2016 (2) TMI 1319 - AT - Income Tax

Loss from Jeevan Suraksha Fund - Whether loss from Jeevan Suraksha fund can be set off against taxable income of the assessee corporation despite the fact that Jeevan Suraksha Fund is covered u/s 10(23AAB) whereby the income including the loss is not includible in the total income? - HELD THAT - As noticed that while computing the taxable surplus, the negative reserves were ignored. On being show caused as to why the negative reserves should not be treated as income of the assessee, it was pointed out that the computation was in terms of the actuarial valuation carried out in accordance with Sec. 13, 15, 49 64V of the Insurance Act, 1938 and in terms of the IRDA regulations. It was also asserted that the prescribed methodology for valuation of the assets and determination of the liabilities was followed, on the basis of which, the actuarial valuation of surplus was arrived at for the purpose of taxation. The contentions of the assessee were not accepted by the Assessing Officer and accordingly he disallowed the adjustment of negative reserves amounting. As a common point between the parties that the decision of the Tribunal dt. 3.4.2013 2013 (6) TMI 377 - ITAT MUMBAI pertaining to Assessment Year 2009-10 on an identical issue continues to hold the field as it has not been altered by any higher authority. As a consequence, we find no error on the part of the CIT(A) in deleting the impugned addition. Ground of appeal no. 1.2 raised by the Revenue is also dismissed. Determination of Dividend Distribution Tax in terms of Sec. 115O - AO Noted that the assessee had distributed/paid to the Government of India on which Dividend Distribution Tax in terms of Sec. 115O of the Act was not levied - HELD THAT - CIT(A) upheld the plea of the assessee following the decision of the Tribunal in the assessee‟s own case for Assessment Year 2006-07 - As a consequence, the stand of the assessee was allowed and the Assessing Officer was directed to delete the tax liability imposed u/s. 115O - As a consequence, the order of the CIT(A) is hereby affirmed and the Revenue fails on this aspect also.

Summary

Issues:
1. Disallowance of loss/deficit from Jeevan Suraksha Fund
2. Treatment of negative reserves in Form I
3. Determination of Dividend Distribution Tax under Sec. 115O

Issue 1: Disallowance of loss/deficit from Jeevan Suraksha Fund

The Revenue challenged the CIT(A)'s decision to delete the addition made by the Assessing Officer on account of loss from Jeevan Suraksha Fund, arguing that income includes loss and the loss from the Fund should not be set off against taxable income due to Sec. 10(23AAB) of the IT Act. However, the CIT(A) relied on a judgment of the Bombay High Court in the assessee's case for Assessment Years 2002-03 to 2006-07 and allowed the claim. Both parties acknowledged the binding nature of the High Court's judgment, leading to the dismissal of the Revenue's appeal on this issue.

Issue 2: Treatment of negative reserves in Form I

The Revenue raised the issue of negative reserves of a significant amount shown in Form I, which were not considered while computing taxable surplus. The Assessing Officer disallowed the adjustment of negative reserves, but the CIT(A) deleted this addition based on a Mumbai Tribunal decision in the assessee's favor for a similar issue. Both parties agreed that the Tribunal's decision for Assessment Year 2009-10 on the same issue remains valid, resulting in the dismissal of the Revenue's appeal regarding the negative reserves.

Issue 3: Determination of Dividend Distribution Tax under Sec. 115O

The last ground of appeal concerned the determination of Dividend Distribution Tax under Sec. 115O of the Act. The Assessing Officer imposed tax liability on the assessee for distributing/paying a specific amount to the Government of India, which the assessee argued was not applicable under Sec. 115O due to statutory obligations. The CIT(A) supported the assessee's position based on a Tribunal decision for Assessment Year 2006-07 in the assessee's case. Both parties acknowledged the Tribunal's decision's continuing validity, leading to the dismissal of the Revenue's appeal on this issue.

In conclusion, the Appellate Tribunal ITAT Mumbai dismissed the Revenue's appeal against the CIT(A)'s order, upholding the decisions regarding the disallowance of loss from Jeevan Suraksha Fund, treatment of negative reserves, and the determination of Dividend Distribution Tax. The Tribunal affirmed the CIT(A)'s rulings based on previous judgments and precedents, resulting in the dismissal of the Revenue's appeal in its entirety.