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TMI Blog2019 (10) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is not required to be added/reduced from the income of the assessee from life insurance business. So, in view of the matter, addition made by the AO and confirmed by CIT (A) for AYs 2007-08, 2008-09 2009- 10 respectively is not sustainable, hence ordered to be deleted. Exemption u/s 10(34) - HELD THAT:- In respect of dividend income earned; that due to inadvertence, the assessee could not claim this exemption in the income tax return filed during the year under assessment. Keeping in view the fact that the appellate authorities can allow the ground even if the claim for relief/exemption has not been made part of the original or revised return. Even otherwise, to decide the controversy once for all and to stop the multiplicity of the proceedings, the assessee is entitled to raise the additional ground because the issue in controversy has also been decided in favour of the assessee by the Tribunal in AY 2006-07. - ITA No.3066/Del./2015, ITA No.3067/Del./2015, ITA No.3068/Del./2015 - - - Dated:- 17-9-2019 - Shri Kuldip Singh, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri Himanshu Sinha, Advocate, Shri B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant, by the Hon'ble CIT(A)'s predecessor and no further appeal in this regard has been preferred by the Income Tax Department before the Hon'ble Income Tax Appellate Tribunal. 2. Without prejudice to ground 1 above, that on the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in referring back the matter on issue of set off of business loss against income from sale of investment under section 70(1) of the Act, instead of disposing off the said ground. 3. That on the facts and circumstances of the case and in law, the Hon'ble CIT (A) has erred in confirming the disallowance made by learned AO (amounting to AYs 2007-08, 2008-08 2009-10 respectively) on account of disallowance of FBT provision by completely disregarding the provisions of Section 44 of the Income tax Act, 1961 which prohibits any adjustment to be made under Section 28 to 43B of the Act in case of a life Insurance Company. 4. That on the facts and circumstances of the case and in law, the Hon'ble CIT (A) has erred in confirming the learned AO's action of initiating penalty proceedings under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. Thereby denying the benefit of provisions of section 44 of the act on the above sum. During the course of assessment proceedings the learned assessing officer noted that assessee has earned income of INR 9 048000/ on account of sale of investments. The learned AO was of the view that nature of income emanating from sale of investment partakes the character of income not from insurance business of the assessee however assessee has considered it is part of business of insurance. The main reason given by the assessee is that life insurance companies in India are governed by the provisions of the insurance act 1938 and insurance regulatory development authority act 1999 and rules framed there under. The assessee is in Indian insurance company and has been allowed the life insurance business license by IrDA. He further stated before the assessing officer that according to section 2 (7A) defines the Indian insurance company wherein according to clause (C) it provides that whole sole purpose of the company is to carry on life insurance business are general insurance business or reinsurance business. According to the provisions of section 2 (11) of the insurance act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 44 of the income tax act restricts only to the extent of income derived from life insurance business and in respect of other sources of income the normal charging sections are mandatorily applicable. Hence profit from sale of investment does not qualify to be income from life insurance business. With respect to the fact that in earlier year no such treatment has been given by the learned assessing officer and in past such profit on sale of investments has been considered as part of the insurance business, the learned AO stated that principles of res judicata do not apply to the income tax proceedings and if it is a mistake it ought to be rectified. Therefore he considered the income from sale of investment of INR 9 048000/ to be business income falling within section 28 of the act and added to the total income of the assessee separately. The learned DR P also upheld the action of the learned assessing officer wide para number 3 of the act stating that activity of earning profit from sale of investment cannot be considered as business of insurance. Therefore the assessee aggrieved with the above order of the learned assessing officer has challenged it by gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this is submitted that the order of the learned assessing officer is not correct in treating the profits and gains of investment as separate business income. Alternatively in ground number 4.1 he raised the plea and stated that if this issue as per ground number 4 is decided against the assessee the assessee is eligible for relief as claimed in the ground number 4.1. 25. The learned departmental representative vehemently supported the order of the learned AO. The learned departmental representative mostly reiterated the argument that has been raised by the assessing officer in his order. 26. We have carefully considered the rival contention and perused the orders of the lower authorities. The only issue involved in this ground of appeal is whether the profit earned by the assessee on sale of its investment is chargeable to tax as part of insurance business or as a separate business. The provisions of section 44 of the income tax act is culled out earlier specifically provides that profits of insurance business specifically required to be computed as per the mandate of section 44 of the income tax act with specific reference to schedule 1 to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purposes of this sub-clause, the expression control shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements; (c) whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business or health insurancebusiness; ] (11) life insurance business means the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include- (a) the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance, (b) the granting of annuities upon human life, and (c) the granting of superannuation allowances and 22 [benefit] payable out of any fund applicable sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d liability; 8. Fixed Deposits with banks included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934) and; such other investments as the Authority may, by notification in the Official Gazette, declare to be Approved Investments. (b) In addition the following investments shall be deemed as Approved Investments 1. All rated debentures (including bonds) and other rated secured debt instruments as per Note appended to Regulations 4 to 9. Equity shares, preference shares and debt instruments issued by All India Financial Institutions recognized as such by Reserve Bank of India investments shall be made in terms of investment policy guidelines, benchmarks and exposure norms, limits approved by the Board of Directors of the insurer. 2. Bonds or debentures issued by companies, rated not less than AA or its equivalent and A1 or equivalent ratings for short term bonds, debentures, certificate of deposits and commercial papers by a credit rating agency, registered under SEBI (Credit Rating Agencies) Regulations 1999 3. Subject to norms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny private limited company or one person company or a company formed under section 8 of the Companies Act, 2013 or erstwhile Section 25 of the Companies Act, 1956. 30. As provided under the insurance act 1938 any company carrying on the life insurance business shall invest or keep invested any part of his controlled fund in a specified securities as under:- Further provisions regarding investments. 27A. (1) No insurer carrying on life insurance business shall invest or keep invested any part of his controlled fund and no insurer carrying on general business shall invest or keep invested any part of his assets otherwise than in any of the approved investments as may be specified by the regulations subject to such limitations, conditions and restrictions therein 31. On Conjoint reading of all these provisions it is apparent that insurance companies are required to invest according to the rules provided by the IRDA of all its controlled funds. It is not the case of the assessee that assessee has invested funds other than its controlled funds. To get out of the provisions of section 44 of the income tax act it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roverted by the ld. DR for the Revenue by bringing on record any other case law. 10. Coordinate Bench of the Tribunal decided the issue in controversy in favour of the assessee by returning following findings :- 22. Now coming to the 3rd issue of this ground with respect to the disallowance of provision of the fringe benefit tax, it is clear that fringe benefit tax is not allowable as a deduction under the provisions of section 40 (ic) of the act, which falls under the bracket of the provisions of section 28 to section 43B of the act. The fringe benefit tax has also been included in the definition of tax under provisions of section 2 (43) of the act as under [(43) tax 77 in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date 79 [and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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