2017 (11) TMI 1859 - AT - Income Tax

Disallowance u/s 14A - computing the income u/s 44 in the case of a insurance company - HELD THAT - 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. We agree with the learned counsel that there is no requirement of head-wise bifurcation called for while computing the income u/s 44 in the case of a insurance company The income of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished to the Controller of Insurance. The actual computation of profits and gains of insurance business will have to be computed in accordance with Rule 5 of the First Schedule. In the light of these special provisions coupled with non obstante clause the AO is not permitted to travel beyond these provisions. Section 14A contemplates an exception for deductions as allowable under the Act are those contained u/s 28 to 43B of the Act. Section 44 creates Special application of these provisions in the cases of insurance companies. We therefore agree with the assessee and delete the disallowance made by the AO which is based on the application of sec. 14A of the act as according to us it is not permissible to the AO to travel beyond section 44 and First Schedule of the Income-tax Act. Respectfully following the decision of the ITAT in the case of Oriental Insurance Co. Ltd. 2009 (2) TMI 240 - ITAT DELHI-B the additional ground raised by assessee is allowed. Accordingly it is held that the provisions of section 14A are not applicable in the case of assessee. - We allow the appeal of the assessee.

Summary

Issues Involved:
Appeal against disallowance under section 14A read with rule 8D.

Analysis:
1. The appellant challenged the disallowance of a specific amount under section 14A read with rule 8D. The grounds of appeal included contentions regarding the applicability of these provisions to the appellant's case. The appellant argued that the Commissioner of Income Tax (Appeals) erred in confirming the disallowance, stating that the reasons given were contrary to the law. The appellant also raised concerns about the continuation of disallowance despite the non-applicability of section 14A and rule 8D. Additionally, the appellant sought relief from an additional disallowance made by the Assessing Officer under section 14A.

2. During the hearing, the appellant's counsel cited a previous order in the appellant's own case, where the issue under consideration was decided in favor of the assessee. The counsel presented this order as supporting the appellant's position. The Departmental Representative supported the lower authorities' orders but failed to counter the appellant's contentions based on the previous order. The Tribunal considered the submissions of both parties and reviewed the relevant material on record.

3. The Tribunal found that the issue was already settled in favor of the assessee in a previous order related to the appellant's own case for the assessment year 2008-09. Referring to specific paragraphs from the earlier decision, the Tribunal highlighted that the provisions of section 44 and the First Schedule of the Income-tax Act were crucial in determining the computation of income for insurance companies. The Tribunal agreed with the assessee's argument that section 14A was not applicable in the case of insurance companies due to the special provisions of section 44. Consequently, the disallowance made by the Assessing Officer under section 14A was deleted based on the precedent set in the earlier case.

4. Ultimately, the Tribunal, following the precedent established in the appellant's previous case, allowed the appeal, thereby overturning the disallowance under section 14A read with rule 8D.

5. As a result of the Tribunal's decision, the appeal of the assessee was allowed, and the disallowance under section 14A was set aside. The order was pronounced in open court on 9th November 2017.