TMI Blog2016 (3) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... ted if such gain or loss is not credited or debited to the P L account. Prior to this there was no such provision. This amendment has been specifically brought w.e.f.01.04.2011 applicable from A.Y. 2011-12 and cannot have retrospective effect. This has been clarified by the notes and clauses to Finance Act amending the said section.Thus, from 01.04.1989 to 01.04.2011, such a provision was not there in the Statute, therefore the same cannot be read into between this period. This issue precisely has been dealt by the Tribunal in the various cases. At the time of passing of the Tribunal order in assessee s case for A.Y. 2002-03 2003-04, such an amendment was not brought on the statute, which clarifies the legislative intent, that prior to 01.04.2011 such an adjustment of profit and sale of investment can be made. - Decided in favour of assessee. Denial of exemption of incomes claimed u/s 10 - HELD THAT:- We notice that this issue is decided in favour of the assessee by the jurisdictional Hon ble Bombay High Court in the case of General Insurance Corporation of India Vs. DCIT [ 2011 (12) TMI 70 - BOMBAY HIGH COURT] Consistent with the view and by respectfully following the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account is prepared in accordance with Insurance Act 1938, as specifically provided in Section 44 read with First schedule, therefore, the provision of section 115JB will not apply in case of assessee.This has been held in the case of General Insurance Corporation [ 2012 (2) TMI 522 - ITAT MUMBAI] - Decided in favour of assessee. Appealable order directly before CIT-A - Grant credit for taxes paid under section 90 and under section 91 - CIT(A) while dealing with the said ground has held that in appeal, the assessee is not challenging any of the issue specified in section 246A of the I.T. Act and since the issue is purely of credit for taxes paid and is thus not an appealable order directly therefore learned CIT(A) held that ground of appeal does not survive and consequently rejected the same - HELD THAT:- From the perusal of the provisions of section 246A, it is clear that this ground is squarely covered u/s. 246A of the Income Tax Act, 1961, where it has been categorically mentioned that appeal in respect of to the amount of tax determined lies before learned CIT(A), therefore on this issue we deem it fit to restore the matter back to the file of the learned CIT(A) for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the disallowance under section 14A of the Act was to be computed as per the formula in Rule 8D of the Income tax Act Rules 1 962( the Rules )as contained in the notification dated 24th March 2008. 4. The CIT(Appeals) erred in upholding the disallowance of ₹ 12,44.56.613 by the AU of the Appellant's claim for a deduction on account of the amortization of Premium paid on the purchase of securities. 5.1 The CIT(Appeals) erred in upholding the addition made by the AU purportedly under Section 69B of the Act. 5.2 The CIT (Appeal s) ought to have held that the af oresaid addition was unsustainable and unjustified i) in law ii) without prejudice to (i) immediately hereinabove on the facts of the Appellant's case. 6. The CIT(Appeals) erred in upholding the addition of ₹ 54,98,493/- made by the AO on account of taxes paid by the Appellant on foreign dividend. 7 The CIT(Appeals) erred in not directing the AU to grant credit ,under section 90 and 91 of the Act, of ₹ 13,93,36,424/- 8. The CIT(Appeals) erred in holding that the Appellant could not be granted relief to the extent of ₹ 1 5,90,60,28,782/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act and in this regard his relevant observations are as under:- 1.7 If, one analyses the provision, it starts with the wordings profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by annual account copies of which are required under the Insurance Act, 1938 to be furnished ..... . In the statement of income submitted alongwith the Return of Income, the assessee has taken the starting point for computing the income as the balance of the profit disclosed in the annual accounts of the relevant ale of investment a sum of ₹ 406,81,17,320/-. If, one analyses the adjustments required to be made from the profits disclosed in the annual account by virtue of sub clause (a) and (c) of Rule 5, it refers to any expenditure or allowance including in the amount debited to the Profit Loss Account either by way of provision of tax, dividend, reserves or any other provisions as may be prescribed which is not admissible under the provisions of section 30 to 43B will have to added back and as per sub clause (c) of Rule 5 of the First Schedule, such amount carried over to the reserves for unexpired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been decided against the assessee by the Tribunal vide order dated 19.11.2008, however, the said order of the Tribunal cannot be held to be applicable in the wake of catena of decisions rendered by the Tribunal in various cases of insurance companies, wherein it has been held that, there is no specific provision for making the adjustment on account of profits on sale of investment after removal of Clause 5(b) w.e.f. 01.04.1989 and till Clause 5(b) was inserted w.e.f. 01.04.2011. In support of his contention he filed compilation of 10 such decisions of the Tribunal in the case of General Insurance Corporation of India and others insurance companies on similar issue. He further submitted that, specific amendment in Rule 5 to First schedule, came w.e.f. 01.04.2011, wherein it has been specifically provided that any gain or loss on realization of investment shall be added or deducted if such gain or loss is not credited or debited to the P L account. Prior to this there was no such provision. This amendment has been specifically brought w.e.f.01.04.2011 applicable from A.Y. 2011-12 and cannot have retrospective effect. This has been clarified by the notes and clauses to Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule contained in First Schedule to the Act. In rule 5 of this schedule, profits and gains of any business of insurance, other than life insurance, are taken to be balance of profits disclosed in the annual accounts furnished to the Controller to insurance subject to certain adjustments. One of the adjustments provided therein respect of any amount either written off or reserved in the accounts to meet depreciation or loss on the realization of investment which is allowed as deduction. Similarly, any sum taken credit for in the account on account of appreciation of or gain on the realization of investments is taken as part of the profits and gains of the business. With a view to enable the General Insurance Corporation and its subsidiaries play a more active role in capital markets for the benefit of policy holders, it proposed to provide for exemption of the profits earned by them on the sale investments. As corollary, it is proposed to provide that the losses incurred by General Insurance Corporation on the realization of investment shall not be allowed as deduction in computing the profits chargeable to tax. To achieve this object clause (b) of rule 5 of the First Schedule to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) rejected the same and thus enhanced the income of the assessee, on the ground that he had disallowed the identical claim made in the assessment year 2007-08 also, on the reasoning that the assessees engaged in insurance business are not entitled to any exemption u/s 10 of the Act. 3.1 We heard the parties on this issue. We notice that this issue is decided in favour of the assessee by the jurisdictional Hon ble Bombay High Court in the case of General Insurance Corporation of India Vs. DCIT (2012)(342 ITR 27). Respectfully following the binding decision of the jurisdictional High Court, we set aside the order of Ld CIT(A) on this issue. 8. The said view of the Tribunal was also subsequently followed by the Tribunal in A.Ys. 2000-01 to 2003-04 (ITA No. 3397 to 3399 3401/Mum/2011 dt. 29.3.2012). Consistent with the view and by respectfully following the orders of the Tribunal in earlier years, we decide this issue in favour of the assessee and allow this ground of appeal filed by the assessee in this year also. Ground No. 3 9. Learned AR submitted that the issue in this ground is covered in favour of the assessee by the Tribunal order in assessee s own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities amortized over the residual period of securities. The assessee claimed that such an amortization is as per IRDA regulations and the amount cannot be treated as part of the cost of the investment as the assessee cannot get more than the face value at the time of maturity of such investments. The assessing officer though admitted the fact that assessee does not get more than the face value at the time of maturity, however, he observed that such a premium paid on purchase of securities treated as investment would be allowable as deduction only at the time of sale/redemption/maturity of the security. These are capital cost incurred to the purchase of the securities at a premium. This he held that, is akin to the diminution in the value of investment in shares which the assessee provides on prudential norms when the value of such shares falls below its acquisition price. The assessee recognized this loss on diminution provision against the profit, but as per its own computation disallows such provisions from the taxable income. He further held that prudential norms laid by IRDA for recognition of investments may be appropriate for the purpose of net wealth of the insurance compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the order of the AO as well as Ld. CIT(A). 16. We have heard the rival submissions and also perused the relevant finding given in the impugned orders. The assessee in the course of carrying of its insurance business, is required to invest its fund in specific debts securities of government or PSU bonds or other securities in accordance with the Insurance Act, 1938 and IRDA regulations. The assessee has purchased securities at a price which was slightly higher than the face value 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 insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above judgment was slightly different, but the words any expenditure or allowance which is not admissible under the provisions of section 30 to 43A were present and the same words being present in the amended sub-rule, they have to be given the same meaning as was given by the Supreme Court. Therefore, even if the debit for amortization is considered as an expenditure or allowance, there being so specific prohibition against the expenditure or allowance in section 30 to 43B, the departmental 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. 13. After perusal of the aforementioned detailed order in assessee s own case, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceeds the amount recorded in the books of account. On these facts alone, the addition cannot be sustained. Accordingly, the same is deleted. In the result, the ground no. 4 is treated as allowed. 15. After perusal of the aforementioned detailed order in assessee s own case, we find that the present ground is squarely covered by the findings recorded by the Tribunal in earlier years. Therefore by respectfully following the same and consistent with the view taken by the Tribunal in earlier year, we decide this ground in this also in favour of the assessee. Ground No. 8 16. Learned AR submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee s own case for in earlier years A.Y. 2004-05 (ITA No. 3562/Mum/2007 dated 27.2.2015) which has been subsequently followed in A.Y. 2006-07 also (ITA Nos. 3180/Mum/2009 dated 27.2.2015). Relevant para of the order in A.Y. 2004-05 read 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 246A of the I.T. Act and since the issue is purely of credit for taxes paid and is thus not an appealable order directly therefore learned CIT(A) held that ground of appeal does not survive and consequently rejected the same. Aggrieved by the said order the assessee has filed the present appeal before us. 20. Before we come to any conclusion, we mention provisions of section 246A, which reads as under :- Appealable order (I) Subject o the provisions of sub-section (2), any assessee aggrieved by any of the following orders of an Assessing Officer (other than the Deputy Commissioner) may appeal to the Deputy Commissioner (Appeals) (before the 1st day of June, 2000) against such order. (a) an order against the assessee, where the assessee denies his liability to be assessed under this Act, or an intimation under sub- section (1) or sub- section (1B) of section 143, where the assessee objects to the making of adjustments] or any order of assessment under sub- section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) is justified in deleting the addition of ₹ 6,57,39,068/- being reversal of provision of impairment of investments made by the Assessing Officer in accordance with Rule 5 of the First Schedule r.w.s. 44 of the I.T. Act, 1961. Whether on the facts and in circumstances of the case and in law, the CIT(A)erred in deleting the disallowance of deduction of ₹ 7,58,646/- in respect of ex-gratia payment made in accordance with Rule 5 of the first Schedule r.w.s. 44 of the I.T. Act, 1961. 27. At the very outset, learned AR appearing on behalf of the assessee submitted that the issue involved in the aforecited grounds are covered in favour of the assessee by the Tribunal order in assessee s own case for earlier years i.e. A.Ys. 2004-05 (ITA No. 4059/Mum/2011 dated 20.2.2015). Learned Departmental Representative fairly conceded that the issue is covered in favour of the assessee. 28. Consistent with the view taken by the Tribunal, by respectfully following the Tribunal order in assessee s own case on the issue, we decide the issue in favour of the assessee. 29. In the result appeal filed by the Revenue is dismissed. 30. In the net result, appeal filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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