2010 (12) TMI 1200 - AT - Income Tax

Summary

Issues Involved:
1. Addition on account of profit on sale of investments.
2. Disallowance on account of investments written off.
3. Disallowance on account of loss on amortization.
4. Disallowance of expenditure u/s 14A.
5. Deletion of interest u/s 234D.

Summary:

1. Addition on account of profit on sale of investments:
The Tribunal noted that this issue had been previously adjudicated in favor of the assessee for the assessment year 2005-06 and earlier years. The Tribunal followed its earlier decision, which was based on the case of Bajaj Allianz General Insurance Co. Ltd., and concluded that profits on sale of investments are not taxable for the years prior to the amendment effective from 2011-12. Consequently, the addition made on account of profit on sale of investment was deleted.

2. Disallowance on account of investments written off:
The Tribunal observed that after the omission of Rule 5(b) of the First Schedule of the Income Tax Rules, any provision or amount written off on account of depreciation or loss on the realization of investment is not allowed as a deduction. Therefore, the disallowance of Rs. 3,73,76,789/- on account of investments written off was upheld.

3. Disallowance on account of loss on amortization:
Similar to the disallowance on investments written off, the Tribunal held that any provision or amount written off on account of depreciation or loss on the realization of investment is not allowed as a deduction. Thus, the disallowance of Rs. 34,00,22,121/- on account of loss on amortization was confirmed.

4. Disallowance of expenditure u/s 14A:
The Tribunal referred to its earlier decisions, including the case of Bajaj Allianz General Insurance Company Ltd. and M/s Reliance General Insurance Co., and concluded that the provisions of section 14A do not apply to insurance companies. The Tribunal reiterated that section 44, which governs the computation of income for insurance companies, prevails over other provisions, including section 14A. Therefore, the disallowance of Rs. 44,03,609/- on account of expenditure u/s 14A was deleted.

5. Deletion of interest u/s 234D:
The Tribunal dismissed this ground of appeal as the Committee on Disputes (COD) had not granted permission to the assessee to pursue this ground. Consequently, the issue of deletion of interest u/s 234D was not considered.

Conclusion:
The appeal of the assessee was partly allowed, with the Tribunal deciding in favor of the assessee on the issues of profit on sale of investments and disallowance of expenditure u/s 14A, while upholding the disallowances on account of investments written off and loss on amortization. The ground related to interest u/s 234D was dismissed for lack of COD permission.