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2017 (9) TMI 1994 - AT - Income TaxLoss from Jeevan Suraksha Fund - income includes loss thus the loss form Jeevan Suraksha Fund can be set off against taxable income of the assessee corporation despite the fact that Jeevan Suraksha is covered u/s 10(23AAB) - Whether non-obstante clause in section 44 of the Act is not extended to section 10(23)AAB? - HELD THAT - Hon'ble High Court 2011 (8) TMI 47 - BOMBAY HIGH COURT clearly held that the object of insert in section 10(23AAB), as per Board Circular No.762 dated 18/02/1998, was to enable the assessee to offer attractive terms to the contributors. The order of the Tribunal with respect to section 10(23AAB) that the loss incurred from the pension fund like Jeevan Suraksha Fund has to be excluded while determining the accrual surplus from the insurance business u/s 44 of the Act cannot be faulted, resultantly, the issue was decided in favour of the assessee. We don t find any infirmity in the conclusion of the First Appellate Authority. Thus, the impugned grounds are dismissed. Dividend income of the assessee hold as exempt u/s 10(34) - As identical issued is covered by the decision in the case of ICICI Prudential Insurance Co. Ltd. 2012 (11) TMI 13 - ITAT MUMBAI therefore, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), resultantly, this ground of the Revenue is also fails. Whether negative reserves has an impact of reducing the taxable surplus, as per form-1 therefore, corresponding adjustment for negative reserves need to be made to arrive a taxable surplus? - HELD THAT - Issue decided in favour of assessee as relying on own case High Court vide order dated 2015 (9) TMI 1718 - BOMBAY HIGH COURT . Assessing Officer had no power to modify its accounts after Actuarial valuation is done. Addition made on account of interim bonus paid - Whether no deduction on account of interim bonus is required to be made from the total surplus as per the regulation of IDRA, the provisions of Act are not applicable in the case of the assessee? - HELD THAT - If section 28 of the Life Insurance Corporation Act, 1956 is analyzed, with respect to surplus from life insurance business and its utilization, it is clear that 95% of such surplus or such higher percentage thereof, as the central government may approve shall be allocated to or reserve for life insurance policy holders of the corporation and after meeting the liability of corporation, if any, which may arise u/s 9, the reminder shall be paid to the Central Government or if the Central Government so direct, shall be utilized for such purposes and in such manner as the government may determine. Considering the clear language of the section, we direct the Assessing Officer to examine the factual matrix/utilization of the surplus and decide in accordance with law. The assessee be given opportunity to substantiate its claim. Thus, this ground is allowed for statistical purposes. Applicability of provisions of section 115-O r.w.s 115Q - HELD THAT - The Tribunal in a later decision dated 10/07/2013 2013 (7) TMI 1204 - ITAT MUMBAI followed the decision of Assessment Year 2006-07 - No contrary decision was brought to our notice by the Revenue, thus, we find no infirmity, in the order of the First Appellate Authority, on this issue also, therefore, this ground is dismissed, resultantly, the appeal of the Revenue is partly allowed for statistical purposes. Addition made on account of income from shareholders funds credited directly to the shareholders account - HELD THAT - As decided in assessee own case 2017 (3) TMI 1904 - ITAT MUMBAI payment made by the assessee to the Central Government could not be treated as dividend within the ambit of definition clause 2(22) of the Act, that provisions of section 115-O of the Act were not applicable, that assessee could not be declared as assessee in default u/s.115 Q of the Act. In our opinion, in the case relied upon by the AR of the assessee, question of taxability of particular items of income under the head income from other sources was not before the Tribunal. Therefore, upholding the order of the FAA we decide Ground of appeal against the assessee.
Issues Involved:
1. Deleting the addition made on account of loss from Jeevan Suraksha Fund. 2. Dividend income of the assessee held as exempt under Section 10(34) of the Income Tax Act, 1961. 3. Negative reserves and their impact on taxable surplus. 4. Addition made on account of interim bonus paid. 5. Applicability of provisions of Section 115-O read with Section 115Q of the Income Tax Act. 6. Income from shareholders' funds credited directly to the shareholders' account. Issue-wise Detailed Analysis: 1. Deleting the Addition Made on Account of Loss from Jeevan Suraksha Fund: The Tribunal examined whether the loss from Jeevan Suraksha Fund could be set off against taxable income of the assessee corporation despite being covered under Section 10(23AAB) of the Income Tax Act. The Tribunal noted that the issue was already covered in favor of the assessee by the Hon'ble Bombay High Court in previous cases (Assessment Years 2002-03 to 2006-07) and by the Tribunal itself in ITA No.4874/Mum/2014. The High Court emphasized that the object of Section 10(23AAB) was to promote insurance business by exempting income from such funds, not to exclude the loss incurred from these funds while determining the actuarial valuation surplus under Section 44. Respectfully following these decisions, the Tribunal found no infirmity in the First Appellate Authority's conclusion and dismissed the grounds raised by the Revenue. 2. Dividend Income of the Assessee Held as Exempt Under Section 10(34): The Tribunal addressed whether the dividend income of the assessee, engaged in life insurance business, should be exempt under Section 10(34). The Tribunal noted that this issue was covered in favor of the assessee by earlier decisions of the Tribunal and the Hon'ble Bombay High Court. Specifically, the Tribunal referenced the decision in the case of ICICI Prudential Insurance, where it was held that the assessee was entitled to exemption under Section 10, including Section 10(34). The Hon'ble High Court also dismissed the Revenue's appeal on similar grounds. Consequently, the Tribunal upheld the First Appellate Authority's decision and dismissed the Revenue's ground. 3. Negative Reserves and Their Impact on Taxable Surplus: The Tribunal examined whether negative reserves should impact the taxable surplus. The Tribunal noted that this issue was covered in favor of the assessee in previous decisions for Assessment Years 2007-08 to 2009-10 and 2010-11. The Tribunal in those cases held that the mathematical reserve is part of actuarial valuation and should not be modified by the Assessing Officer. The Hon'ble High Court also dismissed the Revenue's appeal, affirming that the Assessing Officer had no power to modify the actuarial valuation. Respectfully following these decisions, the Tribunal affirmed the First Appellate Authority's stand and dismissed the Revenue's ground. 4. Addition Made on Account of Interim Bonus Paid: The Tribunal considered whether the addition made on account of interim bonus paid was justified. The Tribunal noted that 95% of the surplus from life insurance business must be allocated to policyholders, with the remainder going to the government, as per Section 28 of the Life Insurance Corporation Act, 1956. The Tribunal directed the Assessing Officer to examine the factual matrix and utilization of the surplus and decide in accordance with the law, giving the assessee an opportunity to substantiate its claim. This ground was allowed for statistical purposes. 5. Applicability of Provisions of Section 115-O Read with Section 115Q: The Tribunal examined whether the provisions of Section 115-O read with Section 115Q were applicable to the assessee. The Tribunal noted that this issue was already decided in favor of the assessee by the Tribunal in earlier years (Assessment Years 2006-07, 2007-08, and 2008-09). The Tribunal held that the amount paid from the profits of life insurance business to the Central Government under statutory obligation is not in the nature of dividend, and thus, Section 115-O is not applicable. Respectfully following these decisions, the Tribunal found no infirmity in the First Appellate Authority's order and dismissed the Revenue's ground. 6. Income from Shareholders' Funds Credited Directly to the Shareholders' Account: The Tribunal addressed whether the income from shareholders' funds credited directly to the shareholders' account should be taxed. The Tribunal noted that this issue was decided against the assessee in earlier years (Assessment Year 2010-11). The Tribunal held that once income is earned by the assessee and later applied for a specific purpose, it cannot be treated as a charge on profit but as an application of income. The Tribunal upheld the Assessing Officer's decision to tax the income from shareholders' funds. Consequently, this ground in the assessee's appeal was dismissed. Finally, the appeal of the Revenue was partly allowed for statistical purposes, whereas the appeal of the assessee was dismissed.
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