2020 (3) TMI 507 - HC - Income Tax

A ddition u/s 14A - computation of income of the Respondent assessee in terms of Section 44 - HELD THAT - For computing the profits and gains of the business of insurance company, the AO had to resort to Section 44 and the prescribed rules, and could not have applied Section 28 to 43B, since the same were excluded from the purview of Section 44. This necessarily includes the exception provision enshrined under Section 14A of the Act. Therefore, in our view, the AO could not have travelled beyond Section 44 in the first schedule of the Act. Besides, the tribunal has also invoked the rule of consistency since the same view of the Tribunal has prevailed in respect of the earlier assessment years i.e. 2000-01, 2001-02 and 2005-06. No merit in the submission of Mr. Sharma that the Tribunal should have remanded back the matter to the Assessing Officer for computation of income of the Respondent-assessee in terms of first schedule of the Act, since that was not even a ground urged by the Revenue before the Tribunal. At this stage, it is too late in the day for the Revenue to argue that notwithstanding the grounds urged to challenge the order of the CIT (A), the Tribunal should have ventured into examining the merits of the computation of income of the Respondent assessee in terms of Section 44 read with the first schedule of the Act. No doubt, the Tribunal is a final factfinding body. However, when the Revenue confined its challenge only in respect of the applicability of Section 14A, we cannot find fault in the impugned order, on the basis of submissions not advanced before the Tribunal.

Summary

Issues:
Delay condonation for re-filing application, Delay condonation for appeal filing, Applicability of Section 14A of the Income Tax Act, 1961, Interpretation of Section 44 read with the first schedule of the Act, Tribunal's decision on exclusion of Section 14A, Tribunal's refusal to remand matter back to the Assessing Officer.

Delay Condonation - Re-filing Application:
The applicant sought condonation of a 175-day delay in re-filing the application, which was allowed by the court after considering the reasons provided in the application. The application was disposed of accordingly.

Delay Condonation - Appeal Filing:
The Appellant requested condonation of a 24-day delay in filing the appeal, which was not opposed by the Respondent's counsel. The court allowed the application, and the delay was condoned. The application was disposed of in the mentioned terms.

Applicability of Section 14A of the Income Tax Act, 1961:
The Revenue filed an appeal challenging the ITAT's order for the assessment year 2011-12, where the Tribunal dismissed the appeal based on earlier orders. The Senior Standing Counsel for the Appellant argued that Section 14A should apply to prevent double benefits for the assessee. However, the court found that Section 44 overrides Section 14A for insurance companies, as it is a special provision under the Act.

Interpretation of Section 44 with the First Schedule:
The court examined Section 44, which begins with a non-obstante clause, and concluded that it excludes Section 14A for computing income of insurance companies. The court found that Section 44 is a special provision that applies to insurance companies, and the AO cannot go beyond Section 44 for computation, including the exception provision of Section 14A.

Tribunal's Decision on Exclusion of Section 14A:
The court agreed with the Tribunal's interpretation that Section 14A is excluded for insurance companies under Section 44. The Tribunal's decision was based on consistency with earlier assessment years, and the court found no substantial question of law in this regard.

Refusal to Remand Matter Back to the Assessing Officer:
The court dismissed the argument that the Tribunal should have remanded the matter back to the Assessing Officer for computation of income in terms of the first schedule of the Act. The court held that since the Revenue did not raise this ground before the Tribunal, it was too late to argue for it at this stage. The court found no fault in the Tribunal's decision and concluded that no substantial question of law arose. The petition was disposed of accordingly.