2020 (1) TMI 619 - AT - Income Tax

Exemption u/s 10(34) without disallowing any expenditure u/s 14A - HELD THAT - Neither any change of circumstances nor any decision of any higher forum is brought to our notice by the Revenue. Hence while respectfully following the above consistent view taken by the Tribunal in assessee s own case for the earlier assessment years 2019 (4) TMI 1769 - ITAT DELHI we allow ground of assessee s appeal and direct the Assessing Officer to allow exemption to the assessee under section 10(34) of the Act without disallowing any expenditure under section 14A of the Act. Addition on account of income from sale of investment to be deleted as relying on own case 2018 (1) TMI 845 - ITAT DELHI Provision of bad debts - HELD THAT - As relying on own case 2018 (1) TMI 845 - ITAT DELHI wherein examined the contention of the learned DR that the assessee himself added back the royalty while computing the shareholders income. This implies that the assessee has accepted the view of the Revenue that the income in the shareholders a/c has to be computed under the normal provisions of the computation of income in Income Tax Act. Royalty paid by the assessee in our view cannot be regarded to be an expense relating to the life insurance business. There is nothing wrong caused to the Revenue as Royalty cannot be regarded to be liability incurred for life insurance business. We therefore set aside order of CIT(A) on this issue and delete the enhancement made by CIT(A).

Summary

Issues Involved:
1. Disallowance of donations.
2. Exemption under section 10(34) of the Income Tax Act for dividend income.
3. Treatment of profit on sale of investments.
4. Provision for bad debts.
5. Appeals against orders under section 154 of the Income Tax Act.

Detailed Analysis:

1. Disallowance of Donations:
The first issue concerns the disallowance of donations made by the assessee. The assessee argued for an alternative deduction under section 80G of the Income Tax Act for the donations made. It was noted that this issue had been previously resolved in favor of the assessee by the Tribunal in ITA No. 5643/Del/2010 for the assessment year 2006-07. The Tribunal had directed the assessee to furnish relevant information before the Assessing Officer to claim the deduction under section 80G, and the Assessing Officer was instructed to verify the details and grant the deduction if found proper. The Tribunal decided to follow this precedent and remanded the issue back to the Assessing Officer for verification and potential deduction under section 80G.

2. Exemption under Section 10(34) for Dividend Income:
The second issue involves the exemption under section 10(34) of the Income Tax Act for dividend income earned by the assessee. The assessee claimed that this issue was covered in their favor by previous Tribunal orders for the assessment years 2006-07, 2007-08 to 2009-10, and 2010-11. The Tribunal confirmed that the exemption under section 10(34) should be allowed without disallowing any expenditure under section 14A. This decision was based on the precedent set in the assessee’s own case and the Tribunal's consistent view. Consequently, the Tribunal directed the Assessing Officer to allow the exemption under section 10(34) without disallowing any expenditure under section 14A.

3. Treatment of Profit on Sale of Investments:
The Revenue challenged the CIT(A)’s direction to the Assessing Officer regarding the taxability of the profit on the sale of investments. The Tribunal noted that this issue had been consistently resolved in favor of the assessee in previous assessment years, including 2010-11, 2006-07, and 2007-08 to 2009-10. It was established that the profit on the sale of investments should be treated as part of the income derived from life insurance business and not as income from other sources. The Tribunal upheld this view and dismissed the Revenue's grounds of appeal on this issue.

4. Provision for Bad Debts:
The fourth issue relates to the provision for bad debts. The Tribunal observed that this issue was also covered in favor of the assessee in the assessment year 2010-11. It was held that the income in the shareholders' account forms part of the profit and gains from the life insurance business, and hence, the normal provisions of the Income Tax Act do not apply. The Tribunal upheld the CIT(A)'s view that the provision for bad debts should not be disallowed and dismissed the Revenue's appeal on this aspect.

5. Appeals Against Orders Under Section 154:
The Revenue filed appeals against the CIT(A)’s orders that set aside the Assessing Officer’s orders under section 154 of the Income Tax Act. Given the Tribunal's findings on the previous issues, these appeals were rendered infructuous and were dismissed.

Conclusion:
- The appeals filed by the assessee (ITA No. 4384 and 4385/Del/2019) were allowed.
- The appeals filed by the Revenue (ITA Nos. 4633 to 4636/Del/2019) were dismissed.

The judgment was pronounced in open court on January 14, 2020.