2012 (2) TMI 522 - AT - Income Tax

Addition on account of profits on sale of investments - Deduction for Investments written off - Deduction for amortization of Premium on Investment debited to Profit & Loss A/c - Benefit of Exemption under section 10(38) in respect of Profit on sale of investments, Rebate under section 88E and concessional rate of tax under section 111A - Availability of Section 10 Exemption - Non applicability of provisions of section 14A - Non-applicability of provisions of section 115JB i.e. MAT - Higher Interest charged under section 234C.

Issues Involved:
1. Addition on account of 'profits on sale of investments'.
2. Deduction for investments written off.
3. Deduction for amortization of premium on investment debited to Profit & Loss A/c.
4. Benefit of exemption under section 10(38) in respect of profit on sale of investments, rebate under section 88E, and concessional rate of tax under section 111A.
5. Availability of section 10 exemption.
6. Non-applicability of provisions of section 14A.
7. Non-applicability of provisions of section 115JB (MAT).
8. Higher interest charged under section 234C.

Detailed Analysis:

1. Addition on account of 'profits on sale of investments':
The assessee claimed an exemption on profits from the sale of investments amounting to Rs. 819,26,24,325/-. The Assessing Officer (AO) and CIT (A) disallowed this exemption. However, the tribunal noted that this issue had been previously adjudicated in favor of the assessee for AY 2005-06 and AY 2006-07. The tribunal cited the precedent decisions in the assessee's own case and similar cases like Bajaj Allianz General Insurance Co. Ltd., HDFC ERGO GIC, and others. Consequently, the tribunal allowed the ground in favor of the assessee, deleting the addition made by the AO.

2. Deduction for investments written off:
The assessee added back Rs. 17,93,33,110/- for investments written off in the computation of income, claiming this deduction as an alternate to the exemption on profit from the sale of investments. Since the tribunal allowed the exemption on profit from the sale of investments, this ground became infructuous and was rejected.

3. Deduction for amortization of premium on investment debited to Profit & Loss A/c:
The assessee sought a deduction of Rs. 34,95,85,335/- for amortization of premium on investments. This claim was made as an alternate to the exemption on profit from the sale of investments. The tribunal noted that this issue was previously decided against the assessee in AY 2006-07. Since the profit on sale of investments was not being taxed, the tribunal rejected this ground, denying the deduction.

4. Benefit of exemption under section 10(38) in respect of profit on sale of investments, rebate under section 88E, and concessional rate of tax under section 111A:
This was an alternate ground without prejudice to the main ground of exemption on profit from the sale of investments. Given that the tribunal allowed the main ground, this alternate ground was deemed unnecessary and was rejected.

5. Availability of section 10 exemption:
The CIT (A) enhanced the assessment by disallowing exemptions under sections 10(15) and 10(34), amounting to Rs. 3,45,19,352/- and Rs. 270,66,46,489/- respectively. The tribunal noted that this issue was settled by the Hon'ble Bombay High Court in the assessee's favor in a writ petition, confirming the assessee's entitlement to exemptions under section 10. Consequently, the tribunal allowed this ground, canceling the enhancement made by the CIT (A).

6. Non-applicability of provisions of section 14A:
The AO disallowed Rs. 25,21,95,669/- under section 14A. The tribunal referenced previous decisions in the assessee's own case and similar cases like Bajaj Allianz General Insurance Co. Ltd., concluding that section 14A does not apply to insurance companies. Thus, the tribunal allowed this ground in favor of the assessee.

7. Non-applicability of provisions of section 115JB (MAT):
The CIT (A) found that section 115JB does not apply to the assessee, as the accounts are prepared under the Insurance Act, not the Companies Act. Despite this, the CIT (A) restricted relief to the extent of the declared income under section 115JB. The tribunal, referencing decisions like Krung Thai Bank PCL and Set Satellite (Singapore) Pte Ltd., directed the AO to exempt the assessee from section 115JB, fully allowing this ground.

8. Higher interest charged under section 234C:
The AO charged Rs. 6,95,54,985/- as interest under section 234C, against the assessee's calculation of Rs. 6,50,54,986/-. The tribunal noted the absence of detailed working by the AO and directed the AO to provide the calculation to the assessee for review. This ground was allowed for statistical purposes, with directions to the AO to re-examine the interest calculation.

Conclusion:
The tribunal partly allowed the assessee's appeal, providing relief on several grounds while rejecting others based on established precedents and detailed analysis of the provisions of the Income Tax Act, 1961.

← Previous Next →