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2016 (5) TMI 1512 - AT - Income TaxTaxability of profits arising on sale of investment - HELD THAT - Tribunal considered the amendments brought in Rule 5 by Finance Act 1988 w.e.f. 1.4.1989 and also subsequent amendment brought w.e.f. 1.4.2011 by Finance Act 2009. The Tribunal noticed that the Finance Act 1988 omitted the provision relating to exemption of the profits earned on sale of investments by general insurance companies and the same was brought to tax again w.e.f. 1.4.2011. Accordingly the Tribunal held that the gain on sale of investments cannot be assessed to tax in AY 2004-05. Since the facts prevailing in the year under consideration are identical by following the order passed by the Tribunal for AY 2004-05 we hold that the profit on sale of investment cannot be taxed. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition. Disallowance computed u/s 14A - income of the assessee is computed as per the provisions of sec. 44 of the Act read with Rule 5 of First schedule of the Income tax Act - HELD THAT - No disallowance u/s 14A can be made in the hands of the assessee since it is covered by the special provision of computation of income u/s 44 of the Act. Consistent with the view taken in the above said years we also hold that no disallowance u/s 14A can be made in this year also. Amortisation of premium paid on purchase of investments - HELD THAT - As in the assessee s own case relating to AY 2004- 05 and 2006-0 decided the same in favour of the assessee by following the decision rendered by the co-ordinate bench of Tribunal in the case of Tata AIG General Insurance Company Ltd 2010 (10) TMI 764 - ITAT MUMBAI . Addition made u/s 69B - AO noticed that the actual value of shares held by the Custodian of the Assessee has exceeded the book value - HELD THAT - The explanation of the assessee was that it had sold the shares but the buyer has failed to take delivery of the same and hence the difference between the book quantity and the physical quantity has arisen. The same was not acceptable to both the tax authorities. The Tribunal has considered an identical issue in AY 2006-07 and held that the provisions of sec. 69B shall not apply to such kind of situations. Following the same we set aside the order of Ld CIT(A) passed on this issue and direct the AO to delete this addition. Rejection of claim for deduction u/s 35DDA - Year of assessment - as in the books of account the said provision was reversed on the first day of next year and a fresh provision was made again on the last date of the year - HELD THAT - Since the assessee has failed to furnish the details of computation of income pertaining to AY 2004-05 and 2005-06 we are unable to decide this issue. However we have noticed that the assessee itself has disallowed the provision amount of 5.94 crores in AY 2003-04 meaning thereby the assessee has intended to omit the entries passed in this regard. The assessee must have excluded the amount of 5.94 crores credited to Profit and Loss account and also disallowed the provision of 5.67 crores made on 31.3.2004 while computing the income for AY 2004-05. If the assessee has so disallowed the provision of 5.67 crores made on 31.3.2004 then the reversal of the above said amount made on 1.4.2004 should not be taxed in AY 2005-06. However this fact requires verification. Upon verification if it is found that the provision of 5.67 crores reversed on 1.4.2004 was not excluded while computing the income for AY 2005-06 then we direct the AO to exclude the same. Since all these facts require verification we set the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine this issue Computation of Book profit u/s 115JB - HELD THAT - As decided in assessee s own case relating to AY 2004-05 and 2006-07 the provisions of sec. 115JB shall not be applicable to the assessee. Non-granting of credit for foreign taxes paid - HELD THAT - A careful perusal of the provisions of sec. 91 would show that the said section does not provide that the tax should have been paid in the foreign country only in the year the credit was claimed. Further the income tax is computed on the total income and hence there is merit in the contentions of the assessee that the credit should be given in the year in which the concerned income is offered to tax in India. Accordingly we set aside the order of Ld CIT(A) on this issue and direct the AO to match the tax paid in the foreign country with the income offered by the assessee and accordingly give credit of the same in accordance with the provisions of the Act. Addition of interest charged u/s 234C - HELD THAT - A.R fairly admitted that this issue is decided against the assessee in the earlier years. Accordingly we confirm the order passed by Ld CIT(A) on this issue. Reversal of Provision for impairment loss on investments - HELD THAT - Since the gain on sale of investments has been held to be not taxable the corrolary is that the loss or the provision made for loss shall also not be deductible Disallowance of exgratia payment - assessee took the plea that the provisions of sec. 43B shall govern this claim - HELD THAT - We have noticed that this issue has already been restored to the file of the AO by Ld CIT(A) to examine the claim for deduction u/s 43B of the Act i.e. the original reasons for making this disallowance appears to have been accepted by the assessee since it has not raised any ground thereon. Hence we do not find any infirmity in his order.
Issues:
1. Taxability of profits arising on sale of investment 2. Disallowance computed u/s 14A of the Act 3. Amortisation of premium paid on purchase of investments 4. Addition made u/s 69B of the Act 5. Rejection of claim for deduction u/s 35DDA of the Act 6. Computation of Book profit u/s 115JB of the Act 7. Non-granting of credit for foreign taxes paid 8. Rejection of claim u/s 10(23G) of the Act and sec. 35DDA of the Act Analysis: 1. The first issue pertains to the taxability of profits from the sale of investments. The Tribunal ruled that the gain on the sale of investments cannot be taxed for the assessment year 2005-06, following a previous decision for AY 2004-05. Consequently, the order to tax the profit on the sale of investments was set aside. 2. The next issue concerns the disallowance under section 14A of the Act. The Tribunal held that no disallowance under section 14A could be made, as it is covered by the special provision of income computation under section 44 of the Act, aligning with previous decisions for AY 2004-05 and 2006-07. 3. Regarding the amortisation of premium paid on the purchase of investments, the Tribunal decided in favor of the assessee, following precedents, and directed the AO to delete the addition made by the Ld CIT(A) on this issue. 4. The issue of addition made under section 69B of the Act was addressed by the Tribunal, which held that such provisions should not apply to situations like the one presented. The order of the Ld CIT(A) confirming the addition was set aside, directing the AO to delete the addition. 5. The rejection of the claim for deduction under section 35DDA of the Act was discussed in detail, highlighting the reversal and creation of provisions over different assessment years. The Tribunal directed the AO to examine the issue further for verification. 6. The computation of Book profit under section 115JB of the Act was contested, with the Tribunal ruling that these provisions shall not be applicable to the assessee, setting aside the orders passed by the tax authorities on this issue. 7. The issue of non-granting credit for foreign taxes paid was resolved in favor of the assessee, with the Tribunal directing the AO to match the foreign tax paid with the income offered by the assessee and grant credit accordingly. 8. The Tribunal did not adjudicate on the issues related to the rejection of claims under section 10(23G) of the Act and section 35DDA of the Act due to the absence of arguments. The appeal filed by the revenue was partly dismissed based on the issues discussed and resolved in favor of the assessee.
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