TMI Blog2020 (12) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... ber For the Appellant : Shri Rahul Ram an, CIT D.R For the Respondent : Shri Farrokh V. Irani, A.R ORDER PER RAVISH SOOD, JM The present appeals filed by the revenue are directed against the respective orders passed by the CIT(A)-9, Mumbai, dated 16.03.2018 and 19.03.2018 for Assessment Years 2012-13 and 2013-14, respectively, which in turn arises from the assessment orders passed u/s 143(3) of the Income-tax Act, 1961 (for short Act ), dated 23.03.2015 and 07.03.2016 for the aforementioned years. As the issues involved in the captioned appeals are inextricably interlinked or in fact interwoven, therefore, we shall dispose off the same by way of a consolidated order. We shall first take up the appeal of the revenue for A.Y 20112-13, wherein the impugned order has been assailed before us on the following grounds : 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 to be taxed as Income from Capital Gain and not income from other sources. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that income of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed u/s 143(3), dated 23.03.2015 at ₹ 152,12,31,353/-, as under: Sr. No. Particulars Amount 1. Profit on sale of investments claimed as exempt u/s 10(38) ₹ 639,06,24,962/- 2. Disallowance of expenditure u/s 14A r.w.r 8D(2)(iii). ₹ 13,05,70,512/- 3. Amortization of Premium on Securities ₹ 8,34,44,847/- 4. Deemed Income u/s 69B ₹ 8,15,000/- 5. Foreign Dividend accounted net of foreign taxes ₹ 34,94,170/- 6. Impairment provision written back ₹ 10,88,950/- 7. Disallowance of reinsurance commission paid for non-deduction on tax at source ₹ 42,58,34,881/- Further, the book profit u/s 115JB was reworked by the A.O at a loss of ₹ 168,80,77,488/- 4. Aggrieved, the assessee assailed the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the assessee s claim for exemption of the profit on sale of investments of ₹ 639,06,24,962/- u/s 10(38) of the Act, and had added back the same to the returned loss of the assessee. We find that the issue as to whether or not the profit on sale of investments is exempt u/s 10(38) of the Act is squarely covered by the order of the Hon ble High Court of Bombay in the assessee s own case for A.Y 2006-07, viz. The Pr. Commissioner of Income-tax- 3 Vs. The New India Assurance Co. Ltd. [ITA No. 1025 of 2015, dated 05.03.2018]. In fact, we find that the ITAT, G Bench, Mumbai, while disposing off the appeal of the assessee for the immediately preceding year i.e A.Y 2011-12 in ITA No. 5116/Mum/2016, dated 06.11.2019, respectfully following the aforesaid judgment of the Hon ble High Court, had observed, that the CIT(A) was right in law and the facts of the assessee in allowing the assessee s claim of exemption u/s 10(38) on the profit on sale of investments. The Tribunal while concluding as hereinabove had observed as under: 5. On hearing both the sides and perusing the orders of the Tribunal in assessee s own case and the decision of the Hon'ble High Court in assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act of an Assessment Order. The aforesaid decision arose out of writing off Investments while determining the income of the Assessee. It did not even remotely deal with the issue of exemption under Section 10(38) of the Act i.e. sale of investment as long term capital gain. Thus, it can have no application to the facts of the present case. Further, the decision of the Apex Court in GIC (supra), relied upon by the Revenue also does not deal with the claim for exemption under Section 10(38) of the Act and would have no application to the present facts. The Revenue was unable to point out the manner in which the above decision of the Apex Court applies to the present facts. 7 Mr. Suresh Kumar, next submits that on an identical issue in GIC v/s. CIT (ITXA No. 201 of 2011) this Court has admitted the following question on 25th February, 2013 as substantial question of law as under: Whether on the facts and in the circumstance of the case and in law the Tribunal was justified in holding that profit on sale of investments are not liable to be taxed in the hands of the assessee in the year under appeal? Therefore, he submits that the question as formulated be admitted. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f disallowance u/s 14A of the I.T Act, 1961 has to be computed as per Rule 8D of I.T Rules, 1962. Briefly stated, the assessee had claimed the following income as exempt u/s 10(38) of the Act: Sr. No. Particulars of Income Amount 1. Interest on tax free bonds ₹ 2,58,46,321/- 2. Interest on Tax Free Securities/Bonds u/s 10(15)(iv)(h) ₹ 94,17,163/- 3. Dividend u/s 10(34) ₹ 339,26,96,410/- 4. Profit on Sale of investments u/s 10(38) ₹ 639,06,24,962/- Total ₹ 981,85,84,856/- In the course of the assessment proceedings, the assessee was called upon to explain as to why disallowance of expenditure incurred for earning of the exempt income may not be worked out as per Sec.14A r.w. Rule 8D. In reply, it was submitted by the assessee that as it was a wholly owned Government of India undertaking into general insurance business, whose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.3 of the grounds of appeal the Ld. Counsel for the assessee submits that this issue also decided by the Tribunal in assessee s own case in the earlier Assessment Years right from A.Y. 2000-01 to 2010-11 wherein it has been held that the provisions of section 14A r.w. Rule 8D have no application to the assessee an insurance company. Referring to the order passed by the Tribunal for the A.Y. 2010-11 in ITA.No. 5013/Mum/2015 dated 28.03.2018, Ld. Counsel for the assessee submits that identical issue came up before the and the Tribunal dismissed the appeal of the Revenue following the earlier year s orders of the Tribunal wherein it has been held that no disallowance u/s. 14A of the Act can be made. 8. Ld. DR fairly submitted that this issue has been decided in assessee s favour in earlier years. However, he supports the order of the Assessing Officer. 9. Heard both sides, perused the orders of the Authorities below and the decision of the Tribunal in assessee s own case. We observe that the Tribunal while disposing of the appeal of the Revenue for the A.Y. 2010-11 in ITA.No. 5013/Mum/2015 dated 28.03.2018, held as under: 15. The issue raised in ground No.3 is against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As the facts and the issue in context of the aforesaid issue under consideration had not witnessed any change during the year before us, we thus respectfully follow the aforesaid view taken by the Tribunal in the assessee s own case for A.Y 2010-11 in ITA No. 5116/Mum/2016, dated 06.11.2019. Accordingly, finding no infirmity in the order of the CIT(A), who in our considered view had rightly vacated the disallowance of ₹ 13,05,70,512/- made by the A.O u/s 14A r.w Rule 8D, uphold his order to the said extent. The Ground of appeal No. 3 is dismissed. 10. We shall now take up the grievance of the revenue that the CIT(A) has erred in holding that the premium paid by the assessee on purchase of Government Securities on Amortisation was allowable as revenue expenditure, without appreciating the fact that there was no provision for amortization of such premium under the Income-tax Act. Briefly stated, the assessee had claimed an amount of ₹ 8,34,44,847/- as an amortization of the premium paid on purchase of investment securities amortized over the residual period of the securities as an admissible expense. On being called upon to justify its aforesaid claim of expense, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposing off the appeal of the assessee for A.Y 2011-12 in ITA No. 5116/Mum/2016, dated 06.11.2019, and find that the aforesaid issue is squarely covered in favour of the assessee. The Tribunal while disposing off the appeal of the assessee for the immediately preceding year i.e A.Y 2011-12 in ITA No. 5116/Mum/2016, dated 06.11.2019, had after relying on the view taken by the coordinate bench while disposing off the assessee s appeal for A.Y 2010-11, had observed, that the premium paid by the assessee on purchase of government securities was liable to be amortized and was rightly claimed by the assessee as a revenue expenditure. The Tribunal while concluding as hereinabove had observed as under : 13. Heard both sides and perused the orders of the Authorities below. On a perusal of the order of the Tribunal we observe that the Tribunal decided this issue in favour of the assessee observing as under: - 20. The issue raised in ground No.4 (4.1 4.2) is against the decision of the Ld. CIT(A) holding that the premium paid by the assessee on purchase of government securities was allowable as revenue expenditure on amortization. 21. The Ld. A.R. submitted that the issue raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g out or away of money is the primary meaning of expenditure. Expenditure is what is paid our or away and is something which is gone irretrievably Expenditure, which is deductible for income tax, is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure. If this meaning is to be given to the word 'expenditure occurring in rule 5(a) the amortization claim cannot be considered as expenditure and, therefore, cannot be added back to the balance of the profits. In General Insurance corporation of India vs. CIT (1999) 240 ITR 139 (SC) the Supreme Court held that even if an item of debit is considered as an expenditure, it should further be such an expenditure contemplated in sections 30 to 43A and, therefore, unless there was a specific prohibition for such an allowance, the departmental authorities would not be justified in adding back the amount under rule 5(a)., Therefore, even if the debit for amortization is considered as an expenditure, there is no specific prohibition against allowing such an expenditure under the provisions of sections 30 to 43B. The words ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding year i.e A.Y 2011-12, we respectfully follow the same. Accordingly, finding no infirmity in the vacation of the disallowance of amortization of premium on securities amounting to ₹ 8,34,44,847/- by the CIT(A), we uphold his order to the said extent. The Grounds of appeal Nos. 4 and 5 are dismissed. 13. We shall now take up the claim of the revenue that the CIT(A) was in error in holding that the provisions of Sec. 115JB of the Act were not applicable in the case of the assessee. Briefly stated, the A.O in the course of the assessment proceedings called upon the assessee to explain as to why the provisions of Sec. 115JB may not be applied in its case for computing the book profit . In reply, it was inter alia submitted by the assessee that being a General Insurance Company its income was to be computed as per Sec. 44 of the Act, and Rule 5 contained in the First Schedule . However, the A.O rejected the aforesaid claim of the assessee and worked out its book profit under Sec. 115JB of the Act. On appeal, the CIT(A) observed that the issue was decided in favour of the assessee by the Tribunal while disposing off the appeals in the assessee s own case for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. D.R. fairly agreed to the argument of the Ld. A.R. 32. We have perused the material on record and the decisions of the co-ordinate bench of the Tribunal for the earlier years i.e. from A.Y. 2004-05 to 2007-08. On sample basis, we would like to quote the operative part from ITA No.3562/M/2007 and others for A.Y. 2004- 05 and others which is as under: 18. Besides this, the assessee has raised additional ground that the provisions of section 115JB has no application to the assessee. 19. Before us, learned counsel submitted that this issue is squarely covered by various decisions of the Co-ordinate Benches in the case of General Insurance Corporation and other decisions. Ld. DR also admitted that this issue is covered by various decisions of the Tribunal as filed by the assessee. 20. After considering the decisions in the case of General Insurance Corporation and other decisions filed by the learned counsel, we find that the issue of non-applicability of MAT u/s 115JB to the General Insurance Company has been upheld. Even otherwise also the provision of MAT will only come into play, only when assessee prepares its P L account in accordance with part (II) and part (III ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case and in law, the Ld. CIT(A) has erred in not appreciating that the amount of disallowance u/s 14A of the I.T Act, 1961 has to be computed as per Rule 8D of I.T Rules, 1962 when the computation of the assessee was not found to be correct and as held by the order of the Hon ble High Court in the case of M/s Godrej Boyce Manufacturing Co. Ltd. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the premium paid by the assessee on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that there is no provision for amortization of such premium in the I.T Act, 1961. 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the premium paid by the assessee on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that such premium paid is capital in nature and hence not allowable u/s 37 of I.T Act, 1961. 6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the provisions of Section 115JB of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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