Ld. CIT(A). The issue involved in ground No. 8 is dismissed. 51.After having gone through the aforementioned orders, we find that the identical issue has already been decided by the Coordinate Bench of ITAT in AY 2010-11 2011- 12 in assessee's own case on merits. Therefore, respectfully following the decision of the coordinate bench of ITAT which is applicable mutatis mutandis in the present case, we dismiss these grounds raised by the revenue. 4. We find that the disputed issues have been decided, considering the facts and the decisions of the Hon ble Income Tax Appellate Tribunal. Further, the Ld.DR could not controvert the finding of the CIT(A) with any new information or cogent evidence. We respectfully follow the judicial preceden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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