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TMI Blog2020 (12) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... avish Sood, Judicial Member For the Appellant : Shri Rahul Ram an, CIT D.R For the Respondent : Shri Farrokh V. Irani, A.R ORDER PER RAVISH SOOD, JM The present appeals filed by the revenue are directed against the respective orders passed by the CIT(A)-9, Mumbai, dated 16.03.2018 and 19.03.2018 for Assessment Years 2012-13 and 2013-14, respectively, which in turn arises from the assessment orders passed u/s 143(3) of the Income-tax Act, 1961 (for short "Act"), dated 23.03.2015 and 07.03.2016 for the aforementioned years. As the issues involved in the captioned appeals are inextricably interlinked or in fact interwoven, therefore, we shall dispose off the same by way of a consolidated order. We shall first take up the appeal of the revenue for A.Y 20112-13, wherein the impugned order has been assailed before us on the following grounds : "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the profit on sale of investments has to be taxed as Income from Capital Gain and not income from other sources. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed u/s 143(3), dated 23.03.2015 at ₹ 152,12,31,353/-, as under: Sr. No. Particulars Amount 1. Profit on sale of investments claimed as exempt u/s 10(38) ₹ 639,06,24,962/- 2. Disallowance of expenditure u/s 14A r.w.r 8D(2)(iii). ₹ 13,05,70,512/- 3. Amortization of Premium on Securities ₹ 8,34,44,847/- 4. Deemed Income u/s 69B ₹ 8,15,000/- 5. Foreign Dividend accounted net of foreign taxes ₹ 34,94,170/- 6. Impairment provision written back ₹ 10,88,950/- 7. Disallowance of reinsurance commission paid for non-deduction on tax at source ₹ 42,58,34,881/- Further, the 'book profit' u/s 115JB was reworked by the A.O at a loss of ₹ 168,80,77,488/- 4. Aggrieved, the assessee assailed the assessment order before the CIT(A). After deliberating on the contentions advanced by the assessee the CIT(A) partly allowed the appeal. 5. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. At the very outset of the hearing of the appeal it was submitted by the ld. Authorized representative (for short "A.R") for the asseseee, that all the issues raised by the revenue in the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income-tax- 3 Vs. The New India Assurance Co. Ltd. [ITA No. 1025 of 2015, dated 05.03.2018]. In fact, we find that the ITAT, "G" Bench, Mumbai, while disposing off the appeal of the assessee for the immediately preceding year i.e A.Y 2011-12 in ITA No. 5116/Mum/2016, dated 06.11.2019, respectfully following the aforesaid judgment of the Hon'ble High Court, had observed, that the CIT(A) was right in law and the facts of the assessee in allowing the assessee's claim of exemption u/s 10(38) on the profit on sale of investments. The Tribunal while concluding as hereinabove had observed as under: "5. On hearing both the sides and perusing the orders of the Tribunal in assessee's own case and the decision of the Hon'ble High Court in assessee's own case, we find that the issue is squarely covered by the decision of the Hon'ble Bombay High Court in Income Tax Appeal No.1025 of 2015, dated 05.03.2018 wherein the question as to whether the Tribunal was justified in law in allowing the exemption to the assessee u/s. 10 of the Act came up before the Hon'ble Bombay High Court and the Hon'ble High Court held as under: - "2 Revenue urges the only following refram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not deal with the claim for exemption under Section 10(38) of the Act and would have no application to the present facts. The Revenue was unable to point out the manner in which the above decision of the Apex Court applies to the present facts. 7 Mr. Suresh Kumar, next submits that on an identical issue in GIC v/s. CIT (ITXA No. 201 of 2011) this Court has admitted the following question on 25th February, 2013 as substantial question of law as under: "Whether on the facts and in the circumstance of the case and in law the Tribunal was justified in holding that profit on sale of investments are not liable to be taxed in the hands of the assessee in the year under appeal?" Therefore, he submits that the question as formulated be admitted. 8 The issue raised in the above question in GIC [ITX No.201 of 2011 (supra)] is not with regard to the exemption claimed under Section 10(38) of the Act as in the present proceedings. The question on which the above appeal has been admitted, is whether profits on sale of investments are liable to be (included) taxed in the hands of the assessee i.e. profits on sale of investments being liable to be tax. It does not deal with the benefit of exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s u/s 10(38) ₹ 639,06,24,962/- Total ₹ 981,85,84,856/- In the course of the assessment proceedings, the assessee was called upon to explain as to why disallowance of expenditure incurred for earning of the exempt income may not be worked out as per Sec.14A r.w. Rule 8D. In reply, it was submitted by the assessee that as it was a wholly owned Government of India undertaking into general insurance business, whose income was computed as per the provisions of Sec. 44 of the Act r.w Rule 5 of the 'First Schedule', therefore, the provisions of Sec. 14A were not applicable in its case. Alternatively, without prejudice to its aforesaid claim, the assessee on a proportionate basis attributed an amount of ₹ 2,10,53,225/- i.e part of the expenses incurred by the Investment Department towards earning of the exempt income. However, the A.O rejected the aforesaid claim of the assessee and worked out the disallowance u/s 14A r.w Rule 8D at ₹ 13,05,70,512/-. On appeal, the CIT(A) relying on the orders passed by the Tribunal and also that of his predecessor in the assessee's own case for the preceding years concluded, that the provisions of Sec. 14A were not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's favour in earlier years. However, he supports the order of the Assessing Officer. 9. Heard both sides, perused the orders of the Authorities below and the decision of the Tribunal in assessee's own case. We observe that the Tribunal while disposing of the appeal of the Revenue for the A.Y. 2010-11 in ITA.No. 5013/Mum/2015 dated 28.03.2018, held as under: "15. The issue raised in ground No.3 is against the deletion of disallowance under section 14A read with rule 8D without appreciating the fact that the assessee was given the benefit of exemption under section 10 of the Act. 16. The Ld. A.R., at the outset, submitted that the issue involved in the present ground is covered in favour of the assessee by the decision of the Tribunal in the earlier years. and therefore prayed before the Bench that by following the same, this ground may be decided in favour of the assessee. 17. The Ld. D.R. appeared to be fairly agreed to the contention of the Ld. A.R. 18. We have perused the decisions of the Tribunal in ITA No.3562/M/2007 and ITA No.3180/M/2009 for A.Y. 2006-07 & 2007- 08 wherein the Tribunal has decided the issue in favour of the assessee. The relevant extract is rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appreciating the fact that there was no provision for amortization of such premium under the Income-tax Act. Briefly stated, the assessee had claimed an amount of ₹ 8,34,44,847/- as an amortization of the premium paid on purchase of investment securities amortized over the residual period of the securities as an admissible expense. On being called upon to justify its aforesaid claim of expense, it was inter alia submitted by the assessee that wherever the securities considered held to maturity were purchased and any premium was paid on purchase of such securities, the amount of premium was amortized over the residual period of security as per the regulations of IRDA. It was further submitted by the assessee, that wherever the premium of held to maturity securities was amortized over the residual period of such securities, the loss at the time of maturity of such security was not claimed at that time. However, the aforesaid reply of the assessee did not find favour with the A.O. Relying on the view taken by his predecessor while framing the assessments in the case of the assessee for the preceding years viz. A.Y 2005-06, A.Y 2006-07, A.Y 2007-08, A.Y 2009-10, A.Y 2010-11 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the order of the Tribunal we observe that the Tribunal decided this issue in favour of the assessee observing as under: - "20. The issue raised in ground No.4 (4.1 & 4.2) is against the decision of the Ld. CIT(A) holding that the premium paid by the assessee on purchase of government securities was allowable as revenue expenditure on amortization. 21. The Ld. A.R. submitted that the issue raised by the Revenue is covered by the decisions of the Tribunal in the earlier years right from A.Y. 2004-05 to 2007-08 and therefore the present issue should be decided in the light of the ratio laid down by the Tribunal in favour of the assessee. 22. The Ld. D.R. fairly agreed to the argument of the Ld. A.R. 23. After perusing the decision of the Tribunal in ITA No.3562/M/2007 and ITA No.3180/M/2009, we find that the issue is squarely covered in favour of the assessee in assessee's own case. The operative part thereof is reproduced as under: "16. We have heard the rival submissions and also perused the relevant finding given in the impugned orders. The assessee in the course of carrying of its insurance business, is required to invest its fund in specific debts securities of govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re contemplated in sections 30 to 43A and, therefore, unless there was a specific prohibition for such an allowance, the departmental authorities would not be justified in adding back the amount under rule 5(a)., Therefore, even if the debit for amortization is considered as an expenditure, there is no specific prohibition against allowing such an expenditure under the provisions of sections 30 to 43B. The words "expenditure or allowance...Which is not admissible under the provisions of sections 30 to 438" appearing in the sub-rule has been explained by the Supreme Court to mean that 10 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd there should be a specific prohibition against the expenditure or allowance in which case alone the Assessing Officer can add back the same to the balance of profits. It is common ground that there is no such specific prohibition against, the allowance of the expenditure in the above sections of the Act. It may be noted that though rule 5(a) of the First Schedule considered by the Supreme Court in the above judgment was slightly different, but the words "any expenditure or allowance which is not admissible under the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee that being a General Insurance Company its income was to be computed as per Sec. 44 of the Act, and Rule 5 contained in the 'First Schedule'. However, the A.O rejected the aforesaid claim of the assessee and worked out its 'book profit' under Sec. 115JB of the Act. On appeal, the CIT(A) observed that the issue was decided in favour of the assessee by the Tribunal while disposing off the appeals in the assessee's own case for the preceding years, viz. A.Y 2004-05, A.Y 2005-06, A.Y 2006-07 and A.Y 2007-08. Accordingly, the CIT(A) decided the issue in favour of the assesee and directed the A.O to compute the assessee's income under the normal provisions of the Act. 14. Aggrieved with the aforesaid direction of the CIT(A), the revenue has carried the matter in appeal before us. The ld. A.R submitted that the aforesaid issue had been decided by the Hon'ble High Court of Bombay in the assessee's own case in Pr. Commissioner of Incpome-tax-3 Vs. M/s The New India Assurance Co. Ltd. [ITA No. 1108 of 2015; dated 16.04.2019] (copy placed on record). Further, as submitted by the ld. A.R, the issue was squarely covered by the orders passed by the Tribunal while disposing off the appeals i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee. 20. After considering the decisions in the case of General Insurance Corporation and other decisions filed by the learned counsel, we find that the issue of non-applicability of MAT u/s 115JB to the General Insurance Company has been upheld. Even otherwise also the provision of MAT will only come into play, only when assessee prepares its P&L account in accordance with part (II) and part (III) of Schedule (VI) of the Companies Act. Since the assessee's P&L account is prepared in accordance with Insurance Act 1938, as specifically provided in Section 44 read with First schedule, therefore, the provision of section 115JB will not apply in case of assessee. This has been held in the case of General Insurance Corporation in ITA No.3554/Mum/2011 order dated 05.02.2012 and ITA 12 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd No.8824/Mum/2011 order dated 15.01.2014. Thus the additional ground raised by the assessee is allowed." 33. Following the decision of the coordinate, we hold that the accounts of the insurance company are prepared in accordance with the Insurance Act, 1938 as has been provided under section 44A read with First Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the premium paid by the assessee on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that such premium paid is capital in nature and hence not allowable u/s 37 of I.T Act, 1961. 6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the provisions of Section 115JB of the I.T Act, 1961 are not applicable in the case of the assessee. 7. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 8. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 19. Briefly stated, the assessee company had e-filed its return of income for A.Y 2013-14 on 28.11.2013, declaring its total income at Rs. Nil. Subsequently, the assessee filed a revised return of income on 09.06.2014 declaring a loss of ₹ 94,06,18,248/-. Thereafter, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 20. The A.O after making certain additions/disallowances assessed the income of the assessee company vide his order passed u/s 143(3), da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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