TMI Blog2016 (10) TMI 1356X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption available to any other assessee under any of the clauses of Sec. 10 of the Act shall also be made available to a person carrying on non-life insurance business. Apart therefrom, at the time of hearing the learned representative for the assessee has referred to the decision of Tribunal in the case of assessee for Assessment Year 2007-08 2015 (2) TMI 1372 - ITAT MUMBAI] wherein similar issue has been decided in favour of the assessee following precedents in the case of ICICI Prudential Insurance Co. Ltd. [ 2012 (11) TMI 13 - ITAT MUMBAI ] and New India Assurance Co. Ltd. [ 1967 (10) TMI 16 - BOMBAY HIGH COURT ] - Decided in favour of assessee. - ITA Nos.6837 & 6832/Mum/2014 (Assessment Years: 2005-06 & 2009-10) - - - Dated:- 4-10-2016 - Shri Joginder Singh, Judicial Member, and Shri Manoj Kumar Aggarwal, Accountant Member Revenue by : Shri B.C.S. Naik CIT-DR Assessee by : Ms. Arati Visanji O R D E R Per Joginder Singh(Judicial Member) Both these appeals are by the Revenue for Assessment year 2005-06 2009-10, aggrieved by the impugned orders both dated 14/08/2014 of the ld. First Appellate Authority, Mumbai. 2. In the appeal for Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT to the AO to reframe the assessment to disallow the expenditure for payment of reinsurance premium to associated enterprises u/s. 40(a)(i) of the Act. 3. The assessee is engaged in general insurance business. The assessee offers insurance in the form of fire, engineering, health, motor, travel, marine and liability insurance policies. The return of income for the year was filed on 18.10.2005 declaring total income at ₹ 14.70 crores. The book profit was computed u/s. 115JB of the Act at ₹ 44.03. Crores. The assessment was completed u/s. 143(3) of the Act. The assessed income was computed at ₹ 46.29 crores. Since the tax payable on the total income computed under the normal provision of the Act was greater than the tax payable on the book profit u/s. 115JB, the total income computed under the normal provision was taken as the total income of the assessee. 3.1. Invoking the powers conferred upon him vide Sec. 263 of the Act, the CIT was of the firm belief that the assessee has made payment of ₹ 16,85,47,839/- without deducting tax at source to its associated enterprises M/s. Odyssey America Reinsurance Corporation, Singapore for providing reinsur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductible at source, details of amount remitted/sent abroad and detailed enquiries were made in connection with the transactions reported in the Form 3CEB. The Ld. Counsel continued by saying that necessary enquiries were made by the AO against which the assessee filed detailed reply which has been considered by the AO before framing the assessment u/s. 143(3) of the Act. Therefore, the order passed by the CIT u/s. 263 is against the facts of the case. 6. Per contra, the Ld. Departmental Representative strongly supported the order of the CIT. 7. We have carefully considered the rival submissions and perused the assessment order and the order of the learned Commissioner. The first thing which has to be considered is whether the Learned Commissioner has rightly assumed the power under section 263 of the Act. The Hon ble Supreme Court in Malabar Industrial Co. Ltd. 243 ITR 83 has laid down the following ratio:- A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Incometax Officer is erroneous in so far as it is prejudicial to the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Co ordinate Bench on identical issue, it can be safely concluded that the assessment order has not been made on an incorrect application of law. On facts, a perusal of the questionnaire issued along with the notice u/s. 142(1) of the Act dt. 18th August, 2008 shows that vide Question No. 29 the AO had sought details of all payments/expenses on which tax was deductible at source as per the provisions of the Act. Question No. 35 was with respect to details of amount remitted/sent abroad supported by RBI prescribed certificate issued by C.A u/s. 195 of the Act, 1961 and Question No. 37 was in connection with the transactions reported in the Form 3CEB. The assessee had filed a detailed reply in respect of these queries raised during the assessment proceedings. Thus the observation of the CIT that the payment of ₹ 16.85 crores to its associated enterprise has not been considered and examined by the AO for disallowance u/s. 40(a)(i) of the Act is incorrect in the light of the facts stated hereinabove. 10.1. The AO has taken a view which may be different from the view of the Ld. Commissioner and assuming that the view taken by the AO is a loss to the Revenue but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income declaring an income of ₹ 111,10,82,730/-. The Assessing Officer assessed the total income at ₹ 224,99,28,526/- under the normal provisions of the Act. This income was deduced after disallowing the exemptions claimed by the assessee u/s 10(38), 10(15) and 10(34) of the Act on account of profit on sale of investments ₹ 54,18,03,880/-; interest ₹ 14,11,04,910/-; and, dividend ₹ 5,87,77,006/- respectively. Additionally, the Assessing Officer also disallowed ₹ 39,71,60,000/- debited in the Profit Loss Account on account of Provision for expenses on the ground that such expenses could not be said to have accrued as it was a mere provision. The sum and substance of the stand of Assessing Officer was that the income of assessee from the business of Insurance was required to be determined in terms of Sec. 44 of the Act read with First Schedule of the Act and accordingly, the exemptions under Sec. 10(38) or Sec. 10(15) or Sec. 10(34) of the Act were not applicable. The aforesaid action of the Assessing Officer was carried in appeal before the CIT(A) on various issues. On some issues, CIT(A) has allowed relief against which Revenue is in appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of Insurance under section 44 of the I T Act and the same shall be computed in accordance with the Rule containing in first schedule of the Act. The profits and gains of business of insurance other than the life insurance shall be computed as per Rule 5 of First Schedule as under: 5. The profits and gains of any business of insurance other than life insurance shall be taken to be the profit before tax and appropriations as disclosed in the profit and loss account prepared in accordance with the provisions of the Insurance Act, 1938 (4 of 1938) or the rules made thereunder or the provisions of the Insurance Regulatory and Development Authority Act, 1999 (4 of 1999) or the regulations made thereunder, subject to the following adjustments; a. Subject to the other provisions of this rule, any expenditure or allowance including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed which is not admissible under the provisions of sections 30 to 43B in computing the profits and gains of a business shall be added back; b. (i) any gain or loss on realisation of investments shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he latest decision dated 22.10.2010, this Tribunal in the case of Tata AIG General Insurance Co Ltd vs ACIT in ITA No.2597/Mum/2009 after considering the earlier decisions of the Tribunal has held in paras 18 to 20 as under: 18. We have carefully considered the rival contentions. There is no dispute that under the guidelines issued by the IRDA (Auditors Report) Regulations of 2002, for preparation of financial statements, the profit on sale of investments is to be credited to the Profit and Loss Account of the insurance company. There is also no dispute that the assessee has credited the Profit and Loss Account with such profit the question is whether such profit can be excluded and exemption can be claimed. Rule 5(b), as it stood before being omitted from 01.04.1989, was as follows: - any amount either written off or reserved in the accounts to meet depredation of or loss on the realization of investments shall be allowed as a deduction, and any sums taken credit for in the accounts on account of appreciation of or gains on the realization of investments shall be treated as part of the profits and gains; Provided that the Assessing Officer is satisfied about the reasona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e therefore consequently cannot be taxed u/s 44 of I T Act. After expressing this view we hereby dismiss the cross objection of the revenue . 19: The aforesaid order of the Pune Bench, which was in the case of a company carrying on general insurance business, was followed by the Mumbai Bench Of the Tribunal in its order dated 17.09.2010, in the case :of HDFC ERGO General Insurance Company Ltd., in ITA No: 338/Mum/2009 (assessment year 2004- 05) as also in its Order dated 30.04.2010, in the case of Reliance General Insurance Co. Ltd., in :ITA No. 781/Mum/2007 (and other appeals).Copies of these orders have also been filed before us. In these orders it has been held that the profit on sale of investment in the case of an assessee carrying on general insurance business cannot be brought to tax after the omission of rule 5(b) and as per the Circular cited above. Since the controversy before us is identical, respectfully following the orders of the Pune and Mumbai Benches of the Tribunal cited above, we direct the Assessing Officer to exclude the profit of Z47,45,699/- on the sale of investments from the assessment V 20. The learned CIT DR, however, argued that the effect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereby it is clarified that exemption available to any other assessee under any of the clauses of Sec. 10 of the Act shall also be made available to a person carrying on non-life insurance business. Apart therefrom, at the time of hearing the learned representative for the assessee has referred to the decision of Tribunal in the case of assessee for Assessment Year 2007-08 (supra), wherein similar issue has been decided in favour of the assessee following precedents in the case of ICICI Prudential Insurance Co. Ltd. (supra) and New India Assurance Co. Ltd. (supra). The relevant discussion in the order of Tribunal dated 12.02.2015 reads as under :- 3. The issues raised vide Ground No. 2 have been considered by the Tribunal in the case of ICICI Prudential Insurance Company Ltd. in ITA No. 6854, 6855, 6856 6859/Mum/2010. The Tribunal has considered the issue at page 59 of its order and at page 60 the Tribunal has considered the decision of Life Insurance Corporation of India vs. CIT (Bom) and at page 62 the Tribunal has considered the decision in the case of New India Assurance Company Ltd. and finally at para 49 of this order the Tribunal concluded that the assessee is entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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