TMI Blog2018 (12) TMI 1939X X X X Extracts X X X X X X X X Extracts X X X X ..... the computation made by the assessee is in accordance with Rule 2 of the Insurance Act 1938, according to which only AO can base his computation. The Revenue has not contested that the working of actuarial surplus / deficit is not in accordance with Rule 2 of 1st Schedule. Accordingly we are of the view that the CIT(A) has rightly deleted the addition and we confirmed the same. Disallowance of deduction/exemption claimed by the assessee u/s. 10(34) of the Act in respect of dividend income - HELD THAT:- As decided in own case [ 2016 (11) TMI 598 - ITAT MUMBAI] the exemption available to any other assessee under any clauses of section 10 is also available to a person carrying on non-life insurance business subject to the fulfilment of the conditions, if any, under a particular clause of section 10 under which exemption is sought. It needs to be emphasized that it is not the case of the Assessing Officer that the assessee had failed to fulfil the condition which attached to the provisions of the relevant clauses of section 10 in respect of which the exemption was allowed. This of course is apart from clause (38) of section 10 where the Assessing Officer had rejected the claim f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in Appellant's own case for AY 2010-I1 and various other tribunal decisions (including that of jurisdictional tribunal) relied upon by the Appellant, wherein it has been held the taxable income of insurance companies shall be computed only in accordance with provisions of section 44 read with First Schedule of the Act and it is not permissible to the assessing oil-ice to travel beyond the provisions of section 44 read with First schedule of the Act and make disallowance by applying section 14A of the Act. 1.3 Without prejudice to the above, the learned CIT(A) erred in law by ignoring the suo moto 14A disallowance of ₹ 9,50,537 made by the Appellant. The Appellant prays that the AO be directed to delete the disallowance of ₹ 3,84,65,018 computed as expenses incurred for earning exempt income. 3. We have heard rival contentions and gone through the facts and circumstances of the case. In this regard, the ld. counsel for the assessee argued that this issue is squarely covered in favour of the assessee by the following the assessee s own case in ITAs No. 4110/Mum/2014 4130/Mum/2014 vide order dated 12.09.2016, wherein Tribunal has considered the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal. The Pune Bench of this Tribunal in the case of Bajaj Allianz General Insurance Company limited V/s Add. CIT (supra) has decided this issue in paragraphs 17 to 20 as under: 17. Finally the quest ion to be answered is about the applicability of s. 14A in respect of sale of investment which is not taxed under the special circumstances of deletion of a sub-rule from the statute. It is not questioned that the impugned profit was non-taxable per se rather the accepted legal position is that the impugned profit was very much taxable in the past .Now it has been informed that this controversy in respect of insurance company set at rest by a decision of Tribunal , Delhi Bench verdict in the case of Oriental Insurance Co. Ltd. (ITA Nos. 5462 5463/Del /2003) asst. yrs. 2000-01 and 2001-02 order dt. 27th Feb. 2009 [reported as Oriental Insurance Co. Ltd. v. Asst t . CIT [2010] 130 TTJ (Delhi)388 : [2010] 38 DTR (Delhi ) 225--Ed. ] . Therefore considering the vehement reliance of learned Authorized Representative it is worth to mention at the outset itself that the issue now stood resolved by this latest decision of Delhi, Tribunal in the case of Oriental Insurance Co. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in ss. 28 to 43B, the profits and gains of any business ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench of insurance, including any such business carried on by a mutual insurance company or by a co operative society, shall be computed in accordance with the rules contained in the First Schedule '. 23. The above provision makes it very clear that s. 44 applies notwithstanding anything to the contrary contained within the provisions of the IT Act relating to computation of income chargeable under different heads. We agree with the learned counsel that there is no requirement of head-wise bifurcation called for while computing the income under s. 44 of the Act in the case of an insurance company. The income of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished in the Controller of Insurance. The actual computation of profits and gains of insurance business will have to be computed in accordance with r. 5 of the First Schedule. In the light of these special provisions coupled with non obstante clause the AO is not permitted to t ravel beyond these provisions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandate to the AO is to compute the said income in accordance with the provisions of ss. 28 to 43B of the Act. In the case of the computation of profits and gains of any business of insurance, the same shall be done in accordance with the rules prescribed in First Schedule of the Act, meaning thereby ss. 28 to 43B shall not apply. No other provision pertaining to computation of income will become relevant. According to the learned counsel, two presumptions that follow on a combined reading of ss. 14, 14A, 44 and r. 5 of the First Schedule are: (a)That no head-wise bifurcation is called for. The income, inter alia, of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished to the ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench Controller of Insurance under the Insurance Act, 1938. The said balance of profits is subject only to adjustments there under. The adjustments do not refer to disallowance under s. 14A of the Act. (b) Profits and gains of business as refer red to in (a) above have only to be computed in accordance with r. 5 of the First Schedule. 22. Sec. 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal s decision in assessee s own case cited supra, this issue of assessee s appeal is allowed. 5. The next issue in assessee s appeal is against the order of CIT(A) in deleting the disallowance made by the AO on account of carry forward of losses of ₹ 11,52,53,672/- from pension business. For this, Revenue has raised following Ground No.4: - Ground No. 2: Rejection of claim of Its. 11,52,53,672 being deficit incurred by the Appellant in pension business segment. The CIT(A) erred in law in upholding the order of the AO and rejecting the Appellant's claim of ₹ 11,52,53,672 being deficit incurred in pension business segment. While rejecting the Appellant's claim, the learned CIT(A) erred on the following counts, 2.1 The learned CIT(A) erred in interpreting the decision of jurisdictional High Court in the case of Life Insurance Corporation of India (LIC) disregarding the point that the facts of this ease is absolutely identical to that of LIC and that fact that both, the Appellant and LIC operates in the same industry. 2.2 The learned CIT(A) erred in ignoring the order of jurisdictional tribunal for AY 2010-I1 in the Appellant's o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profis as well as loss arising from Jeevan Suiraksha Fund would not be includible in the total income of the assessee and, therefore, while determining the distributable profits of the assessee, the loss from Jeevan Suraksha Fund ought not to be allowed to be adjusted against the taxable income. 17. It is not in dispute that the Jeevan Suraksha Fund is a pension fund approved by the Controller of Insurance appointed by the Central Government to perform the duties of the Controller of Insurance under the Insurance Act, 1938. The loss incurred in the Jeevan Suraksha fund has been considered by the actuary as a business loss, as per the valuation report as on the last day of the financial year, allowable under section 44 read with the First Schedule to the Income-tax Act, 1961. The fact that the income from such fund has been exempted under section 10(23AAB) with effect from 1st April 1997, does not mean that the pension fund ceases to be insurance business, so as to fall outside the purview of the insurance business covered under section 44 of the Income-tax Act, 1961. In other words, the pension fund like Jeevan Suraksha Fund would continue to be governed by the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein Tribunal held as under: - 9. At the outset Ld. Counsel for the assessee stated that the similar issue was raised before Hon‟ble Jurisdictional High Court in the case of CIT Vs. ICICI Prudential Insurance Co. Ltd. in ITA No. 711 688/2014 dated 20/07/2015 and Hon‟ble High Court has adjudicated the following question no. 6: 6. Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in failing to appreciate that negative reserve has an 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? Ld. Counsel stated that Hon‟ble High Court has answered this question in its judgment vide para 4 as under: 4. So far as Question No. 6 is concerned, the grievance of the revenue is that the Tribunal after having taken total surplus as arrived by Actuarial valuation ought to have reduced negative reserve amount of ₹ 27.27 crores while determining respondent assessee‟s income under Section 44 of the Act. The impugned order records that the mathematical reserves is a part of the Actuarial valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival contentions and gone through the facts and circumstances of the case. In this regard, the ld. counsel for the assessee argued that this issue is squarely covered in favour of the assessee by the following the assessee s own case in ITAs No. 4110/Mum/2014 4130/Mum/2014 vide order dated 12.09.2016, wherein Tribunal has considered the issue as under: - 5. As regards to Revenue s issue of claim of deduction by assessee u/s 10(34) of the Act allowed by the CIT (A), Ld. Counsel for the assessee stated that the similar issue was raised before Hon ble Jurisdictional High Court in the case of CIT Vs. ICICI Prudential Insurance Co. Ltd. in ITA No. 711 688/2014 dated 20/07/2015 has adjudicated the following question no. 5 : Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct 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? According to Ld. Counsel, Hon ble High Court has confirmed the order of Tribunal and this question was not admitted. 6. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the CIT (A) was that the assessee was not eligible for deduction under section 10, once the incomes are brought to tax under section 44 r.w. Rule 5 of First Schedule to the Income Tax Act, 1961. 8. There is no need to consider the arguments of the CIT (A) and how he has arrived at that conclusion in this order as this issue was decided by the Hon'ble Bombay High Court in favour of the assessee in writ petition No.2560 of 2011 in the assessee's own case dated 1.12.2011. Consequent to the findings of the CIT(A) in AY 2007-08 (impugned AY ) the Assessing Officer seems to have issued notice under section 148 for reopening the assessment for the AY 2006-07 on the reason that the assessee was not eligible for claiming income as exempt under sub-sections 15, 23G, 34 and 38 of Section 10 and assessee challenged the issue by way of writ petition. The Hon'ble Bombay High Court not only disapproved the reopening of the assessment but gave the findings on merit also which are as under:- 11. Section 44 of the Income Tax Act, 1961 stipulates as follows: 44. Notwithstanding anything to the contrary contained in the provisions of this Act relating to the compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench that case which carried on life insurance business had made a claim to exemption under section 10(15) and section 19(1). In a reference before the Court, the questions referred included whether in computing the profits and gains of the business of insurance under section 44 read with the First Schedule certain items which were ordinarily not includible in the total income were rightly included in the taxable surplus. The Division Bench of this Court held as follows: The question which essentially falls to be determined in this reference is whether, in view of the provisions in section 44 or rule 2 of the first Schedule, the Life Insurance Corporation will not be entitled to claim the deductions which are otherwise admissible in the case of an assessee, computation of whose income is governed by the other provisions of the Act. The argument of Mr. Kolah for the Life Insurance Corporation is that unless there are express provisions which disable the Corporation from claiming the deductions referred to above, the Corporation cannot be deprived of the benefit of the provisions referred to in the questions Nos. 1 to 6. Section 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew India Assurance Co Ltd . That was a case of an assessee which carried on non life insurance business. In New India Assurance Co. Ltd. the Division Bench dealt inter alia with the provisions of section 19(7) of the Income Tax Act, 1922. The questions referred to this Court included whether the assessee was entitled to claim an exemption from tax under section 15B and15C (4) and in respect of interest on a government loan under a notification issued under section 60. Section 10(7) of the Income Tax Act, 1922 provided that notwithstanding anything to the contrary contained in section 8,9,10,12 or 18, the profits and gains of any business of insurance and the tax payable thereon shall be computed in accordance with the rules contained in the Schedule to the Act. The Division Bench held that upon the language of sub-section (7) of section 10 read along with rule 6 it was impossible to hold that the provisions relating to exemptions stood excluded from operation. In that context the Division Bench held as follows: It is only after the profits and gains of a business are computed that any question of granting exemptions arises and if the latter stage were intended to be excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the provisions of the First Schedule to the Income-tax Act and satisfying the requirements of the Insurance Act are binding on the Assessing Officer under the Income-tax Act and he has no general power to correct the errors in the accounts of an insurance business and undo the entries made therein . ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench The question whether an assessee who carries on general insurance business would be entitled to avail of an exemption under section 10 did not arise. The issue as to whether the assessee which carries on the business of general insurance would be entitled to the benefit of an exemption under clauses (15), (23G) and (33) of section 10 is directly governed by the decision rendered by the Division Bench in Life Insurance Corporation vs. Commissioner of Income-tax (Supra) following the earlier decision in Commissioner of Income-tax vs. New India Assurance Co. Ltd(supra). The Assessing Officer could not have ignored the binding precedent contained in the two Division Bench decisions of this Court. Moreover, the Assessing Officer in allowing the benefit of the exemption in the order of assessment under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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