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2016 (3) TMI 1402 - AT - Income TaxTaxabiity of Profit on the Sale of Investments - assessee is engaged in the business of general insurance - HELD THAT - As this ground raised by the assessee in the present appeal is covered in favour of the assessee by the Tribunal order in assessee s own case for A.Ys. 2004-05 2006-07 2015 (2) TMI 1323 - ITAT MUMBAI the computation of taxable profit of an insurance company is governed by specific provision as given in section 44, read First schedule to the Income-Tax Act. Under the said scheme, only such adjustment can be made to the profits as disclosed in the annual accounts drawn under the Insurance Act, 1938, which are specifically provided under Rule 5 - there is no specific provision for making the adjustment on account of profits on sale of investment after removal of Clause 5(b) w.e.f. 01.04.1989 and till Clause 5(b) was inserted w.e.f. 01.04.2011. Specific amendment in Rule 5 to First schedule, came w.e.f. 01.04.2011, wherein it has been specifically provided that any gain or loss on realization of investment shall be added or deducted if such gain or loss is not credited or debited to the P L account. Prior to this there was no such provision. This amendment has been specifically brought w.e.f.01.04.2011 applicable from A.Y. 2011-12 and cannot have retrospective effect. This has been clarified by the notes and clauses to Finance Act amending the said section.Thus, from 01.04.1989 to 01.04.2011, such a provision was not there in the Statute, therefore the same cannot be read into between this period. This issue precisely has been dealt by the Tribunal in the various cases. At the time of passing of the Tribunal order in assessee s case for A.Y. 2002-03 2003-04, such an amendment was not brought on the statute, which clarifies the legislative intent, that prior to 01.04.2011 such an adjustment of profit and sale of investment can be made. - Decided in favour of assessee. Denial of exemption of incomes claimed u/s 10 - HELD THAT - We notice that this issue is decided in favour of the assessee by the jurisdictional Hon ble Bombay High Court in the case of General Insurance Corporation of India Vs. DCIT 2011 (12) TMI 70 - BOMBAY HIGH COURT Consistent with the view and by respectfully following the orders of the Tribunal in earlier years, we decide this issue in favour of the assessee Disallowance u/s 14A - HELD THAT - This ground is covered in favour of the assessee by the Tribunal order in assessee s own case A.Ys. 2004-05 2006-07 2015 (2) TMI 1323 - ITAT MUMBAI which was subsequently followed by the Tribunal in A.Ys. 2000-01 to 2003-04 2012 (10) TMI 882 - ITAT MUMBAI as 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 and accordingly Disallowance of amortization of premium - assessee has claimed an amount as revenue expenses, which represented premium paid on purchase of investment of securities amortized over the residual period of securities - HELD THAT - As decided in own case for in earlier years i.e. A.Y. 2004-05 to 2006-07 2015 (2) TMI 1323 - ITAT MUMBAI amortization claimed by the assessee as revenue expenditure is allowable. Addition u/s 69B - Shares excess of book value shown in its account - CIT(A) too confirmed the said addition on the ground that non obstante clause appearing in section 44 does not hit the provision of section of section 69B and same is fully applicable - HELD THAT - As decided in in assessee s own case for in earlier year i.e. A.Y. 2006- 07 2015 (2) TMI 1323 - ITAT MUMBAI . The assessee has sold the shares and buyers have failed to take the delivery, then in such a case how the provision of 69B gets attracted because here it is not a case that the investment exceeds the amount recorded in the books of account. On these facts alone, the addition cannot be sustained. Accordingly, the same is deleted. MAT Applicability u/s 115JB - HELD THAT - we find that the issue of non applicability of MAT u/s 115JB to the General Insurance Company has been upheld. Even otherwise also the provision of MAT will only come into play, only when assessee prepares its P L account in accordance with part (II) and part (III) of Schedule (VI) of the Companies Act. Since the assessee s P L account is prepared in accordance with Insurance Act 1938, as specifically provided in Section 44 read with First schedule, therefore, the provision of section 115JB will not apply in case of assessee.This has been held in the case of General Insurance Corporation 2012 (2) TMI 522 - ITAT MUMBAI - Decided in favour of assessee. Appealable order directly before CIT-A - Grant credit for taxes paid under section 90 and under section 91 - CIT(A) while dealing with the said ground has held that in appeal, the assessee is not challenging any of the issue specified in section 246A of the I.T. Act and since the issue is purely of credit for taxes paid and is thus not an appealable order directly therefore learned CIT(A) held that ground of appeal does not survive and consequently rejected the same - HELD THAT - From the perusal of the provisions of section 246A, it is clear that this ground is squarely covered u/s. 246A of the Income Tax Act, 1961, where it has been categorically mentioned that appeal in respect of to the amount of tax determined lies before learned CIT(A), therefore on this issue we deem it fit to restore the matter back to the file of the learned CIT(A) for examining the same afresh and to decide on merit as per law. We direct accordingly. This ground is accordingly allowed for statistical purposes. Addition being reversal of provision of impairment of investments made in accordance with Rule 5 of the First Schedule r.w.s. 44 - HELD THAT - Consistent with the view taken by the Tribunal, by respectfully following the Tribunal order in assessee s own case A.Ys. 2004-05 2015 (2) TMI 1322 - ITAT MUMBAI on the issue, we decide the issue in favour of the assessee.
Issues Involved:
1. Taxability of profit on sale of investments. 2. Disallowance of exemption under Section 10 of the Income Tax Act. 3. Applicability of Section 14A disallowance. 4. Disallowance of amortization of premium paid on purchase of securities. 5. Addition under Section 69B of the Income Tax Act. 6. Addition on account of taxes paid on foreign dividend. 7. Credit for taxes paid under Sections 90 and 91. 8. Applicability of Section 115JB (Minimum Alternate Tax). 9. Additions to book profit under Section 115JB. Detailed Analysis: Issue 1: Taxability of Profit on Sale of Investments The assessee argued that the profit on the sale of investments should not be taxed, relying on CBDT Circular No. 528 dated 16.12.1988. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] disagreed, citing Section 44 read with Rule 5 of the First Schedule of the Income Tax Act, which does not provide for such an exemption. The Tribunal, however, found that this issue had been decided in favor of the assessee in earlier years (A.Ys. 2004-05 & 2006-07). The Tribunal noted that the legislative intent clarified that prior to 01.04.2011, adjustments for gains on the realization of investments could not be made. Thus, the Tribunal allowed the ground in favor of the assessee. Issue 2: Disallowance of Exemption under Section 10 The CIT(A) had disallowed the exemption under Section 10, enhancing the assessee's income. The Tribunal referred to its earlier decision and the jurisdictional Bombay High Court's ruling in General Insurance Corporation of India Vs. DCIT (2012) (342 ITR 27), which supported the assessee's claim. Consequently, the Tribunal set aside the CIT(A)'s order and allowed the exemption. Issue 3: Applicability of Section 14A Disallowance The AO made a disallowance under Section 14A, which was upheld by the CIT(A). The Tribunal found that Section 14A does not apply to general insurance companies governed by Section 44, as confirmed in earlier Tribunal decisions. The Tribunal allowed the ground in favor of the assessee. Issue 4: Disallowance of Amortization of Premium Paid on Purchase of Securities The AO disallowed the amortization of premium paid on securities, treating it as a capital cost. The CIT(A) upheld this view. However, the Tribunal found that this issue had been decided in favor of the assessee in earlier years, noting that the amortization is allowable as there is no specific prohibition under Sections 30 to 43B. The Tribunal allowed this ground. Issue 5: Addition under Section 69B The AO added an amount under Section 69B, which was upheld by the CIT(A). The Tribunal found that the shares in question were sold but not claimed by the buyers, and thus, Section 69B did not apply. The Tribunal deleted the addition and allowed the ground in favor of the assessee. Issue 6: Addition on Account of Taxes Paid on Foreign Dividend This issue had been decided against the assessee in earlier years (A.Ys. 2004-05 & 2006-07). Consistent with the earlier view, the Tribunal decided this ground against the assessee. Issue 7: Credit for Taxes Paid under Sections 90 and 91 The CIT(A) had rejected this ground, stating it was not an appealable order. The Tribunal noted that the issue falls under Section 246A, which allows appeals on the amount of tax determined. The Tribunal restored the matter to the CIT(A) for fresh examination and decision on merit, allowing the ground for statistical purposes. Issue 8: Applicability of Section 115JB (Minimum Alternate Tax) The CIT(A) had applied Section 115JB to the assessee. The Tribunal found that this issue had been decided in favor of the assessee in earlier years, noting that MAT provisions do not apply to general insurance companies preparing accounts under the Insurance Act, 1938. The Tribunal allowed this ground. Issue 9: Additions to Book Profit under Section 115JB Given the decision on Issue 8, this ground did not survive and was not separately addressed. Conclusion: The Tribunal partly allowed the appeal filed by the assessee, dismissing the appeal and cross-objection filed by the Revenue. The Tribunal's decisions were largely based on consistency with its earlier rulings and applicable legal precedents.
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