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2013 (12) TMI 55 - AT - Income TaxEnvironmental Relief Fund disallowance u/s 43B Held that - Following Pruthvi Brokers and Shareholders Pvt. Ltd. 2012 (7) TMI 158 - BOMBAY HIGH COURT has held that even if a claim is not made before the AO, it can be made before the appellate authorities and the jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Hon ble Supreme Court - Since the assessee in the revised return has made a claim that the amount of Rs.70,31,561/- collected towards environmental relief fund does not fall under the purview of section 43B and since the Assessing Officer has not entertained the claim for not being claimed through a revised return, therefore, respectfully following the decisions cited (Supra) we hold that the assessee can make the claim before the appellate authorities and the appellate authorities can entertain such a claim The issue was restored for fresh decision. Profit on sale/redemption of investments Whether business income of the Public Financial Institution or income from Insurance business - Held that - Deletion of sub rule (b) from Rule 5 of the First Schedule was with a specific purpose. This schedule not only prescribe the method of computation of income of Insurance Business in Part (A) but also prescribe the method of computation of other Insurance Business in Part (B). Rule 5 is within Part(B) and earlier it has prescribed the method of taxation of profit on sale of investments which was later on scraped - The Revenue Department has no right to tax such an income in the absence of any enabling provision. Naturally, such a deletion cannot be treated a superfluous action but this change had to give a definite judicial meaning. We have to ascribe a logical 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 I.T. Act Decided against Revenue. Applicability of section 14A Sale of investment exempt u/s 44 - Held that - Following DCIT vs. Oriental General Insurance Co. Ltd. 2004 (9) TMI 323 - ITAT DELHI-C - Section 44 of the Act is a special provision dealing with the computation of profits and gifts of business of insurance - It being a non obstinate provision, has to prevail over other provisions in the Act - Income from insurance business has to be computed in accordance with the rule contained in the First Schedule - Section 44 creates a specific exception to the applicability of sections 28 to 43B The purpose of section 14A has no applicability to the profits and gains of an insurance business - Section 44 applies notwithstanding anything to the contrary contained within the provisions of the Income-tax Act relating to computation of income chargeable under different heads - In the cases of assessment of Insurance Companies it was not permissible to the A.O to travel beyond sec. 44 of First Schedule of I. T. Act Decided against Revenue.
Issues Involved:
1. Disallowance of liability towards Environmental Relief Fund under Section 43B. 2. Deletion of addition on account of disallowance of claim exemption of profit on sale/redemption of investments. 3. Applicability of Section 14A in the case of the present assessee. Issue-wise Detailed Analysis: 1. Disallowance of liability towards Environmental Relief Fund under Section 43B: The assessee challenged the CIT(A)'s decision upholding the Assessing Officer's (AO) action of disallowing the liability towards the Environmental Relief Fund amounting to Rs.69,76,873/- under Section 43B of the Income Tax Act. The AO noted that the assessee had added back the amount in the statement of income as it was not paid before the date of furnishing the return. The AO rejected the assessee's claim for deduction, citing the Supreme Court decision in Goetz (India) Ltd. vs. CIT, which mandates that claims for deduction can only be made by filing a revised return. The CIT(A) upheld the AO's action. The Tribunal found that a similar issue had been restored to the AO for fresh consideration in the assessee's own case for A.Y. 2006-07. Respectfully following this precedent, the Tribunal restored the issue to the AO for fresh decision in accordance with the law, allowing the ground raised by the assessee for statistical purposes. 2. Deletion of addition on account of disallowance of claim exemption of profit on sale/redemption of investments: The revenue appealed against the CIT(A)'s decision to delete the addition of Rs.11,23,922/- made by the AO on account of disallowance of claim exemption of profit on sale/redemption of investments. The AO had added the amount, arguing that the profit realized on the sale of investments should be considered as business income and not exempt, as Rule 5(b) of the First Schedule had been deleted. The CIT(A) deleted the addition, following the Tribunal's order for A.Y. 2003-04, which was upheld by the Tribunal for A.Y. 2006-07. The Tribunal found that the issue had been consistently decided in favor of the assessee in previous years and followed the rule of consistency, dismissing the revenue's grounds. 3. Applicability of Section 14A in the case of the present assessee: The revenue contested the CIT(A)'s conclusion that Section 14A of the Income Tax Act was not applicable to the assessee. The AO had made an addition of Rs.18,14,03,633/- under Section 14A, rejecting the assessee's explanations. The CIT(A) allowed the assessee's claim, following the Tribunal's decision in the assessee's own case for previous years, which held that Section 14A did not apply to insurance companies assessed under Section 44. The Tribunal found that the issue had been consistently decided in favor of the assessee in previous years, including A.Y. 2003-04 and A.Y. 2006-07, and upheld the CIT(A)'s decision, dismissing the revenue's ground. Cross Objection by Assessee: The assessee's cross objection challenged the computation of disallowance under Section 14A at Rs.18,14,03,633/-. The CIT(A) had held that Section 14A was not applicable to the assessee, a view upheld by the Tribunal. Consequently, the cross objection became infructuous and was dismissed. Conclusion: The Tribunal allowed the assessee's appeal (ITA No.1508/PN/2012), dismissed the revenue's appeal (ITA No.1406/PN/2012), and dismissed the assessee's cross objection (CO No.42/PN/2013), pronouncing the order on October 23, 2013.
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