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TMI Blog2016 (12) TMI 1741X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred from one account to the other by the assessee for the purpose of maintenance of accounts as per requirement of law. As relying on Tribunal order wherein it has been held that assessee was engaged in only one business, i.e. business of life insurance - recomputation of income made by the AO was rightly rejected by the Ld. CIT(A). As a result, Grounds 1(i) & 1(ii) raised by the Revenue are hereby dismissed. Disallowance of stamp duty charges - treating expenses as capital expenditure as against revenue expenditure claimed by the assessee - Held that:- This issue stands decided by the AO in favour of the assessee on the basis of legal principle by relying upon the orders of the Tribunal in the case of HDFC Standard Life Insurance Co Ltd [2013 (10) TMI 1072 - ITAT MUMBAI]. In this year also, there would be no point in sending the issue back for futile exercise as the decision has already been taken, which can be applied here also. We have considered the request of the Ld. Counsel. No objection or any contrary argument was made by the Ld. CIT-DR in this regard. - Decided against revenue Addition on account of Negative Reserve - Held that:- AO has himself took a decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on order. During the course of hearing, it was stated at the very outset by the Ld. Counsel of the assessee that the issues involved in this case have already been reached before the Tribunal in assessee s own case and the Tribunal decided the issues for earlier assessment years. It was further stated that there is no distinction in facts and legal position in those years and the years before us now. Under these circumstances, reliance was placed on the order of the Tribunal for earlier years, especially the order passed in ITA No 3800/Mum/2008 Others for A.Ys 2003-04 and 2006-07. 2. Per contra, the Ld.CIT-DR did not object to the above submission and could not point out any distinction in facts or legal position. Thus, with this background we proceed to decide the present appeals in the light of the decision taken by the Tribunal in earlier years on identical issues. 3. First, we shall take up appeal filed by the Revenue for AY. 2002-03 in ITA No.1668/Mum/2011 filed against the order of Commissioner of Income-tax (Appeals)-2, Mumbai [in short, CIT(A)] dated 10-12-2010 passed against the assessment order dated 14-12-2009 u/s 143(3) r.w.s. 147 of the Act for AY. 2002-03 on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me under the head 'income from other sources' are overridden obviating the requirement of headwise computation of total income, the income mentioned in chapter Ill, of included in the total income in any form, is required to be excluded. As observed by Hon'ble Bombay High Court in life Insurance Corporation of India case reported in 119 STR 900 the surplus in a life insurance business is worked out on the basis of the net liability under business as shown in the summary and valuation of policies and the balance of life insurance fund as shown in the balance sheet . Since income from dividend become part of the life insurance fund, it enters into the computation of total income under Section 44 read with First Schedule of the LT. Act. The mere fact that the income from other sources has not been separately computed does not make any difference in the tax treatment of such income. Ground No 2 ADDITION ON ACCOUNT OF DIS LLOWANCE OF EXPENDITURE U/S 14A: Based on the decision leading to withdrawal of exemption granted in respect of income from dividend, the learned CIT has held that the provisions of Section 14A are not applicable to the case. However, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in holding that the exemption u/ s 10 (23AAB) in regard to income of Pension Fund is not available to the appellant on the ground that such an exemption is applicable only when the Pension Fund is an independent assessable entity. (iii) The learned CIT(A) failed to take a note of the fact that for the purpose of availing the exemption under section 10(23AAB) there are only two conditions to be fulfilled as laid down in the section, firstly that the contributions to such a fund is made by any person for the purpose of receiving pension from such fund and secondly the fund is approved by the Controller of Insurance or the Insurance Development Authority of India(IRDA). Hence, the learned CIT (A) was not justified in such an understanding of the provision which nowhere lays down the requirement of the Fund to be an independent assessable entity. The provision is applicable and consequently, the exemption is available to the Fund, irrespective of the fact whether it is an independent entity or run as a segment of the life insurance company, provided the conditions set out in sub-section (23AAB) of Section 10 are complied with. The appellant humbly submit that the Fund is ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the AO. It was also submitted that orders of the Ld. CIT(A) of those years reached before the Tribunal and have been confirmed by the Tribunal by dismissing the appeal of the Revenue. Thus, it was requested by the Ld. Counsel that the earlier orders of the Tribunal may be followed in this year also. 6. Per contra, the Ld. CIT-DR could not point out any distinction in facts or in law in earlier orders of this Tribunal and in the years before us. 7. We have gone through the orders passed by lower authorities, submissions made by both the sides before us as well as the earlier orders of the Tribunal. These three grounds are related to each other involving common issues, i.e. whether the assessee was carrying on two independent activities, i.e. one of insurance business which was reflected in Policyholders Account by the assessee and the other, being an independent activity depicted in Shareholders Account, as per the detailed findings given in the assessment order. Under these circumstances, the AO taxed the income arising in Shareholders Account as Income from other sources and the activity related to insurance as reflected in Policyholders Account was held to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the policyholders account. It is this transfer entry which is critical to the issue under consideration. It is clarified that the shareholders account is also known as the profit and loss account whereas the policyholders account as another name as revenue account. These two accounts are maintained separately under specific guidelines of IRDA, the Regulating Authority of- Insurance In India. 11. For the sake of clarity, it is necessary to understand the breakup of the amount transferred from shareholders account to policyholders account. It consists of two parts as under: 1 1. Bonus paid to policyholders ₹ 14,320/- 2. Deficiency in revenue accountRs.10,91,55,367/- 12. According to appellant, the transfer is necessitated because the appellant desired to effect payment of bonus which could not have been done by appellant as long as there was negative surplus in the policyholders account. Therefore, the positive income in the shareholders account was transferred by passing a journal entry to the policyholders account. 13. Assessing Officer has treated the effect of the transfer entry as under: (1) The amount of dividend paid to the policyholders at ₹ 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity in relation to funds in- the, shareholders account and that the activity of investment of these funds is intricately interlaced with the activity of insurance undertaken under the policyholders account and the two together reflect business of insurance. 8. Thereafter, the Ld. CIT(A) made his detailed analysis and recorded well reasoned findings by making reference to his earlier order passed in another case and concluded that as per law and facts, the whole business of the assessee is that of life insurance and, therefore, it has to be taken as one integrated business and should be assessed as such in view of section 44 of the Act. Thus, addition made by the AO was deleted. The AO was also directed to re-compute the income by accepting the income as was computed in the return filed by the assessee. 9. During the course of hearing before us, Ld. CIT-DR was not able to show anything incorrect or contrary to law in the detailed and well reasoned findings of Ld. CIT(A). Further, the Ld. Counsel of the assessee drew our attention on the order passed by the Tribunal wherein identical issue has already been decided in assessee s own case by the Tribunal vide its order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is the actuarial surplus / deficit for the year took the amount as disclosed at Regulation 8 (1) (f) (total surplus after transfer from Shareholder's account) which is not at all correct. 42. In View of the above, looking at the issue in any way what we notice is that the computation made by assessee is in accordance with Rule-2 of the Insurance Act 1938 according to which only AD can base his computation. This also corresponds to the way incomes were assessed in earlier years ie. the correct method as per Rule 2 and Sec 44 of IT ACT. In view of the discussion above and after analyzing the Forms, Regulations and Provisions we have no hesitation to hold that the assessee working of actuarial surplus / deficit is in accordance with Rule 2 of First Schedule. Therefore, assessee grounds on this issue are allowed and AD is directed to modify the order accordingly. Ground Nos. 1 to 3 are considered allowed. 55. We have heard the rival contentions. As briefly discussed while deciding the issue of taxing surplus, assessee is in life Insurance business and it is not permitted to do any other business. All activities carried out by assessee are for furtherance of Life Insura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove extracted ratio of the judgments. 11. We have also examined the facts of the year before us. It is noted from the notes to accounts appended to the balance-sheet, wherein it has been mentioned that investments shown in the balance-sheet were made in accordance with Insurance Act, 1938, the Insurance Regulator and Development Authority (Investment Regulations, 2000) as amended and circulars / notifications issued by IRDA from time to time. Further, during the course of proceedings before the AO for AY. 2010-11, the assessee submitted to the AO, vide its reply dated 26-12-2012 as under:- 13) Why the Net Profit from Shareholders Accounts should not be taxed as income from other business activities as per the provisions of section from 28 to 43B other than activity of Insurance Business as per section 44 of the Income Tax Act, 1961? We would like to submit that the amount of ₹ 98,7047,844/ -which profit from shareholders account, cannot be treated as profit/Ioss other than insurance business and accordingly applied the provisions of Section 28 to 43B, for the following reasons: i. The company is engaged in the business of life insurance. It is debarred under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er s funds, reserves and funds for future appropriations. Under the account of shareholders called P L A / c, the revenues earned on shareholders investments and the expenses not directly related to policyholders are accounted for. It is relevant to mention that surplus / deficiency in Revenue account is duly reflected in P L A/ c and it is only after taking account of surplus/ deficiency in Revenue account that the profit subject to appropriation is arrived at in the P L A/ c. The two accounts are, therefore, inseparable and for arriving at the profit of the insurance business as a whole, one has to see the combined result in the two accounts. iv. Further, Section 64VA(IA) of the Insurance Act 1938 mandates that every life insurer must maintain a prescribed solvency margin in respect of its life insurance business. For the purpose of calculating the solvency margin, consideration has to be given to assets relating to policyholders as well as shareholders as reflected in the combined balance sheet. Any shortfall in solvency margin is required to be made up by the insurer. by infusing additional capital. The Shareholders fund does not therefore, represents fund for an independent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness only, as they are part of same business and investments are made as part of solvency ratio of same business. The grounds are allowed. AO is directed to treat them as part of Life Insurance Business and tax them u/s 115B. vii. The Learned CIT (A) has decided the said issue in favour of appellant in the previous assessment years. (Kindly refer the Sl.no. .3 of Annexure 8.) 14) Why the amount transfer from Policyholders' Accounts has been reduced from the Net Profit/(Loss) in Policyholders'. Account(Technical) and why it should not be treated as income / loss from other business activity. i. In this regard, we would like to submit that the amount transferred from the Policyholders Account to the shareholders' account is a mere appropriation from the surplus in the Revenue Account (Policyholders Account). This amount has already been subject to tax in the Revenue Account and is included in ₹ 1,942,556,721/-. This Amount is the amount of surplus generated from the Policyholders Account and a portion of which i.e. ₹ 1,777,528,757 has been transferred to the Shareholders by way of an appropriation. Taxing the same amount again in the shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ightly rejected by the Ld. CIT(A). Therefore, we do not find any reason or justification to interfere in the findings of the Ld. CIT(A). Thus, the order of Ld.CIT(A) is hereby confirmed. As a result, Grounds 1(i) 1(ii) raised by the Revenue are hereby dismissed. 13. Ground 1(iii) : In this ground, the Revenue has challenged the action of Ld.CIT(A) in deleting disallowance of ₹ 12,50,00 by treating the same as capital expenditure as against revenue expenditure claimed by the assessee. 14. The brief background is that the AO noted from the perusal of Share holders Account that assessee had claimed stamp duty charges amounting to ₹ 12,50,000 as revenue expenditure. It was noted by the AO that these charges were disallowed by the Ld. CIT(A) in A.Y. 2005-06 and thus relying upon the same, these were disallowed as capital expenses during the year which was allowed by the Ld. CIT(A) holding it as revenue expenses. 15. During the course of hearing before us, it was stated by the Ld. Counsel that this issue is also covered in favour of the assessee by the earlier order of the Tribunal. Ld. CIT-DR did not make any distinction on facts of the case. It is noted that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for statistical purposes. So, in view of the above, the AO is not allowed to disturb the actuarial valuation carried out under Insurance Act, 1938, including the allowability or otherwise or nature of expenditure i.e. revenue or capital. After verification of the same, the said addition is to be deleted. On the basis of the above, it was stated by the Ld. Counsel that this issue stands decided by the AO in favour of the assessee on the basis of legal principle by relying upon the orders of the Tribunal in the case of HDFC Standard Life Insurance Co Ltd. Under these circumstances, in this year also, there would be no point in sending the issue back for futile exercise as the decision has already been taken, which can be applied here also. We have considered the request of the Ld. Counsel. No objection or any contrary argument was made by the Ld. CIT-DR in this regard. Thus, under these circumstances, we find that there would not be any requirement to send this issue back to the file of the AO which would be a redundant exercise since the issue has already been decided in favour of the assessee by the AO himself. Therefore, the addition is directed to be deleted. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 44 of the Act, despite the fact that income in schedule 1 is determined under non-obstante clause of Section 44 of the Act . 3.3 Whether the Ld. CIT(A) is correct in holding that the provisions of chapter III of the LT. Act pertaining to exempt income as per section 10 was available to the assessee despite the fact that the computation of taxable income of the assessee (Life Insurance Company) was governed by non-obstante provision of section 44 of the LT. Act which includes even dividend income under the head income from other sources to be dealt as per rules contained in the First Schedule of the I.T. Act? 4. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is correct in deleting the disallowance u/s 14A of the Act made by the Assessing Officer in accordance with the Rule 8D? 20. Ground 1: This ground is identical to Ground 1 of Revenue s appeal for AY 2002-03 wherein we have rejected the ground raised by the Revenue. Relying upon our order for AY 2002-03, this ground is dismissed. 21. Ground 2: In this ground, the Revenue has challenged the action of Ld. CIT(A) in deleting the addition made by the AO on account of Negative Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;, where the value of future income extends the value of estimated liabilities. However, in terms of regulations governing the insurance business, such a negative reserve has to be ignored and has to be taken as zero. The Hon'ble Supreme Court has in the case of LIC (Supra), held that the assessing officer shall not disturb such accounting methodology which is regulated under the Insurance Act. As also cited by the appellant company, the Hon'ble Mumbai Tribunal in the case of ICICI Prudential Insurance Co. Ltd. (Supra) has cited the decision of the Hon'ble Supreme Court [51 ITR 773] and held that there is no scope for the assessing officer to make any adjustment after the actuarial valuation is done. By respectfully following the decision of the Hon'ble Supreme Court, my predecessor CIT(A) vide order No CIT(A)- XXIlACIT1(3)/IT- 111/08-09 dated 18.08.2009 for AY 2006-07 has allowed the appeal of the appellant company on this issue. Therefore, I have no reason to differ with my decision and that of my predecessor, since the facts are identical and the decision is rendered in the appellant company's own case. Accordingly, the addition made by the AO, on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) in his order in Appeal No. CIT(A)-2/IT-114/2010-11 and dated 19-12-2011 dismissed the appeal of the assessee on both the grounds of appeal. 5. Against the order of CIT(A), the assessee went into appeal before ITAT. The Hon'ble ITAT, Mumbai vide its order in Appeal No. ITA No. 16841M12012 dated 19-06-2015 disposed the appeal of the assessee. The Hon'ble IT AT upheld the reopening of assessment u/s 148 of the Act. The ITA T restored the issue on negative reserves to the file of the AO to decide the same in the light of directions given by the Tribunal for adjudicating the issue for subsequent year i.e. AY 2006-07 vide ITA No. 5670/M/2009 in assessee's own case decided on 23-05-2014 along with other appeals of the assessee bearing No. 3800/M/2008, 3801/M/2008, 1501/M/2008 and corresponding cross appeals of the Revenue, wherein the Tribunal restored the matter to the file of the AO for fresh adjudication after considering the decision of ITA T, Mumbai in the case of ICICI Prudential Insurance Co. Ltd (ITA No. 6854/M/2010) and LIC Vs Addl. CIT (ITA No. 6221/M/2012). 6. In this regard, the decision of the Tribunal on the issue of treatment of negative reserves in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any modification. The appointed actuary shall, for the purpose of sections 13, 49, 64Vand 64VA of the Act, set the amount of such mathematical reserve to zero, in case of such negative reserve, or to the guaranteed surrender value, in case of such guaranteed surrender value deficiency reserves, as the case may be. (6) The valuation method shall be called Gross Premium Method . (7) If in the opinion of the appointed actuary, a method of valuation other than the Gross Premium Method of valuation is to be adopted, then, other approximations (e.g. retrospective method) may be used. Provided that the amount of calculated reserve is expected to be at least equal to the amount that shall be produced by the application of Gross Premium Method. (8) The method of calculation of the amount of liabilities and the assumptions for the valuation parameters shall not be subject to arbitrary discontinuities for one year to the next. (9) The determination of the amount of mathematical reserves shall take into account the nature and term of the assets representing those liabilities and the value placed upon them and shall include prudent provision against the effects of possibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles laid down by the Hon'ble Supreme Court in LIC vs. CIT 512 ITR 773 about the powers of Assessing Officer also restricts the scope and adjustments by the A O. In view of this we uphold the order of the CIT(A) and dismiss the Revenue ground. 7. As can be seen above, the Hon'ble ITAT, Mumbai held that Mathematical Reserve, which is debited on expense side of the profit and loss account, is computed as per the insurance regulations, as per which negative reserve is to be ignored while arriving at the Mathematical Reserve and as the Assessing Officer has no power to modify the amount after actuarial valuation was done, which is the basis of assessment under Rule 2 of First Schedule read with Section 44 of the Income-tax Act, 1961. In view of the same, after going through the decision of ITAT, Mumbai in the case of ICICI Prudential Insurance Co. Ltd (Supra), the negative reserve cannot be added back while computing the income of life insurance business of the assessee company under Section 44 r.w. Rule 1 2 of the First Schedule to the Income-tax Act, 1961. So, the addition of ₹ 8,17,92,000/- made by the AO on account of negative reserves is to be deleted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10(34) is independent of the provisions of section 44 of the Income Tax Act, 1961. Therefore, while calculating the income of a life insurance business as per the rule 2 of the first schedule it is considered by the actuary for calculating the surplus of such business. Hence, by virtue of section 10(34) of the Income Tax Act, 1961 the exemption is available to the assessee while computing the taxable income. Also, the same view is approved by the Hon'ble High Court of Bombay in case of Life Insurance Corporation of India vs. Commissioner of Income Tax reported in 115 ITR 45 (Born), Hon ble Mumbai Tribunal in the case of ICICI Prudential Insurance Co. Ltd vs. Asstt. Commissioner of Income Tax Circle- 6(1),(2012- TIOL-580-ITAT-MUM-ITA No. 7765/MUM/2010) and Honble Mumbai Tribunal in the case of SBI Life vs Commissioner of Income Tax - 1, Mumbai, (2013-TIOL-681-ITAT-MUM, ITA No.6366/ Mum/2011). Hence, respectfully following the judgments (supra), I am in agreement with the contentions of the appellant. Accordingly, the addition made by assessing officer on account of Dividend Income is hereby deleted. 30. During the course of hearing before us, it was stated by the Ld. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (34). Accordingly Revenue his issue is rejected. 6.3 In view of the above, the claim of the assessee company U/s 10(34), 10(38) and 10(23AAB) are to be excluded before computation of income from life insurance business under Section 44 read with Rule 1 2 of the First Schedule of the Act. This issue was already decided in favour of the assessee as per the decision and directions of the CIT(A) and made part of the order giving to appellate order of CIT(A) 1154 of the Act, as mentioned above. 33. We have gone through the order passed by Ld. CIT(A) also and find that the benefit of exemption was granted by the Ld. CIT(A) relying upon the judgement of the Hon'ble Bombay High Court in the case of Life Insurance Corporation of India vs CIT 115 ITR 45 (Bom) as well as judgement of Mumbai Bench of the Tribunal in the case of ICICI Prudential Insurance Co Ltd vs ACIT (supra). The AO in Order Giving Effect has also granted relief to the assessee by relying upon these judgements. Under these circumstances, we do not find it necessary to interfere in the finding of Ld. CIT(A) and, therefore, the order of the Ld.CIT(A) is upheld. These Grounds raised by the Revenue are dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 14A r.w. rule 8D were not applicable to insurance companies, therefore, the order of the Ld. CIT(A) should be upheld on this issue. 37. Per contra, the Ld. DR did not make any distinction on facts or law. 38. We have gone through the orders passed by lower authorities as well as earlier orders passed by the Tribunal in assessee s own case. It is noted that the Tribunal has already decided this issue in favour of the assessee in its aforesaid order by observing as under:- 17. We have heard both the parties and perused the orders of the Revenue Authorities as well as the decisions of the Tribunal cited before us. On perusal of the decision of the ITAT in the case of lCICI 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 assessee. Therefore, in view of the special provisions applicable to the insurance companies, we are of the opinion that the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide the provisions of Chapter III of which Section 10(34) is a part. (iv) The learned CIT (A) failed to the take note of the settled position of law that income is to be computed as per the applicable provisions of the Act unless all or any of the provisions are expressly made inapplicable. In cases where application of only specific provisions is barred, all other provisions remain applicable. Any other view taken renders the overriding of specified provisions redundant and the law cannot be interpreted in a manner so as to render any provision of the Act or part thereof as redundant. (v) That the learned CIT (A) erred in basing his decision on the erroneous understanding of the computation of actuarial surplus/deficiency as per the provisions of the Insurance Act when he observed that income from dividend has not been taxed. Even if income from dividend is not being charged to tax under the respective heads of income, such income gets included in the total income of the appellant. Even if the provisions relating to computation of income under the head 'income from other sources' are overridden obviating the requirement of head wise computation of total income, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfy the correctness of the claim and that too with effect from A.Y. 2008-09. Prior to 2008-09, there being no prescribed method, the amount of disallowance is to be solely determined on the basis of the facts of each individual case and not by blanket application of Rule 8D. (iii) The learned CIT (A) was, therefore, not justified in holding computation of disallowable amount as per Rule 8D as a rule of universal application based on the argument that the rule signified legislative wisdom in determination of such amount in all cases and in all the years, even prior to its coming into force. In case the proposition is accepted, it will render the findings of the Honble Bombay High Court in Godrej and Boyce redundant and of no legal consequence. (iv) The amount offered for disallowance by the Appellant was based on facts and ought to have been accepted as reasonable and justified. Ground No. 3 DISALLOWANCE OF EXEMPTION IN RESPECT OF INCOME FROM PENSION FUND UIS 10(23AAB): (i) The learned CIT (A) was not justified in holding that the exemption u/s 10 (23AAB) in regard to income of Pension Fund is not available to the appellant on the ground that such an exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, respectfully following our order, we decide this issue in favour of the assessee. The AO is directed to grant the benefit of exemption u/s 10(34) on the dividend income. Ground 1 is allowed. 43. Ground 2: This ground deals with the disallowance made u/s 14A of the Act. It was jointly stated by both the parties that this ground is identical to Ground 4 of Revenue s appeal for A.Y. 2010-11 which has been decided in favour of the assessee by holding that provisions of section 14A are not applicable on the assessee company being a life insurance company. Consistent with our order, this issue is also decided in favour of the assessee and it is held that the provisions of section 14A are not applicable upon the assessee; therefore disallowance made by the AO is directed to be deleted. 44. Ground 3 : In this ground, the assessee is aggrieved with the action of lower authorities in holding that exemption u/s 10(23AAB) in regard to income of pension fund was not available to the assessee due to the fact that such an exemption is applicable only when pension fund is an independent assessable entity. 45. During the course of hearing, it was stated by the Ld. Counsel that this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other(s). On the facts and circumstances of the case and in law, SBI Life Insurance Company Limited [hereinafter referred to as the Appellant] craves to prefer an appeal against the order passed by the Commissioner of Income-tax (Appeals) -II, Mumbai [hereinafter referred to as the learned CIT(A)], under section 250(6) of the Income-tax Act, 1961 (Act) in respect of the order passed by the Deputy Commissioner of Income-tax - Range 1(3), Mumbai (the AO) under section 143(3) of the Act, on the following grounds: Ground No 1 The Learned CIT (A) has erred in confirming the action of the AO to disallow the exemption of ₹ 19,62,41,801/- in respect of dividend income under section 10(34) and failed to appreciate that section 10(34) is not overridden by the provisions of section 44 of the Act. Ground No 2 The Learned CIT (A) has erred in confirming the action of the AO to disallow the exemption of ₹ 18,47,89,000/- in respect of income of pension fund under section 10(23AAB) and failed to appreciate that section 10(23AAB) is not overridden by the provisions of section 44 of the Act. Ground No 3 The Learned CIT (A) has erred in enhancing the actuarial surp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of appeal are without prejudice to and independent of the other(s). On the facts and circumstances of the case and in law, SBI Life Insurance Company Limited [hereinafter referred to as the Appellant] craves to prefer an appeal against the order passed by the Commissioner of Income-tax (Appeals) - 2, Mumbai [hereinafter referred to as the learned CIT(A)], under section 250 of the Income-tax Act, 1961 (Act) in respect of the order passed by the Deputy Commissioner of Income-tax (OSD)-1(2), Mumbai (the AO) under section 143(3) of the Act, on the following grounds: Ground No 1 The Learned CIT (A) has erred in confirming the action of the AO in making addition of negative reserves amounting ₹ 2,66,25,660/ - to the actuarial surplus for determining the profit from business of life insurance in disregard of the law laid down by the Supreme court in the case of LIC vs CIT 51 ITR 773 for prohibiting any adjustment to the actuarial surplus determined as per the provision of Insurance Act. Ground No 2 The Learned CIT (A) has erred in confirming the action of the AO to disallow the exemption of ₹ 50,92,75,738/- in respect of dividend income under section 10(34) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income Tax Act, 1961 is not available to assessee as separate pension fund is not established by the company. The learned CIT (1) has failed to appreciate that the company has a separate fund and its pension schemes are duly approved by the Insurance Regulatory and Development Authority as required by the law. 2.1 The Learned CIT (1) erred in guiding himself by the understanding that crediting income to P L AI C amounts to confirmation that a separate fund has not been created. He ignored the fact that a pension segment, even though a distinct segment, remains part of insurance business. The CIT (1) failed to appreciate that by virtue of section 3 (4h) of the Insurance Act, 1938 an insurer is not permitted to do any other business except insurance business. 2.2 The CIT (1) failed to take note of the observations of the Honourable Bombay High Court in the case of Life Insurance corporation of India Ltd vs CIT (1), Mumbai (2011- TIOL-483-HCMUM- IT), that the object of inserting section 10(23AAB) of the Income Tax Act, 1961 was not with a view to treat the pension Fund like Jeevan Suraksha outside the purview of insurance business but to promote insurance business by ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment of the appellant to be made fresh, on the following grounds: 1. The learned CIT (1) erred in invoking the provisions of section 263 of the Income Tax Act, 1961 and assuming jurisdiction to proceed under the section. The learned CIT (1) while passing the order went wrong in not applying the ratio of the Honourable Supreme Court laid in Malabar Industrial Company Ltd v Is CIT (2000) 243 ITR 83 (SC) for reason not relevant to the applicability of the ratio and failed to appreciate that the exemption of income from pension fund is matter on which different views are possible, one of which taken by the assessing officer (AO). 1.1 The learned CIT (1) erred in directing the AO to decide the issue of exemption under Section 10(23AAB) of the Income Tax Act, 1961 and pass an assessment order afresh. 2. The learned CIT (1) erred in holding that exemption under section 10(23AAB) of the Income Tax Act, 1961 is not available to assessee as separate pension fund is not established by the company. The learned CIT (1) has failed to appreciate that the company has a separate fund and its pension schemes are duly approved by the Insurance Regulatory and Development Authority of India a ..... 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