2022 (12) TMI 1458 - AT - Income Tax

Taxability of profits of life insurance business - transfer from Share Holders Account to Policy Holder s Account and shown as part of surplus in the actuarial valuation - Whether was only transfer asset and not taxable u/s 44 of the act read with Rule 2 of the First Schedule? - HELD THAT - Said position qua the issue in question as decided by co-ordinate bench of Tribunal vide order 2017 (3) TMI 1696 - ITAT MUMBAI has not been controverted by Ld.DR, we are of the considered view that when undisputedly, the assessee is carrying on life insurance business, its income is to be determined u/s 44 of the Act by taking into account total surplus as arrived at by actuarial valuation and further income from share holder account was also to be taxed as part of the life insurance business. So finding no illegality or perversity in the impugned findings returned by Ld.CIT(A), grounds 1 2 raised by the Revenue are dismissed. Addition u/s 10(23AAB) - Loss from Pension Fund - HELD THAT - As we are of the considered view that Ld.CIT(A) has rightly deleted the addition made by the Assessing Officer on account of loss from Pension Fund being exemption under section 10(23AAB) of the Act. So we find no scope to interfere into the finding by Ld.CIT(A).

Summary

Issues:
1. Taxability of transfer from Share Holders Account to Policy Holder's Account under section 44 of the Income-tax Act.
2. Tax treatment of surplus in Policy Holders Account and Share Holder's Account.
3. Treatment of loss from Pension Fund under section 10(23AAB) of the Income-tax Act.
4. Interpretation of the non obstante clause in section 44 in relation to section 10(23AAB) of the Income-tax Act.

Issue 1: The Appellant, a life insurance company, challenged the addition made by the Assessing Officer regarding the transfer from Share Holders Account to Policy Holder's Account, arguing that it should not be taxable under section 44 of the Income-tax Act. The Appellant contended that the surplus shown in actuarial valuation was not taxable. The Ld.CIT(A) partly allowed the appeal, and the Revenue appealed to the Tribunal. The Tribunal upheld the decision based on previous judgments, stating that the income from Share Holder Account should be taxed as part of the life insurance business under section 44.

Issue 2: The Appellant also questioned the tax treatment of surplus in Policy Holders Account and Share Holder's Account. The Tribunal referred to previous decisions where it was held that the total surplus from actuarial valuation should be considered for taxation, including income from the Share Holder Account. The Tribunal dismissed the Revenue's appeal, upholding the decision of the Ld.CIT(A) regarding the tax treatment of the surplus.

Issue 3: The Appellant contested the addition made by the Assessing Officer on account of loss from Pension Fund, claiming it should be exempt under section 10(23AAB) of the Income-tax Act. The Tribunal referred to previous rulings and upheld the decision of the Ld.CIT(A) to delete the addition, stating that the loss from the Pension Fund should be excluded while determining actuarial valuation surplus under section 44.

Issue 4: The Appellant raised a question regarding the interpretation of the non obstante clause in section 44 in relation to section 10(23AAB) of the Income-tax Act. The Tribunal, following previous judgments, upheld the decision of the Ld.CIT(A) to delete the addition made by the Assessing Officer on account of loss from the Pension Fund, considering it exempt under section 10(23AAB). The appeal was dismissed, and the Tribunal affirmed the decision of the Ld.CIT(A) on all issues.

In conclusion, the Tribunal's judgment clarified the tax treatment of various transactions and accounts for a life insurance company under the Income-tax Act, emphasizing the importance of considering actuarial valuation surplus and income from different accounts while determining taxable income.