2020 (2) TMI 1232 - HC - Income Tax

Dividend income of assessee as exempt u/s 10(34) - whether dividend income is considered as part of income of Life Insurance Business and is included as an income by the actuary? - whether dividend income of assessee as exempt u/s 10(34) of the I.T. Act, 1961, ignoring the fact that dividend income is considered as part of income of Life Insurance Business and is included as an income by the actuary? - HELD THAT - As substantial question of law (a) and (c) are concerned they were part of the question of law urged in ICICI PRUDENTIAL LIFE INSURANCE CO. LTD. 2018 (7) TMI 2092 - BOMBAY HIGH COURT and have not been entertained. Hence they do not arise for consideration in this Appeal. Loss from pension business - Whether income includes loss and that the income from pension fund does not form part of the total income of the assessee under section 10(23AAB) ? - HELD THAT - As regards question of law (d) is concerned the Tribunal has followed the decision of this Court LIFE INSURANCE CORPORATION OF INDIA LTD. 2011 (8) TMI 47 - BOMBAY HIGH COURT - Hence, this question of law does not arise for consideration. Appeal is admitted on the following substantial question of law - Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that provisions of section 14A of the Act did not apply to insurance business, even when the assessee has claimed exempted income u/s 10 of the Act?

Summary

Issues Involved:
1. Whether the Tribunal erred in allowing dividend income as exempt under section 10(34) of the Income Tax Act, 1961?
2. Whether the provisions of section 14A of the Act apply to insurance business when the assessee has claimed exempted income under section 10 of the Act?

Analysis:

Issue 1:
The Appellant-Revenue raised a question of law regarding the treatment of dividend income as exempt under section 10(34) of the Income Tax Act, 1961. The Appellant contended that the dividend income should not be exempt as it is considered part of the income of the Life Insurance Business and is included as 'income' by the actuary. However, the Tribunal did not entertain this question as it was previously raised in a different case and not considered. The Tribunal also did not find it necessary to consider the impact of negative reserve on the 'taxable surplus' for this issue.

Issue 2:
The second substantial question of law raised in the appeal was whether the provisions of section 14A of the Act apply to insurance business when the assessee has claimed exempted income under section 10 of the Act. The Tribunal, following a previous decision of the Court, held that section 14A did not apply to insurance business. Therefore, the Tribunal did not find it necessary to consider this question further. The appeal was admitted on this specific substantial question of law for consideration.

In conclusion, the High Court of Bombay considered the issues raised by the Appellant-Revenue regarding the treatment of dividend income and the applicability of section 14A to insurance business. The Court relied on previous decisions and orders to determine that the Tribunal's decisions were justified in not entertaining certain questions and in holding that section 14A does not apply to insurance business in this case.