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TMI Blog2012 (10) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 29-3-2012 - G E Veerabhadrappa, D K Agarwal, JJ. For Appellant: Shri Farrokh V Irani For Respondent: Smt Kusum Ingle ORDER Per: D K Agarwal: All these four appeals preferred by the assessee are directed against the separate orders dated 22.3.2011 passed by the ld.CIT(A) for the Assessment Years 2000-01 to 2003-04. Since facts are identical and issues involved are common, all these four appeals are disposed of by this common order for the sake of conveyance. 2. Briefly stated facts of the case extracted from ITA No.3397/Mum/2011(AY-2000-01) are that the assessee company is engaged in the business of General Insurance and investment. The return of income declaring total income at Rs.3,43,13,72,540/- was filed. However, the assessment was completed at an income of Rs.4,87,50,76,330/- including disallowance of Rs.7,76,85,000/- u/s 14A vide order dated 31.1.2003 passed u/s 143(3) of the Income Tax Act, 1961 (the Act). On appeal, the ld. CIT(A) confirmed the disallowance made by the AO. On further appeal before the Tribunal, the Tribunal vide order dated 26.8.2008 has set aside the issue with regard to the disallowance u/s 14A for re-examination with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance u/s 14A, the ld. CIT(A) after considering the issue in detail held (para 9.4): Both the wisdom, that of the judiciary as pronounced by Hon ble Bombay High Court in the case of Godrej Boyce and, that of the legislature as contained in Rule 8D convey that in the present scenario, the best wisdom is to apply principles contained in Rule 8D for determining disallowance u/s. 14A, subject of course to Section i4A(1) of the I.T. Ac Therefore, I hold that the disallowance to be made u/s. 14A for expense incurred in relation to income which does not form part of the total income under the Income-tax Act has to be the basis of principles as spelt out in the Rules as contained in the Notification dated 24th March,2008. and accordingly upheld the views of the AO. 5. Being aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 6. Grounds Nos.1.1 to 1.3 taken by the assessee read as under : 1.1 The CIT(Appeals) erred and cited illegally and without jurisdiction in disallowing the Appellant the benefit of the exemption provisions of section 10 of the Income Tax Act, 1961 ( The Act ). 1.2 The CIT(Appeals) had no jurisdiction to go beyond the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that section 14A overrides the section 44 and effect of section 14A is required to be given even though the income of insurance business computed u/s 44 of the Act. Thus, in principle we agree with the revenue authorities that effect of section 14A is to be given while computing the insurance business income. However, for computation of disallowance we learnt that this part of the issue is before the Special Bench in the case of Daga Capital Management Pvt.Ltd. in ITA No.8057/ Mum/2008 for assessment year 2001-02 the order of which is awaited. In the light of the above fact, we send this matter back to the file of the AO with a direction to compute the disallowance of amount u/s 14A in accordance with the decision of ITAT Special Bench supra and after providing reasonable opportunity of being heard to the assessee. We further find that pursuant to the direction of the Tribunal, the AO has considered the matter and made disallowance amounting to Rs.8.08 crores. We further find that the ld. CIT(A) while hearing the appeal has raised the new issue that the assessee is not entitled to the exemption u/s 10 of the Act. He accordingly issued a notice for enhancement prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion and examine the total sale consideration as the appellant in the present case had applied under Chapter XX-C and the Appropriate Authority had accepted the sale consideration mentioned by the appellant. The sale consideration and the quantum thereof was never in question or doubt. This was not the aspect which was to be reexamined. Thus, the enhancement made by the Assessing Officer by increasing the sale consideration from Rs.17.5 lakhs to Rs. 21,42,502/- was not justified and as per law. 13. Thus it is clear that when the Tribunal has set aside the assessment and remand the case for making a fresh assessment, the power of the AO is confined to the subject matter of appeal before the Tribunal. He cannot take up the questions which were not the subject matter of the appeal before the Tribunal. Like wise the ld. CIT(A) has also no power to enhance the assessment by discovery of a new source of income not considered by the AO in the order appealed against. In this view of the matter, we are of the view that the ld. CIT(A) was not justified in enhancing the income by discovering a new source of income not considered by the AO. 14. In General Insurance Corporation of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Income-tax Act, 1961. It is to be noted that section 44 does not say-"notwithstanding anything to the contrary contained in the provisions of this Act or any other law for the time being in force". Nor does rule 2(2)(a) of the General Insurance Business (Nationalisation) Rules have an overriding effect on the provisions of the Income-tax Act. The two provisions contained in the two enactments have thus different purposes to achieve. The rule of harmonious construction has to be applied. There is another approach to the same issue. Section 44 of the Income-tax Act read with the Rules contained in the First Schedule to the Act lays down an artificial mode of computing the profits and gains of insurance business. For the purpose of income-tax, the figures in the accounts of the assessee drawn up in accordance with the provisions of the First Schedule to the Income-tax Act and satisfying the requirements of the Insurance Act are binding on the Assessing Officer under the Income-tax Act and he has no general power to correct the errors in the accounts of an insurance business and undo the entries made therein. The amount set apart by the General Insurance Corporation for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly or exclusively incurred for the purposes of any of the sub-clauses mentioned in clause (b) of section 35B(1) was not entitled to weighted deduction under section 35B. (iv) that there was nothing in the circular which supported the contention of the assessee. The circular merely says that each case has to be examined and the issue would be basically a finding of fact. The assessee had not made its claim before the Income-tax Officer by relying on this circular. The Tribunal must examine the question of section 35B with reference to the various sub-clauses of clause (b) of that section. [Matter in SLP (C) No. 10982 of 1987 and C.A. No. 12419 of 1996 remanded.] (v) that the Tribunal had to consider whether payment to the HHEC, ECGC and STC and in respect of foreign sales commission and expenditure on articles of presentation, qualified for weighted deduction. [Matters in C.A. No. 6942, 7847, 3120 of 1995 and C.A. Nos. 7666-7667 of 1996 and SLP(C) Nos. 7485/86 and 4588-89/89 remanded to Tribunal.] (vi) that with regard to expenditure on maintenance of car and motor cycle and generator expenses, the Tribunal had to decide the case afresh after examining the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be emphasised that it is not the case of the Assessing Officer that the assessee had failed to fulfil the condition which attached to the provisions of the relevant clauses of Section 10 in respect of which the exemption was allowed. This of course is apart from clause (38) of Section 10 where the Assessing Officer had rejected the claim for exemption in the original order of assessment under Section 143 (3). The Assessing Officer above all was bound by the communication of the CBDT. Having followed that in the order under Section 143 (3) he could not have taken a different view while purporting to reopen the assessment. Having applied his mind specifically to the issue and having taken a view on the basis of the communication noted earlier, the act of reopening the assessment would have to be regarded as a mere change of opinion which has also not been based on any tangible material. Consequently, we hold that the reopening of the assessment is contrary to law. The Petition would have, therefore, to be allowed. 19. Respectfully following the above decisions, we while reversing the order passed by the ld. CIT(A) on this account, allow the grounds taken by the assessee. 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Ground of Appeal No.3.1 to 3.4 - Original Ground of Appeal No.3.1 to 3.5). The issue is with reference to the applicability of section 14A and disallowance of expenditure in respect of sale of investment which are not taxed. We have heard the rival contentions. We also note that this issue is also considered by the Coordinate Bench in assessee s own case for 2006- 07 vide Para 7 to 9: 7. Grounds of appeal no.4 regarding the expenditure under section 14A. 8. We have heard the rival contentions and perused the relevant record. We note that this issue has been considered and decided by the Pune Bench of this Tribunal in the case of Bajaj Allianz General Insurance Company limited V/s Add. CIT in ITA No.1447/PN/2007 for the assessment year 2003-04 order dated 31.08.2009. This Tribunal in the case of JCITV/s M/s Reliance General Insurance co. in ITA No.3085/Mum/2008 for the assessment year 2005-06 vide order dated 26.2.2010 has considered this issue and decided in favour of the assessee. This order was followed by this Tribunal while deciding the issue in ITA No.781/Mum/2007 vide order dated 30.4.2010. Thus, this issue has been consistently decided in favour of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999] 240 ITR 139 (SC), wherein their Lordships of the apex Court have categorically held that the provisions of s. 44 being a special provision govern computation of taxable income earned from business of insurance. It mandates the tax authorities to compute the taxable income in respect of insurance business in accordance with the provisions of the First Schedule to the Act. In the light of these, their Lordships of Delhi High Court have held that no quest ion of law, much less a substantial quest ion of law survives for their consideration. In other words, order of the Tribunal has been affirmed. Following the same reasoning, addition made by the AO is deleted. 22. We have considered the rival contentions and gone through the records. The provisions of s. 44 read as under: 44. Insurance business.-Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head' Interest on securities'. 'Income from house property', 'Capital gains' or' Income from other sources', or in s. 199 or in ss. 28 to 43B, the profits and gains of any business of insurance, including any such business carried on by a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of s.14A was inserted by Finance Act, 2001 w.e.f. 1st April, 1962. It is stated that the investments made by the assessee are both taxable as well as tax free. An estimated disallowance of 50 per cent out of the management expenses incurred and as claimed in the P L a/c is treated as expenses incur red in connect ion with the looking after tax-free investment. 19. The learned counsel for the assessee vehemently argued that the income of the assessee is to be computed under s. 44 r/w r. 5 of Sch. 1 of the IT Act. Sec. 44 is a non obstinate clause and applies notwithstanding anything to the contrary contained within the provisions of the IT Act relating to computation of income chargeable under different heads, other than the income to be computed under the head 'Profit and gains of business or profession'. For computation of profits and gains of business or profession the mandate to the AO is to compute the said income in accordance with the provisions of ss. 28 to 43B of the Act. In the case of the computation of profits and gains of any business of insurance, the same shall be done in accordance with the rules prescribed in First Schedule of the Act, meaning thereby ..... X X X X Extracts X X X X X X X X Extracts X X X X
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