2018 (3) TMI 1891 - AT - Income Tax

Addition u/s 69B - HELD THAT - Difference in the books of accounts of the assessee and the statement is only due to the fact that the buyers have failed to take the delivery of the shares and therefore the provision of section 69B is not attracted. Therefore the order of CIT(A) is set aside and AO is directed to delete the addition. The ground No.1 is allowed. Profit on sale of investments - taxed under the head income from capital gain and income from business - HELD THAT - In order to maintain consistency with the decision of the Tribunal we hold that the profit on sale of investments cannot be taxed as the amendment by the Finance Act is effective from A.Y. 2011-12 onwards and not prior to that. The grounds no 1 and 2 raised by the revenue are dismissed. Disallowance u/s 14A read with rule 8D - HELD THAT - We find that it has been consistently held that provision of section 14A is not applicable in the cases of Insurance company which are governed by section 44 because it is non obstante provision wherein the income is to be computed as per P L account prepared under the Insurance Act 1938. Section 14A contemplates exception for deduction allowable under the act whereas section 44 creates special application of provision of computation of profit as per the Insurance Act. Thus no disallowance u/s 14A can be made. Premium paid on purchase of government securities was allowable as revenue expenditure on amortization - HELD THAT - As relying on assessee own case 2015 (2) TMI 1323 - ITAT MUMBAI we hold that such an amortization claimed by the assessee as revenue expenditure is allowable. Accordingly assessee s ground no.5 is treated as allowed. Disallowance u/s 40(a)(ia) - HELD THAT - CIT(A) allowed the appeal of the assessee by observing that identical issue was decided in the earlier years and same was followed in the current year also. The case is also covered by the decision of Tribunal in the case of General Insurance Corporation of India 2009 (2) TMI 234 - ITAT BOMBAY-G in which it has been held that the provision qua deduction of TDS at source are not applicable on reinsurance commission and accordingly the order under section 201(1) r.w.s. 201(1A) was set aside - Decided in favour of the assessee. Premium paid by the assessee on purchase of government securities was allowable as revenue expenditure on amortization. MAT applicability u/s 115JB - HELD THAT - Accounts of the insurance company are prepared in accordance with the Insurance Act 1938 as has been provided under section 44A read with First Schedule and therefore the provisions of section 115JB do not apply to the assessee s case. Accordingly the ground raised by the Revenue is dismissed.

Issues Involved:
1. Confirmation of addition under section 69B of the Income-tax Act, 1961.
2. Taxation of Foreign Dividend Income.
3. Taxation of profit on sale of investments.
4. Deletion of disallowance of expenses under section 14A.
5. Allowability of premium paid on purchase of government securities as revenue expenditure.
6. Deletion of disallowance under section 40(a)(ia).
7. Applicability of provisions of section 115JB.

Detailed Analysis:

Issue 1: Confirmation of Addition under Section 69B
The assessee contested the confirmation of an addition of ?27,98,000/- under section 69B. The Tribunal found that the issue was covered in favor of the assessee by earlier decisions in similar cases. The assessee explained that the discrepancy arose due to buyers not taking delivery of shares, leading to a notional difference in records. The Tribunal concluded that section 69B did not apply as the investment did not exceed the amount recorded in the books. The addition was deleted, setting aside the CIT(A)'s order.

Issue 2: Taxation of Foreign Dividend Income
The assessee did not press this ground, and it was dismissed as not pressed.

Issue 3: Taxation of Profit on Sale of Investments
The Revenue's appeal challenged the CIT(A)'s decision to tax the profit on sale of investments as capital gains and not business income. The Tribunal noted that this issue was already decided in favor of the assessee in earlier years, holding that profit on sale of investments was exempt under section 10(38) of the Act. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's grounds.

Issue 4: Deletion of Disallowance under Section 14A
The Revenue contested the deletion of disallowance under section 14A. The Tribunal found that section 14A did not apply to insurance companies governed by section 44, as established in previous decisions. The Tribunal upheld the CIT(A)'s deletion of the disallowance, dismissing the Revenue's ground.

Issue 5: Allowability of Premium Paid on Purchase of Government Securities
The Revenue appealed against the CIT(A)'s decision to allow the premium paid on government securities as revenue expenditure. The Tribunal noted that the issue was covered in favor of the assessee in earlier years, where it was held that such amortization was allowable as revenue expenditure. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground.

Issue 6: Deletion of Disallowance under Section 40(a)(ia)
The Revenue challenged the deletion of disallowance under section 40(a)(ia). The Tribunal found that the CIT(A) had followed earlier decisions where it was held that TDS provisions did not apply to reinsurance commission. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground.

Issue 7: Applicability of Provisions of Section 115JB
The Revenue contested the CIT(A)'s decision that section 115JB did not apply to the assessee. The Tribunal noted that this issue was covered in favor of the assessee in earlier years, holding that the accounts of insurance companies prepared under the Insurance Act were not subject to section 115JB. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground.

Conclusion:
The appeal filed by the assessee was partly allowed, and the appeal filed by the Revenue was dismissed. The Tribunal's order was pronounced in the open court on 28.03.2018.

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