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TMI Blog2014 (5) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... of by this consolidated order. Appeal wise and ground wise adjudication is given in the succeeding paragraphs. 2. Core issue common in AYs under consideration- Income nature of the funds transferred from shareholders' Accounts to the Policyholders' Account to meet out the deficiencies: During the proceedings before us and at the outset, in connection with the appeals of the assessee, F.V. Irani and Shri Manoj Purohit, Ld Counsels for the assessee stated that the assessee in the present case is an insurance company and the provisions of section 44 of the Income tax Act are applicable here. Further, bringing our attention to the core issue raised in all the grounds 1 to 4 of the appeal for the AY 2003-04, which is common in all the AYs under consideration, he mentioned that under the provisions of IRDA Act, the assessee is under obligation to maintain separate accounts namely 'policy holders account' and the 'shareholders account'. In case, there is income deficiency in policy holders' account, the funds are transferred from the shareholders account otherwise, both these accounts are part of the business of the assessee and it is case of transfer of funds from one hand to the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in business is integral part of Life Insurance business. The LD. CIT(A) gives a finding that assessee is exclusively in Life Insurance business. However, since he gave primacy to Form I proforma he concluded that other incomes are not of Life Insurance business. We have already considered and decided that assessee was mandated to maintain separate accounts by IRDA Regulations. Just because separate accounts are maintained the incomes in Shareholder's account does not become separate from Life insurance business. As per Insurance Act 1938 all incomes are part of one business only and these incomes are considered as part of same business. Therefore, the incomes in Shareholder's account are to be considered as arising out of Life insurance business only. More over Sec 44 mandates that only First Schedule will apply for computing incomes and excludes other heads of income like, Interest on Securities, income from house property, Capital gains or Income from other sources. Being non-obstante clause, sec. 44 mandates that the profits and gains of insurance business shall be computed in accordance with the rules contained in First Schedule. Therefore, the incomes in Shareholder's accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal profit / loss as contained in 'Revenue account' and 'P&L A/c' is the profit from business of insurance which is subject to the special provision of Section 44 of the I.T. Act. The Ld. CIT(A) has not correctly understood the purpose of maintaining two separate accounts viz 'Revenue account' and 'P&L A/c' which is directed by the IRDA to assure the policyholders-with whom the company stands in a fiduciary relationship about the capability of the insurer to fulfill the long-term commitments made to them. The IRDA directions are not designed to segregate the total profit of the insurer between insurance profit and non-insurance profit. Further, the Ld. CIT(A), while holding that 'Revenue account' along reflects the profit from insurance, ignored the following relevant provisions of Insurance Act, the IRDA Act and the directions issued there under: (i) An insurance company is debarred from carrying on any other business. [Clause (c) of Section 2(7A) of the Insurance Act] (ii) All the assets of the Insurance Company - whether in Policyholders account (viz Revenue Account) or in Shareholders account (viz Profit and Loss account) - determine the solvency ratio required to be mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r may be remanded to the files of the AO for the limited purpose of examining the facts and figures of the present appeals. Per contra, it is the case of the assessee, since the issues are exactly identical, the matters may be decided by the Tribunal. 5. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited decisions of the Tribunal. We have carefully examined the grounds raised in the appeals qua the conclusions of the Tribunal in the above referred cases in general and ICICI Prudential Insurance (supra) in particular. On perusal of the same, we find that it is the conclusion of the said decisions that the sums transferred from account to the other of the same assessee to meet the deficit if any do not amounts to the chargeable income of the assessee -the insurance company. Relevant extracts from the said orders fo the Tribunal are already incorporated in the paragraphs above. Thus, in principle, the issues raised by the assessee in its grounds stand covered. Accordingly, the grounds 1 to 4 raised in the appeal for the AY 2003- 04 are allowed and ground 5, being general in nature, does not need any specific adjudication. 6. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's appeal ITA 3346/Mum/2009- A Y 2005-06 - Revenue's appeal 10. These are cross appeals and first we shall take up assessee's appeal considering the covered nature of grounds 1 to 4 of the appeal. Ground 6 is found general and it does not call for specific adjudication. In connection with grounds 1-4 of the appeal, both parties mentioned that the issues raised in these appeal are exactly identical to the ones raised in the appeals for the AYs 2003-04 and 2004-05. The core issue relates to the income nature of the funds transferred from one account to the other of the same assessee and the same is decided in favour of the assessee considering the conclusions of the Tribunal in many cases referred to above. On hearing the parties and on perusal of the relevant orders and the documents, we find the issues are already decided by us in favour of the assessee for the said AYs 2003-04 and 2004-05 and we find no reason to deviate from the same. Accordingly, we allow grounds 1 to 4 of the assessee's appeal. 11. Regarding ground 5 of the assessee appeal for the AY 2005-06, Ld Counsel mentioned that it relates to the 'allowability of claim of stamp duty expenditure incurred in Equity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the funds transferred from one account to the other of the same assessee and the same is decided in favour of the assessee considering the conclusions of the Tribunal in many cases referred to above. On hearing the parties and on perusal of the relevant orders and the documents, we find the issues are already decided by us in favour of the assessee for the said AYs and we find no reason to deviate from the same. Accordingly, we allow grounds 1 and 2 of the assessee's appeal. 14. Ground no.3 of the assessee's appeal in ITA No.5673/M/2009 for the AY 2006-2007, relating to the applicability of provisions of section 14A of the Act. In this regard, it is the case of the assessee that this issue also stands covered in favour of the assessee as the provisions of section 14A have no application to the insurance companies which are governed by the provisions of section 44 of the Income Tax Act, 1961 and the same is having over riding effect on the normal provisions of the Act. In this regard, he relied on the Coordinate Bench decision of the ITAT in the case of ICICI Prudential Insurance (supra) and para 46 of the said order of the Tribunal is relevant in this regard. "46. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TJ (Delhi)388 : [2010] 38 DTR (Delhi ) 225-Ed. ] . Therefore considering the vehement reliance of learned Authorized Representative it is worth to mention at the outset itself that the issue now stood resolved by this latest decision of Delhi, Tribunal in the case of Oriental Insurance Co. Ltd. (supra), the relevant portion reproduced below: "17. We have heard rival submissions of the parties and have gone through the material available on record. Identical issue arose in assessee's own case for asst. yr. 1985-86. The Tribunal accepted the plea of the assessee and in fact the issue went up to the Hon'ble Delhi High Court in asst . yrs. 1986-87 to 1988-89, which is reported as CIT v. Oriental Insurance Co. Ltd. [2003] 179 CTR (Delhi ) 85 : [2002] 125 Taxman 1094 (Delhi ), decided the issue in favour of the assessee by holding that s. 44 of the Act is a special provision dealing with the computation of profits and gifts of business of insurance. It being a non obstinate provision, has to prevail over other provisions in the Act. It clearly provides that income from insurance business has to be computed in accordance with the rule contained in the First Schedule. It is not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special provisions coupled with non obstante clause the AO is not permitted to travel beyond these provisions. 24. Sec. 14A contemplates an exception for deductions as allowable under the Act are those contained under ss. 28 to 43B of the Act. Sec. 44 creates special application of these provisions in the cases of insurance companies. We therefore, agree with the assessee and delete the act as according to us, it is not permissible to the AO to travel beyond s.44 and First Schedule of the IT Act ." 18. It may not be out of place to mention that the respected Co-ordinate Bench has duly taken the note of an earlier decision of that very Bench decided in the case of that very assessee vide order dt . 29th Sept. 2004 bearing ITA Nos. 7815/Del/1989, 3607 to 3609/Del /1990; 5035/Del / 1998 and 3910/Del /2000 named as Dy. CIT v. Oriental General Insurance Co. Ltd. [2005] 92 TTJ (Delhi ) 300. As seen from the Paras reproduced above on due consideration of the relevant provisions as applicable to resolve this issue a conclusion was drawn that since the Courts have held, s. 44 creates a special provision in the cases of assessment of insurance companies therefore it was not permissible t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 43B. Therefore, the purpose, object and purview of s. 14A has no applicability to the profits and gains of an insurance business. 21. The learned Departmental Representative strongly justified the act ion of the AO and that of the CIT(A) in the light of the clear provisions of s. 14A of the Act . Since the view has already been expressed by respected Co-ordinate Bench therefore, we have no reason to take any other view except to follow the same. With the result we hereby accept the argument of learned Authorized Representative to the extent that in the present situation the provisions of s. 14A need not to apply while granting exempt ion 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 of s. 44 of IT Act. Once we have taken this view therefore the enhancement as proposed by learned CIT(A) is reversed and the directions in this regard are set aside. Resultantly ground No. 1 is allowed consequent thereupon ground No. 2 automatically goes in favour of the assessee". Accordingly, by following the orders of this Tribunal, we decide this issue in favour of the assessee. Therefore, the ground is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Tribunal cited before us. On perusal of the decision of the ITAT in the case of ICICI Prudential Insurance (supra) as well as another decision in the case of HDFC Standard Life Insurance Company (supra), we find revenue raised the arguments revolving around the applicability of the judgment in the case of Godrej & Boyce Mfg Co Ltd, supra. Despite the same, the Tribunal considered the said judgment and still allowed the claim of the assesses. Therefore, in view of the special provisions applicable to the insurance companies, we are of the opinion that the provisions of section 14A r.w.r. 8D were held not applicable to the insurance companies i.e., ICICI Prudential Insurance, HDFC Standard Life Insurance Company. Therefore, the SBI Life Insurance Company Limited (assessee in the present case should not be any exception. Considering the settled nature of the issue vide the decisions of the Tribunal's orders (supra), ground no.3 raised by the assessee for the AY 2006-2007 is allowed. 18. Ground 4 relates to the disallowance of the Fringe Benefit Tax. It is the case of the assessee that the provisions of the FBT are not attracted the assessee being an insurance company, whose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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