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TMI Blog1961 (9) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... m taxation under section 4(3)(xii) of the Act. This contention was not accepted by the Income-tax Officer. In his view the insurance company had to be assessed according to the rules contained in the Schedule of the Act. In that Schedule, the income of an insurance company is only the income from its business and is not divided under the various heads. The income assessed is a notional income as determined under the Schedule of the Act. In this view of the matter, the deduction claimed by the assessee was not granted. An appeal taken by the assessee to the Commissioner failed. A second appeal was taken to the Tribunal. The Tribunal took the view that the assessee was entitled to the benefit of the exemption in respect of the Borivli property under section 4(3)(xii) of the Act, and that income being exempt from tax, the manner of computation of the assessee's income did not arise. In this view of the matter, the Tribunal held that from the figure of surplus arrived at in accordance with the Schedule of the Act the rental income derived by the assessee from the Borivli property should be excluded, and the assessee taxed on the balance. On an application made by the Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 4 of the Act. If any receipt is taken away or taken out of the total income of an assessee, then that amount cannot be taken into consideration at all. It goes out at the inception and no question arises of any computation of that income as such. Sub- section (7) of section 10 of the Act deals only with computation. Unless and until it is shown that a particular receipt is income which can be included in the total income of the assessee, section 10(7) has no application thereto. It is his argument that the rental income received by the assessee from its Borivli property is exempt under clause (xii) of sub- section (3) of section 4 of the Act. That income, therefore, goes out of the total income of the assessee. Section 10(7) therefore has no application to that income and that income will have to be deducted from the sum ascertained under section 10(7) read with the rules in the Schedule. He referred us to the decisions in Commissioner of Income- tax v. Sir Kameshwar Singh [1935] 3 I.T.R. 305 and B.M. Kamdar, In re [1946] 14 I.T.R. 10. In our opinion, the contentions raised on behalf of the revenue are well founded. Section 3 of the Act provides that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head income from property is satisfied. Now, the heads of income are enumerated in section 6 of the Act. It provides that Save as otherwise provided by this Act, the following heads of income, profits and gains shall be chargeable to income-tax in the manner hereinafter appearing... , and then it enumerates those heads, head (iii) being income from property . Reading these material provisions of section 6 together with clause (xii) of sub-section (3) of section 4, it is apparent that unless and until the assessee establishes that the income relating to which it has claimed exemption is income from property within the meaning of section 6 and chargeable in income-tax in the manner provided in the Income-tax Act, he cannot claim that the provisions of clause (xii) of sub-section (3) of section 4 are attracted thereto. Section 9 is the relevant section of the Act, which deals with computation of income from property, which is chargeable to tax. The answer then is, if the provisions of section 9 of the Act govern the income derived by the assessee from the Borivli property, the assessee establishes that the income from the Borivli property in its hands is an income chargeable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains of life insurance business shall be taken to be either what is stated in sub-clause (a) or sub-clause (b) and whichever is greater,.....Therefore, it will be noticed that instead of an insurance company making its return of income under the various heads as laid down in section 6, it has got to submit one unit of income, a sort of notional or artificial income, as provided in the Schedule to the Act. The aforesaid observations of the learned Chief Justice lend support to our conclusion that the income received by the insurance company from a property is in its hands not an income chargeable as income from property, but, on the other hand, the entire income of the insurance company received by it during the course of business bears one character only and that is profits and gains from the business of insurance. In Commissioner of Income-tax v. Western India Life Insurance Co. Ltd. [1949] 17 I.T.R. 125 , an Indian assurance company doing business in India held, for the purpose of its business, certain foreign investments from which it received income. The income received by the company outside British India was not brought by the company into British India. The company c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. That sub-section makes an income from whatever source received by an assessee chargeable to tax, save and except such income as is excluded therefrom in accordance with the provisions of the Act. We have also discussed above that the assessee is not entitled to claim any exemption in respect of this income under clause (xii) of sub-section (3) of section 4. The other decision on which reliance is placed is Commissioner of Income-tax v. Sir Kameshwar Singh [1935] 3 I.T.R. 305 (P.C.). The assessee in that case was a money-lender. In the course of his money-lending, the assessee had advanced considerable amount, and as a part of that money-lending transaction, he obtained as a mortgagee in possession certain agricultural property. A question arose whether income of that agricultural property was liable to tax. The department contended that it was income from business and, therefore, taxable; while it was the contention of the assessee that the source of the income being agricultural, it was exempted from being included in the total income of the assessee. Reliance was placed by the assessee on clause (viii) of sub- section (3) of section 4 of the Act. This contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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