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2019 (7) TMI 387 - HC - Income TaxProfit on sale of investments - profits realized from investments are real and hypothetical - whether assessee is not liable to deduct the tax at source made to surveyors outside the country was not taxable in India? - HELD THAT - Prior to 1st April, 2011, there was no provision which required the Revenue to disallow the deduction of loss on sale of investments. In the respondent/assessee's case, identical view was taken by the CIT (Appeals), Large Taxpayer Unit, Chennai, and the order was confirmed by the Tribunal. The finding in favour of the assessee was on the ground that prior to 1st April, 2011, there was no provision which required the Revenue to disallow the deduction of loss on sale of investments. We respectfully agree with the view taken by the High Court of Delhi in Oriental Insurance Co. Ltd. 2017 (9) TMI 172 - DELHI HIGH COURT . Accordingly, the first substantial question of law is answered against the Revenue. TDS made to surveyors outside the country was not taxable in India - a Division Bench of this Court in the case of Commissioner of Income Tax vs. M/s.Royal Sundaram Alliance Insurance Company Limited 2019 (2) TMI 923 - MADRAS HIGH COURT considered these three substantial questions of law and the substantial questions of law were decided against the Revenue. MAT computation - whether the Tribunal is correct in holding that the provisions of Section 115JB which enables the companies to compute book profit may not be applicable to insurance companies, this Court had an occasion to consider the same question in the case of The Commissioner of Income Tax vs. M/s.Cholamandalam MS General Insurance Company Limited 2019 (2) TMI 1075 - MADRAS HIGH COURT and the same was rejected and held against the Revenue.
Issues Involved:
1. Profit on sale of investments. 2. TDS on payments to surveyors outside India. 3. Applicability of Section 115JB to insurance companies. 4. TDS on commission paid for re-insurance premium. Detailed Analysis: Issue 1: Profit on Sale of Investments The core question was whether the profit on the sale of investments is exempt. The High Court of Delhi in the case of Oriental Insurance Co. Ltd. vs. Deputy Commissioner of Income-tax analyzed Rule 5(b) of the First Schedule to the Income-tax Act, which was omitted by Finance Act, 1988 and reintroduced by Finance Act, 2009 effective from April 1, 2011. The rationale for omitting Rule 5(b) was to exempt profits and gains in investments by the General Insurance Corporation of India and related companies. The Court noted that the 2009 amendment aligned with IRDA Regulations, requiring non-life insurance companies to include profit or loss on the realization/sale of investments in their Profit and Loss Account. This requirement applied from AY 2011-12, and prior to April 1, 2011, there was no provision for disallowing the deduction of loss on the sale of investments. The CIT(A) and the Tribunal had taken a similar view in the respondent/assessee's case. The High Court agreed with the Delhi High Court's decision, answering this question against the Revenue. Issue 2: TDS on Payments to Surveyors Outside India The Tribunal's decision that the assessee is not liable to deduct tax at source on payments to surveyors outside India was upheld. A Division Bench of the Madras High Court in Commissioner of Income Tax vs. M/s. Royal Sundaram Alliance Insurance Company Limited had previously considered and decided this question against the Revenue. Issue 3: Applicability of Section 115JB The question was whether Section 115JB, which allows companies to compute book profit, applies to insurance companies. This issue was also addressed by a Division Bench in the case of Commissioner of Income Tax vs. M/s. Royal Sundaram Alliance Insurance Company Limited and further in The Commissioner of Income Tax vs. M/s. Cholamandalam MS General Insurance Company Limited. Both decisions held that Section 115JB does not apply to insurance companies, and this view was upheld against the Revenue. Issue 4: TDS on Commission for Re-insurance Premium The Tribunal's decision that the assessee is not liable to deduct tax at source on the commission paid for re-insurance premium was also upheld. This issue was similarly decided against the Revenue in the case of Commissioner of Income Tax vs. M/s. Royal Sundaram Alliance Insurance Company Limited. Conclusion: The appeals were dismissed, and all substantial questions of law were answered against the Revenue. Consequently, connected miscellaneous petitions were closed, and no costs were awarded.
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