2017 (10) TMI 722 - AT - Income Tax

Income from share holders account - whether to be treated on par with the income from the insurance business under the policy holders account taxable u/s 44 - Held that - This issue is squarely covered in assessee s own wherein the tribunal has considered that the shareholders funds constituted an integral and indivisible part of assessee s Life Insurance Business and assessee s sole business purpose was to carry on Life Insurance Business as per extant regulations and, hence, these two accounts formed part and parcel of the assessee s business. Exemption u/s. 10(34) of dividend income - Held that - We find that the Tribunal consistently is holding that the assessee has already suffered divided distribution tax u/s. 115O of the Act and, therefore, it is exempt u/s. 10(34) of the Act. Disallowance u/s. 14A r/w Rule 8D - Held that - This issue is covered in assessee s own case as held that Section 14A disallowance do not apply to insurance companies which are covered by special provisions of Section 44 and hence, dismiss revenue s appeal.

Summary

Issues:
1. Treatment of income from shareholders account in relation to insurance business under section 44 of the Income Tax Act.
2. Exemption of dividend income under section 10(34) of the Act.
3. Disallowance under section 14A r/w Rule 8D of the Rules.

Issue 1:
The first issue pertains to the treatment of income from shareholders account in connection with the insurance business under section 44 of the Income Tax Act. The Revenue challenged the order of CIT(A) deleting the addition of income from the shareholders' account. The Tribunal, following precedent, held that the shareholders' funds were an integral part of the Life Insurance Business and that the income from the shareholders' account should be treated on par with the income from the insurance business. The Tribunal dismissed the Revenue's appeal, citing consistency with its previous decisions in the assessee's own case.

Issue 2:
The second issue revolves around the exemption of dividend income under section 10(34) of the Act. The Revenue contested the CIT(A)'s decision to reduce the dividend income from the computed income. The Tribunal, relying on previous rulings, upheld that the dividend income, which had already suffered dividend distribution tax, should be considered exempt under section 10(34). The Tribunal dismissed the Revenue's appeal, emphasizing that income falling under section 10 of the Act must be excluded from the total income, and provisions of section 44 do not include incomes otherwise exempt under section 10(34).

Issue 3:
The final issue concerns the disallowance under section 14A r/w Rule 8D of the Rules. The Revenue challenged the CIT(A)'s deletion of the disallowance made by the Assessing Officer. The Tribunal, in line with earlier decisions, ruled that no disallowance should be made in insurance companies covered by the special provisions of section 44 of the Act. Therefore, the Tribunal dismissed the Revenue's appeal, reiterating that section 14A disallowance does not apply to insurance companies covered by the special provisions of section 44.

In conclusion, the Appellate Tribunal ITAT Mumbai, in its judgment, addressed issues related to the treatment of income from shareholders' accounts, exemption of dividend income, and disallowance under section 14A r/w Rule 8D of the Rules. The Tribunal upheld the decisions of the CIT(A) based on precedent and consistent interpretation of the relevant provisions of the Income Tax Act. The appeal by the Revenue was dismissed in all three issues, affirming the positions taken by the lower authorities.