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2015 (1) TMI 9 - AT - Income TaxApplicability of provision of section 14A on insurance companies Held that - As decided in assessee s own case for the earlier assessment year, it has been held that the applicability of s. 14A in respect of sale of investment which is not taxed under the special circumstances of deletion of a sub-rule from the statute - It is not questioned that the profit was nontaxable per se rather the accepted legal position is that the impugned profit was very much taxable in the past assessee rightly contended that in the present situation the provisions of s. 14A need not to apply while granting exemption to an income earned on sale of investment primarily because of the reason of the withdrawal or deletion of sub- r. 5(b) to First Schedule r.w.s. 44 of IT Act Thus, the AO is directed to delete the disallowance made at ₹ 62.53 crores on account of section 14A - Decided in favour of assessee.
Issues Involved:
1. Non-adjudication of the specific ground raised before the CIT(A) regarding computation of income. 2. Applicability of provisions of Section 14A to the appellant. 3. Confirmation of disallowance under Section 14A of the Income Tax Act, 1961. 4. Various grounds raised by the department related to interpretation and application of Section 44 and Rule 2 of the First Schedule of the Income Tax Act. Detailed Analysis: 1. Non-Adjudication of the Specific Ground Raised Before the CIT(A) Regarding Computation of Income: The appellant argued that the CIT(A) failed to adjudicate on the computation of income, which was a specific ground raised. Both parties agreed that there was no finding by the CIT(A) on this issue. Consequently, the tribunal restored the matter to the file of the CIT(A) for adjudication on the correctness of the computation basis. This ground was allowed for statistical purposes. 2. Applicability of Provisions of Section 14A to the Appellant: The appellant contended that Section 14A does not apply to insurance companies, citing previous ITAT decisions in similar cases. The tribunal reviewed these precedents, including decisions in the cases of Bajaj Allianz General Insurance Co., Reliance General Insurance Company, and General Insurance Corporation of India, which consistently held that Section 14A does not apply to insurance businesses due to the special provisions of Section 44 of the Income Tax Act. The tribunal followed these precedents and ruled that Section 14A is not applicable to the appellant. 3. Confirmation of Disallowance Under Section 14A of the Income Tax Act, 1961: The CIT(A) had confirmed a disallowance of Rs. 62.52 crores under Section 14A. The tribunal, following its own earlier decisions and those of other coordinate benches, directed the AO to delete the disallowance. The tribunal found no reason to deviate from its previous orders, thus allowing the appellant's grounds on this issue. 4. Various Grounds Raised by the Department Related to Interpretation and Application of Section 44 and Rule 2 of the First Schedule of the Income Tax Act: The department raised multiple grounds challenging the CIT(A)'s reliance on ITAT orders from previous assessment years (2005-06 to 2008-09). These grounds included issues related to actuarial valuation adjustments, tax neutrality of transfers between Shareholders' and Policyholders' accounts, and the treatment of surplus and other incomes. The tribunal noted that all the issues raised by the department were already covered by its earlier decisions in the appellant's own case for the assessment years 2005-06 to 2008-09. The department had not accepted these decisions and had filed appeals under Section 260A, but the tribunal saw no reason to deviate from its earlier rulings. Consequently, the tribunal sustained the order of the CIT(A) and dismissed the department's appeal. Conclusion: The tribunal allowed the appeal filed by the assessee, directing the CIT(A) to adjudicate on the computation of income and deleting the disallowance under Section 14A. The department's appeal was dismissed, with the tribunal upholding the CIT(A)'s reliance on previous ITAT decisions in the appellant's case. The order was pronounced in the open court on 26th December 2014.
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