TMI Blog2021 (10) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... losses incurred from pension fund is exempt under section 10(23AAB) - taxability of income from life insurance business is governed by section 44 of the Act with the first schedule of the Act even though when section 10 of the Act is applicable and income is exempt from tax, it follows that losses are also not allowed to be set off nor can be carried forward - HELD THAT:- The insurance business has to be considered by the actuary valuation as per the valuation report allowable under Section 44 read with First Schedule to the Act. Merely for the reason that the income from pension fund is exempted under Section 10(23AAB) with effect from 01.04.1997, it cannot be held that the loss incurred under the fund cannot be carried forward or given a set-off. The Clause 13.1 of the C.B.D.T. Circular No.762, dated 18.02.1998, provides that the Life Insurance Corporation of India (LIC) has started a new personal-cum-family pension scheme. The scheme offers attractive terms to its contributors and has a provision for payment of a life-time widow s pension in the event of the death of the contributor during the contribution period. Clause 13.3 provides that in order to enable the LIC to offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal, A Bench, Bangalore ( Tribunal for short) in ITA No.1005/Bang/2019 relating to the assessment year 2014-15. 4. These appeals were admitted to consider the following substantial questions of law:- (IN ITA No.112/2020) 1. Whether on the facts and in the circumstances of the case and in law, the Tribunal is in law in allowing claim of assessee made on account of surplus from shareholders account being treated as income from other business at ₹ 32,11,86,149/- by holding that surplus available both in Policy Holders Account and Share Holders Account is to be consolidated and only net surplus is to be taxed as income from insurance business without observing that income from life insurance business is liable to be treated differently when compared to income from other business (share holder s account) since section 44 read with First Schedule do not cover income from other business? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law setting aside disallowance made in respect of claim of losses from pension fund not allowed to be carried forward at ₹ 93,39,11,564/- by holding that losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible for set-off and carry forward, from the income from the life insurance business. Being aggrieved, the revenue preferred appeals before the Tribunal. The Tribunal dismissed the appeals. Being aggrieved, the revenue has preferred the above appeals. 6. Learned counsel Sri. K.V. Aravind appearing for the appellants revenue argued that the Tribunal erred in holding that surplus available both in policy holder s account and shareholder s account is to be aggregated and only net surplus is to be taxed as income from insurance business. Income from other business is not covered by Section 44 of the Act and therefore to be taxed as per normal provisions which deal with exempt income namely, Section 10 of the Act. The provisions of Section 10 were brought into force to specifically exclude some income from purview of taxation. The income of the fund, set up by the Life Insurance Company of India or any other insurer under the pension scheme to which contribution is made by any person for the purpose of receiving pension for such fund is not included in computing the total income. As such, losses from pension fund cannot be allowed to be carried forward. Thus, it was argued tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bombay) has been rightly followed by the Tribunal. It was further argued that the judgment of Yokogawa India Ltd., supra, would come to the aid of the assessee, wherein it has been held that phrase total income used in Section 10A need not necessarily mean the total income as computed in accordance with the provisions of the Act. The computation of the relief as provided in Section 10A(4) is also with reference to the undertaking. The phrase total income used in Section 10A cannot be understood in the same sense as in Section 2(45). The phrase total income in Section 10A is not the total income of the assessee, the said total income means profits and gains of the STP undertaking as understood in its commercial sense. Thus, Section 10A and the interpretation given by this Court and the Hon ble Apex Court in Yokogawa India Ltd., supra would not come to the assistance of the revenue in support of the second question of law raised. 9. Heard the learned counsel for the parties and perused the material on record. Re. Substantial Question of Law No.1:- 10. This Court has dealt with this substantial question of law in extenso in ITA Nos.128/2018, 181/2017 and 436/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority established under subsection (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), as the case may be]. Explanation .- For the purposes of this clause, the expression Controller of Insurance shall have the meaning assigned to it in clause (5B) of section 2 of the Insurance Act, 1938 (4 of 1938);] 14. In the case of Harprasad, supra, the Hon ble Apex Court has held thus.. It may be remembered that the concept of carry forward of loss does not stand in vacuo. It involves the notion of set-off. Its sole purpose is to set off the loss against the profits of a subsequent year. It pre-supposes the permissibility and possibility of the carriedforward loss being absorbed or set off against the profits and gains, if any, of the subsequent year. Set off implies that the tax is exigible and the assessee wants to adjust the loss against profit to reduce the tax demand. If follows that if such set-off is not permissible or possible owing to the income or profits of the subsequent year being from a non-taxable source, there would be no point in allowing the loss to be carried forward . Conversely, if the loss arising in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal in holding that even after insertion of section 10(23AAB), the loss incurred from the pension fund like Jeevan Suraksha Fund had to be excluded while determining the actuarial valuation surplus from the insurance business under section 44 of the Income-tax Act, 1961 cannot be faulted. Accordingly, questions (c) and (d) are answered in the affirmative, that is, in favour of the assessee and against the revenue. 16. Learned counsel for the revenue argued that the aforesaid judgment was rendered on August 2, 2011, prior to the judgment rendered in Yokogawa, supra. Hence, the said judgment would not have any bearing on the facts of the present case. We are not inclined to accede to the submissions of the learned counsel for the revenue for two reasons; firstly, Section 10A of the Act deals with the special provisions in respect of newly established undertakings in free trade zone etc., whereas Section 44 of the Act deals with the profits and gains of any business of insurance, including any such business carried on by a mutual insurance company (relevant herein). It is true that while considering Section 10A of the Act, it has been held by the Co-ordinate Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
