TMI Blog2019 (11) TMI 1544X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the insurance company are prepared in accordance with the Insurance Act, 1938 as has been provided under section 44A read with First Schedule and therefore, the provisions of section 115JB do not apply to the assessee s case. - ITA NO.5116/MUM/2016 - - - Dated:- 6-11-2019 - Shri C.N. Prasad, Hon'ble Judicial Member And Shri Manoj Kumar Aggarwal, Hon'ble Accountant Member Assessee by: Shri Farookh Irani Department by: Shri Sushil Kumar Poddar ORDER C.N. Prasad, 1. This appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) 8 Mumbai [hereinafter in short Ld.CIT(A) ] dated 20.05.2016 for the A.Y. 2011-12. 2. Revenue has raised the following grounds in its appeal: - 1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was justified in holding that the profit on sale of investments has taxed as Income from Capital Gain and not Income from Business. 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding that income of ₹ 9,51,43,61,596/- is exempt u/s.10(38) of the I.T. Act, 1961 3. Whether on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Income Tax Appeal No.1025 of 2015 dated 05.03.2018 wherein the question as to whether the Tribunal was justified in law in allowing the exemption to the assessee u/s. 10 of the Act came up before the Hon'ble Bombay High Court and the Hon'ble High Court held as under: - 2 Revenue urges the only following reframed question of law, for our consideration: Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in allowing exemption to the assessee u/s. 10 of the I.T. Act, 1961? 3 The impugned order of the Tribunal dismissed the Revenue's Appeal from the order dated 12th November, 2012 of the Commissioner of Income Tax (Appeals) [CIT(A)], who held that Respondent is entitled to the benefit of Section 10 (38) of the Act in respect of the sale of investments being long term capital gains. The proceedings before the Tribunal leading to the impugned order dated 27th October, 2014 emanated from the reopening notice dated 17th March 2011, seeking to reopen the assessment completed under Section 143(3) of the Act on 31st December, 2017. 4 The impugned order of the Tribunal dismissed the Revenue's appeal by f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption claimed under Section 10(38) of the Act as in the present proceedings. The question on which the above appeal has been admitted, is whether profits on sale of investments are liable to be (included) taxed in the hands of the assessee i.e. profits on sale of investments being liable to be tax. It does not deal with the benefit of exemption under Section 10(38) of the Act. The question as raised herein proceeds on the basis that even if sale of investments is liable to be taxed, yet to the extent it relates to long term capital gain falling under Section 10(38) of the Act, the exemption would be available. Thus, the question arising for our consideration in this appeal is different from the question on which the appeal of the GIC in ITX No. 201 of 2011 (Supra) was admitted. 9 Moreover, we find that this Court in General Insurance Corporation (supra) had also relied upon the communication dated 21st February, 2006 of the CBDT to the Chairman of the Insurance Regulatory and Developing Authority. In the above communication, it has been clarified that exemption available to any other assesee under clause 10(38) relating to long term capital, would also be available to a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2006-07 200708 wherein the Tribunal has decided the issue in favour of the assessee. The relevant extract is reproduced as under: 11. In Ground no. 3, the assessee has challenged the disallowance of ₹ 16 lakhs made u/s 14A on estimated basis. It has been admitted by both the parties that provision of section 14A has no applicability in the cases of General Insurance Company, which are governed by specific provision laid down in section 44, as held by various decisions of the Tribunal including that, in assessee's own case for the A.Y. 2000-01 2003-04 and in the case of other General Insurance Corporation of India specifically in ITA No. 3554/Mum/2011, for A.Y. 2007-08. In view of the aforesaid submissions and also on the perusal of various decisions of the Tribunal including that of the assessee, we find that it has been consistently held that, provision of section 14A is not applicable in the cases of Insurance company which are governed by section 44, because it is non obstante provision wherein the income is to be computed as per P L account prepared under the Insurance Act 1938. Section 14A contemplates exception for deduction allowable under the act, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the security because of accumulated interest on such securities According to the terms of issue of the securities, the assessee was to get only the face value at the time of redemption or maturity. IRDA regulation prescribes, the accounting principle for preparation of financial statement, whereby the assessee is required to prepare the financial statements in the manner provided in the said regulation. The said regulation read with relevant rules given in the schedules therein, provides that debts securities including, Government securities shall be considered as held to maturity and shall be measured at historical cost subject to amortization. This IRDA regulation are binding on the insurance companies. The Tribunal in the case of Tata AIG General Insurance Company Ltd. has dealt this precise issue in detail after analyzing the relevant provision and the decision of the Hon'ble Supreme Court and observed and held as under:- 7. On a careful consideration of the facts and the rival contentions, we are of the view that the amortization claim cannot be considered as 'an expenditure or allowance within the meaning of rule 5(a) of the First Schedule. As held by the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental authorities were not justified in adding back the amount of the balance of the profits. The judgment of the Supreme Court in the case of General Insurance Corporation of India (supra) takes care of all the arguments advanced on behalf of the Revenue. We, therefore, delete the addition of ₹ 1,91,33,945/- and allow the first ground. Since, no contrary decision have been brought to our notice, therefore, respectfully following the same, we hold that such an amortization claimed by the assessee as revenue expenditure is allowable. Accordingly, assessee s ground no.5 is treated as allowed. 24. Following the decision of the Tribunal, we hold that the premium paid by the assessee on purchase of government securities is liable to be amortized and amortization claimed by the assessee is revenue expenditure and is allowable. The ground raised by the Revenue is dismissed. 14. Respectfully following the said decision, we uphold the order of the Ld.CIT(A) and reject Ground Nos. 4 5 of the Revenue s appeal. 15. The last issue in Ground No. 6 of grounds of appeal is, whether the provisions of section 115JB have application to the assessee an insurance company and we ob ..... X X X X Extracts X X X X X X X X Extracts X X X X
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