TMI Blog1977 (11) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to include all rights and powers, and all property, whether movable or immovable, appertaining to his controlled business, including, in particular, cash balances, reserve funds, investments, deposits and all other interests and rights in or arising out of such property as may be in the possession of the insurer and all books of account or documents relating to the controlled business of the insurer ; and liabilities shall be deemed to include all debts, liabilities and obligations of whatever kind then existing and appertaining to the controlled business of the insurer ...... " We are not concerned with the Explanation to sub-section (2) of section 7 for the purposes of this reference. A reference to the provisions in section 7(2) will become material later when we come to discuss the contentions of the assessee in respect of question No. 7 which has been referred to this court. In respect of the assessment year in question, the assessee had claimed certain deductions as follows : --------------------------------------------------------------------------------------------------------------------------------------------------- S. Amount Nature of the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gains of any business 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." The provisions of the First Schedule which were in force at the material time in so far as they are relevant for the purposes of the present reference are to be found in rule 2 of the First Schedule which provides as follows : " The profits and gains of life insurance business shall be taken to be the greater of the following : (a) the gross external incomings of the previous year from that business, less the management expenses of that year ; (b) the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation made in accordance with the Insurance Act, 1938 (IV of 1938), in respect of the last inter-valuation period ending before the commencement of the assessment year, so as to exclude from it any surplus or deficit included therein which has made in any earlier inter-valuation period and any expenditure or allowance which is not deductible under the provisions of sections 30 to 43A in computing, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and (2) the expenditure or allowance which is not deductible under sec tions 30 to 43A of the Income-tax Act. These were the only adjustments which were permissible and barring these adjustments, according to the Tribunal, the Income-tax Officer was not entitled to make any other adjustments. The effect was that the deductions which were permitted by the Appellate Assistant Commissioner were held to be not permissible. With regard to the said amount of Rs. 29,29,282, the Tribunal confirmed the finding given by the Appellate Assistant Commissioner that these amounts of refund of income-tax which were now included in the surplus disclosed in the actuarial valuation of the latest inter-valuation period, were never included in the actuarial surplus of the earlier inter-valuation period. The Tribunal held as a fact that in the surplus as disclosed in the actuarial valuation in the last inter-valuation period, there was no brought forward surplus or deficit of the earlier inter-valuation period and, therefore, the tax refunds received did not form part of the surplus of the earlier inter-valuation period. The Tribunal also further found that only such portions of the refund which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961, to rebate of income-tax and super-tax on dividends of Rs. 29,38,237 received by it from newly established industrial undertakings during the relevant inter-valuation period ? (5) Whether in the computation of income from life insurance business, was the assessee-Corporation entitled under section 99(1)(iv) of the Income-tax Act, 1961, to rebate of super-tax on dividends of Rs. 50,75,413 received by it during the relevant inter-valuation period from industrial undertakings ? (6) Whether in the computation of tax in respect of income from life insurance business, was the assessee-Corporation entitled under section 235(b)(ii) of the Income-tax Act, 1961, to a rebate of income-tax of Rs. 1,52,511 on dividends assessed to agricultural income-tax received by it during the relevant inter-valuation period ? (7) Whether, on the facts and in the circumstances of the case, the sum of Rs. 29,39,959 being the refund of income-tax received by the Corporation during the inter-valuation period in respect of the income-tax up to the assessment year 1956-57 of the life insurance business of the erstwhile insurers whose business had been taken over by the Corporation, should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to therein is excluded in the case of an assessee who carries on insurance business and in whose case the provisions of rule 2 of the First Schedule are attracted. If the deductions which are claimed by the assessee do not fall within the provisions which are referred to in section 44, it will have to be held that the applicability of those provisions in the case of an assessee whose assessment is governed by section 44 read with rule 2 in the First Schedule is not excluded. Mr. Kolah has relied on the decision of this court in Commissioner Of Income-tax v. New India Assurance Co. Ltd. [1969] 71 ITR 761 (Bom), in support of his proposition that the applicability of only certain provisions is excluded by the provisions of section 44 and that the other provisions which deal with allowable deductions, unless they are expressly excluded, will have to be held applicable in the case of even an assessee who carries on life insurance business. In the case of New India Assurance Co. Ltd. [1969] 71 ITR 761 (Bom), the provision considered was section 10(7) of the Indian Income-tax Act, 1922. Section 10(7) read as follows : " Notwithstanding anything to the contrary contained in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee that the amounts referred to above could not be included while computing the income of the assessee-Corporation. Mr. Joshi appearing on behalf of the revenue was not in a position to dispute that the authority of the decision in New India Assurance Co. Ltd.'s case [1969] 71 ITR 761 (Bom) has not been in any way shaken by any other decision. It was also not possible for him to dispute that, in view of this decision, it will have to be held that the several provisions on which reliance was placed on behalf of the assessee for claiming that the several amounts referred to above should not be included in the income of the assessee could have been availed of by the assessee. It is, therefore, clear that the Tribunal was in error in setting aside the order of the Appellate Assistant Commissioner who had allowed the several amounts referred to above to be excluded from the total income of the assessee. In view of this, the questions Nos. 1 to 6 will have to be answered in favour of the assessee. Coming to question No. 7, it is vehemently contended by Mr. Kolah appearing on behalf of the assessee that though the Appellate Assistant Commissioner and the Appellate Tribunal have foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policies, he deducts that liability from the life assurance fund and the result is the surplus. If this is the concept of the surplus to be found on actuarial valuation, then it is obvious that before a surplus is asked to be deducted on the ground that that part of the surplus was carried forward from the earlier inter-valuation period, it must be found as a fact that what is now sought to be deducted was shown as a surplus of the earlier inter-valuation period. Rule 2(1)(b) operates in respect of the particular assessee whose profits of the life insurance business are under computation. Accepting the contention of the learned counsel for the assessee would mean that we would have to add to the language of rule 2(1)(b) so that it should be so construed that what is to be taken into account is not the actual surplus which has been carried forward into the inter-valuation period in question but also some amount which must be deemed to have been carried forward into the surplus of the inter-valuation period. It is, no doubt, true that the legal effect of section 7 of the Life Insurance Act is that the assets of the insurer who carried on the life insurance business are vested in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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