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2016 (12) TMI 1741 - AT - Income TaxAssessment of income - Assessee carrying on two independent activities, - one of insurance business which was reflected in Policyholders Account by the assessee and the other, being an independent activity depicted in Shareholders Account, as per the detailed findings given in the assessment order - Held that - Assessee has time and again brought to the notice of the AO that assessee is engaged only in the business of life insurance. It has been brought to the notice of the AO that no other business has been carried out. The investments were made in line with the requirement of applicable regulations. It is further noted that nothing has been brought out by the AO in the assessment order to show if any other business has been done by the assessee. Shareholders Account and Policyholders Account have been separately maintained for the purpose of meeting the requirement of law as mentioned above also. There was no justification to artificially disintegrate the business by separately assessing the amount transferred from one account to the other by the assessee for the purpose of maintenance of accounts as per requirement of law. As relying on Tribunal order wherein it has been held that assessee was engaged in only one business, i.e. business of life insurance - recomputation of income made by the AO was rightly rejected by the Ld. CIT(A). As a result, Grounds 1(i) & 1(ii) raised by the Revenue are hereby dismissed. Disallowance of stamp duty charges - treating expenses as capital expenditure as against revenue expenditure claimed by the assessee - Held that - This issue stands decided by the AO in favour of the assessee on the basis of legal principle by relying upon the orders of the Tribunal in the case of HDFC Standard Life Insurance Co Ltd 2013 (10) TMI 1072 - ITAT MUMBAI . In this year also, there would be no point in sending the issue back for futile exercise as the decision has already been taken, which can be applied here also. We have considered the request of the Ld. Counsel. No objection or any contrary argument was made by the Ld. CIT-DR in this regard. - Decided against revenue Addition on account of Negative Reserve - Held that - AO has himself took a decision that the Negative Reserves cannot be added back while computing the income of life insurance assessee company u/s 44 read with rules 1 & 2 of First Schedule of the Income-tax Act, 1961. Under these circumstances, we find that no dispute is left on this issue. Therefore, we find that addition has been rightly deleted by the Ld. CIT(A) on the basis of his well reasoned findings. - decided against revenue Grant of benefit of exemption u/s 10(32) on dividend income received - Held that - We have gone through the order passed by Ld. CIT(A) also and find that the benefit of exemption was granted by the Ld. CIT(A) relying upon the judgement in the case of Life Insurance Corporation of India vs CIT (1977 (11) TMI 25 - BOMBAY HIGH COURT) as well as ICICI Prudential Insurance Co Ltd vs ACIT (2012 (11) TMI 13 - ITAT MUMBAI). AO in Order Giving Effect has also granted relief to the assessee by relying upon these judgements. Under these circumstances, we do not find it necessary to interfere in the finding of Ld. CIT(A) and, therefore, the order of the Ld.CIT(A) is upheld. These Grounds raised by the Revenue are dismissed. Addition u/s 14A on the basis of Rule 8D - Held that - In view of the special provisions applicable to the insurance companies, we are of the opinion that the provisions of section 14A r.w.r. 8D were held not applicable to the insurance companies i.e., lCICI Prudential Insurance, HDFC Standard Life Insurance Company. Therefore, the SSI Life Insurance Company Limited (assessee in the present case should not be any exception. Exemption u/s 10(23AAB) in regard to income of pension fund to be allowed as relying on ICICI Prudential Insurance Co Ltd vs ACIT (2012 (11) TMI 13 - ITAT MUMBAI).
Issues Involved:
1. Disallowance of Exemption in Respect of Dividend Income u/s 10(34) 2. Addition on Account of Disallowance of Expenditure u/s 14A 3. Disallowance of Exemption in Respect of Income from Pension Fund u/s 10(23AAB) 4. Not Allowing Set Off of Brought Forward Losses 5. Addition on Account of Negative Reserve 6. Penalty Proceedings u/s 271(1)(c) 7. Jurisdiction under Section 263 Issue-Wise Detailed Analysis: 1. Disallowance of Exemption in Respect of Dividend Income u/s 10(34): The Revenue challenged the exemption of dividend income under Section 10(34) of the Income Tax Act, arguing that the income from dividends should be included in the total income of the assessee. The Tribunal upheld the CIT(A)'s decision, allowing the exemption under Section 10(34), citing that Section 44, which deals with the computation of income for insurance companies, does not override Chapter III provisions, including Section 10(34). 2. Addition on Account of Disallowance of Expenditure u/s 14A: The AO disallowed expenses under Section 14A, arguing that they were incurred in relation to exempt income. The CIT(A) deleted the disallowance, supported by the Tribunal's earlier decisions in similar cases, which held that Section 14A does not apply to insurance companies due to the special provisions of Section 44. The Tribunal upheld this view, affirming that disallowance under Section 14A is not applicable to life insurance companies. 3. Disallowance of Exemption in Respect of Income from Pension Fund u/s 10(23AAB): The AO disallowed the exemption under Section 10(23AAB), claiming it was applicable only if the Pension Fund was an independent assessable entity. The CIT(A) and Tribunal disagreed, stating that the exemption applies if contributions are made for receiving a pension and the fund is approved by the IRDA, regardless of whether it is an independent entity or a segment of the life insurance company. 4. Not Allowing Set Off of Brought Forward Losses: The CIT(A) directed the AO to pass a specific order under Section 157 instead of allowing the set-off of brought forward losses. The Tribunal found this unnecessary as the losses were already determined and should be set off against the current year's income without requiring an additional order under Section 157. 5. Addition on Account of Negative Reserve: The AO added the negative reserve to the actuarial surplus, arguing it reduced the taxable surplus. The CIT(A) and Tribunal disagreed, citing the Supreme Court's decision in LIC vs. CIT, which prohibits adjustments to the actuarial surplus determined under the Insurance Act. The Tribunal upheld the deletion of the addition, confirming that the negative reserve should not be added back while computing the income of a life insurance business. 6. Penalty Proceedings u/s 271(1)(c): The CIT(A) levied a penalty under Section 271(1)(c) on the income enhanced by the CIT(A). Since the Tribunal deleted the additions on which the penalty was based, it directed the deletion of the penalty, rendering the penalty proceedings moot. 7. Jurisdiction under Section 263: The CIT invoked Section 263, directing the AO to reassess the exemption under Section 10(23AAB). The Tribunal found that the issues raised under Section 263 had already been decided in favor of the assessee in earlier years. Consequently, the Tribunal set aside the CIT's order under Section 263, making the exercise redundant. Conclusion: The Tribunal upheld the CIT(A)'s decisions on all counts, affirming the exemptions under Sections 10(34) and 10(23AAB), and the non-applicability of Section 14A to life insurance companies. It also confirmed the set-off of brought forward losses and the exclusion of negative reserves from the actuarial surplus. Penalty proceedings under Section 271(1)(c) were dismissed, and the jurisdictional challenge under Section 263 was set aside. The appeals filed by the Revenue were dismissed, and those by the assessee were allowed or partly allowed.
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