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TMI Blog2025 (2) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... . Briefly stating, the assessee company is engaged in the business of the general insurance. Assessee e-filed its return of income on 30.11.2012, declaring total loss at (-) Rs. 317,49,19,625/-. The return was processed u/s. 143(1) of the Act. The case was selected for scrutiny and statutory notices u/s. 143(2) and 142(1) of the Act were issued and duly served upon the assessee. In response thereof, assessee filed its submissions. After considering assessee's submissions, learned assessing officer, vide assessment order dated 13.12.2016, found that the assessee company has deducted Rs. 5,44,26,022/- as long term capital gain u/s. 10(38) Rs. 10,81,88,869/- as interest u/s. 10(15) and Rs. 15,54,75,935/- as dividend u/s. 10(34) of the Act to a total of Rs. 31,80,90,826/-. Learned assessing officer observed that the computation of income from business of insurance had to be made in accordance with section 44 r/w 1st Schedule of the Act and the other provisions of the Act in respect of relevant heads of income were not applicable in the case of an insurance company. Learned assessing officer therefore made the aforesaid addition of Rs. 31,80,90,826/- to assessee's business income. 3. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case and in law, the Ld.CIT(A) erred in not appreciating the facts that the valuation of the insurance companies is done under the Insurance Act, therefore, what can be reduced is only what is specifically provided in schedule 1 Rule 2 and nothing else. Therefore, exemption under section 10 i.e 10(38), 10(15) & 10(34) cannot be granted to an assessee engaged in business of life insurance where income is computed u/s 44 of the I.T Act? 7. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) erred in interpreting that on account of "legislation by incorporation", 'only' the "un-amended' Insurance Act 1938 and the Regulations there under became part of section 44 r. w rule 2 of the First Schedule of the I.T Rules?" 5. Perused the records and heard learned DR for appellant revenue and learned representative for the respondent assessee. 6. Learned DR, though, fairly admitted that the issue in dispute under appeal is covered by various decisions of this Tribunal in assessee's own cases, however, he submitted, to keep the issue alive as the revenue has preferred the present appeal. 7. Learned AR for the respondent assessee has suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's income has to be computed under section 44 r/w rule 5 of the first Schedule of the Act, though, he has agreed that in the preceding assessment years assessee's claim of exemption have been allowed by the Tribunal. It is evident, the dispute pertaining to assessee's claim of exemption as referred to above is a recurring issue and has been subject matter of dispute from the preceding assessment years. The Tribunal while deciding the issue in assessee's own case in preceding assessment years was of the consistent view that assessee's claim of exemption relating to profit on sale of shares and securities, interest on securities, dividend on share are allowable under section 10(38), 10(15) and 10(34) respectively. In the latest order of the Tribunal in ITA no.6837 and 6832/Mum./2014 dated 4th December 2016, relating to assessment year 2005-06 and 2009-10, the Tribunal while allowing assessee's claim has held in the following manner:- 3.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order dated 31/08/2016 (ITA No.3698/Mum./2013) fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) reads as under :- "5. We have considered the rival submissions as well as the relevant material on record. There is a special provision for computation of income chargeable under the head "profits and gain" inter-alia in the business of Insurance under section 44 of the IT 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided in the circular no.528 dated 16.12.1988 that the loss incurred by the general insurance companies on realization of investment shall not be allowed as deduction in computing the profit chargeable to tax. 5.3 In the 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 tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al conclusion to the said deletion of sub rule (b) from Rule 5 and the natural meaning is that after the deletion the income described therein is out of the purview of computation of Insurance Business from the First schedule therefore consequently cannot be taxed u/s 44 of IT 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 Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act of Rs. 14,11,04,910/- and Rs. 5,87,77,006/- respectively. On this aspect, it is seen that the CIT(A) allowed the plea of assessee by referring to the clarification issued by CBDT dated 21.02.2006 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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