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TMI Blog2019 (7) TMI 1857X X X X Extracts X X X X X X X X Extracts X X X X ..... 644 - ITAT MUMBAI] Tribunal has already concluded that transfer between share holders account and policy holders account is tax neutral and not taxable u/s. 44 of the Act r.w. Rule-2 of the First Schedule. It was the contention of the Revenue that the Revenue has not accepted the decision of the ITAT and further appeals have been filed before the Hon'ble High Court. We noted that it is an admitted position that this issue is squarely covered in favour of the assessee in assessee own case vide orders of the Tribunal, hence, are not interfering in the finding of CIT(A) allowing the claim of the assessee. Even before us, now also the Ld. DR could not distinguish the facts of the present case vis- -vis the orders of the Tribunal in earlier years. 100% depreciation in respect of assets costing less than ₹ 20,000/- - HELD THAT:- As there is no dispute on facts, the claim of assessee is that it has been consistently following the policy of providing depreciation @ 100% on the value of assets costing less than ₹ 20,000/-. The contention of the assessee is that since computation of profits and gains of the business of assessee, being in the business of life insurance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes specified u/s.115B - HELD THAT:- As decided in own case [ 2017 (8) TMI 1644 - ITAT MUMBAI] these grounds are held in favour of the appellant and the AO is directed to apply the tax rate of 12.5% as per the provisions of section 115B in respect of the surplus in SHA by treating the same as part of the profits and gains of Life Insurance business and in respect of the income assessed as Profits and gains of life insurance business. Claim of deduction on account of decrease in negative reserve - HELD THAT:- As in case HDFC STANDARD LIFE INSURANCE COMPANY LTD. AND OTHER VERSUS DCIT (OSD) -1 (1) MUMBAI AND OTHERS [ 2013 (10) TMI 1072 - ITAT MUMBAI] allowed the claim of the assessee - CIT(A) only on this basis allowed the claim of assessee of negative reserve. Since the issue is covered in favour of the assessee in regard to actuarial valuation, we uphold the order of CIT(A). The issued raised by the assessee in regard to negative reserve has become academic and, hence, infructuous. - ITAs No. 70 & 71, 1044 & 1045/Mum/2018, ITA No. 6948, 6970/Mum/2017, - - - Dated:- 24-7-2019 - SRI MAHAVIR SINGH AND SRI MANOJ KUMAR AGGARWAL, JJ. Appellant by : Shri Manoj Kumar Singh, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2012-13 declaring a loss of ₹ 83,17,14,360/- on account life insurance business. The AO noted that the assessee has aggregated the surplus/deficit of policy holders account and share holders account in order to arrive at surplus/deficit in view of section 44 of the Act r.w. Rule 2 of the First Schedule. The AO noted the computation of income/loss, which is reproduced in the assessment order as well in the order of the CIT(A). The assessee disclosed the surplus at Nil in policy holders account, whereas deficit of ₹ 69.86 crores in share holders account. After aggregating both, assessee arrived a deficit of ₹ 69.86 crores and the same was considered as profit and gains of the insurance business as per section 44 of the Act r.w. Rule 2 of the First Schedule. The assessee claimed exemption of dividend income of ₹ 12.70 crores and pension business income of ₹ 60.00 cores included therein under the provisions of section 10(34) and 10(23AAB) of the Act. Accordingly, the assessee worked out the loss at ₹ 83.17 crores. According to the AO, the assessee is not following the principle of the provisions of section 44 of the Act. According to the AO as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. Rule -2 of the First Schedule along with the provisions of Insurance Act 1938, Insurance Regulatory and Development Authority Act 1999 and regulations there under. As the issue is squarely covered in favour of the assessee consistently, the Ld. CIT DR could not point out any distinguishing facts in the present case. Hence, we affirm the order of the CIT(A) and dismiss this issue of Revenue s appeal. 7. The second issue in this appeal of Revenue is against the order of CIT(A) in holding that transfer between share holders account and policy holders account is tax neutral and not taxable u/s. 44 of the Act r.w. Rule-2 of the First Schedule. For this the Revenue has raised the following Ground:- 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in giving relief to the assessee following the decision of Hon'ble ITAT in the case of ICICI Prudential Life Insurance CO. Ltd. for the earlier years and in the case of IDBI Federal Life Insurance CO. Ltd. for A.Y. 2009-10 and 2010-11 respectively, in concluding that transfer between shareholders Account and Policy Holders Account is tax neutral and not taxable u/s 44 of the Act r.w. Rule 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We noted that the assessee has claimed 100% depreciation in respect of assets costing less than ₹ 20,000/-. The AO disallowed the claim of assessee of 100% deprecation in respect of assets costing less than ₹ 20,000/- amounting to ₹ 81,50,646/-. The CIT(A) allowed the claim of the assessee by following the Tribunal s decision in assessee s own case for assessment years 2009-10 and 2010-11 in ITA Nos. 6282/Mum/2012, 6281/Mum/2012, 5567/Mum/2014 (assessee s appeal) ITA Nos. 6306/Mum/2012 5378/Mum/2014 (Revenues appeal) and for assessment year 2008-09 vide ITA Nos.1562/Mum/2013 1488/Mum/2013. As there is no dispute on facts, the claim of assessee is that it has been consistently following the policy of providing depreciation @ 100% on the value of assets costing less than ₹ 20,000/-. The contention of the assessee is that since computation of profits and gains of the business of assessee, being in the business of life insurance, is in accordance with the provisions of section 44 of the Act, which over rides section 28 to 43B of the Act are not applicable to the assessee for determining the income from life insurance business. We noted that this issue is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made u/s 14A r.w.r. 8D on protective basis without appreciating the fact that the Ld. CIT(A) has allowed dividend as exempt income, then , the disallowance has to be made u/s 14A r.w.r. 8D of the Act and on the contrary, the department is in appeal for allowing the claim of assessee u/s 10(34) of the Act. The assessee has raised the following Grounds of appeal: - 2. Application of Rule 8D. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the action of the DCIT that the provisions of rule 8D of the Income-tax Rules, 1962, are applicable even though it has been explicitly held the provisions of section 14A of the Income-tax Act, 1961 ('the Act') are not applicable to the facts of the case. The Appellant prays that it be held the rule 8D is not applicable to the facts of the case. 3. Amount of disallowance Without prejudice to Ground no 2 above, having held that provisions of rule 8D were applicable in the case of the Appellant, the learned CIT(A) erred in confirming the action of the DCIT in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the following Ground: - 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the carry forward of losses which is assessed under the head Income from Other Sources without considering the restriction of carry forward of losses under section 74A of the Act to set off against the business income in the current year. The assessee has raised the following Ground No.4. On the facts and circumstances of the case and in law, the CIT(A) ought to have directed the DCIT to set off the brought forward business of loss of earlier years while computing the total income of the Appellate for the subject year. 16. Brief facts are that the assessee has brought forward business losses aggregating to ₹ 371.12 crores from assessment year 2008- 09 to 2011-12 and claimed the same to be allowed as set off against the income of the present assessment year 2012-13. The AO disallowed the claim of the assessee. The CIT(A) allowed the claim of the assessee against business income of the present assessment year. The CIT(A) observed in para 61 62 as under :- 61. I have carefully considered the facts of the case, the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as raised the following Ground of appeal :- 7. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in allowing relief to the assessee by holding that surplus available in Share Holders Account is not to be taxed separately as income from other sources and at the normal corporate rate and holding that surplus from Share Holders Account was only part of income from insurance business arrived at after combining surplus available in Share Holders Account with the surplus available in Policy Holders Account and then taxing this 'net surplus' arrived at, at the rates specified u/s.115B of the Act ? 20. The facts of the case are that the AO while computing the tax in respect to surplus arising out of share holders account @30% treated the same as income from other sources. The CIT(A) treated surplus arising out of shares holders account as profits and gains of life insurance business as per the provisions of section 115JB of the Act. Accordingly, the CIT(A) directed the AO to apply the special rate of tax @12.50%. Aggrieved by this, the Revenue is in appeal before the Tribunal. 21. We noted that this issue is squarely covered in assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years the increase in negative reserve was added to the total income. It was contended by the assessee before AO that consistent stand with regard to the negative reserve should be followed. The AO has not considered the allowance of deduction. Aggrieved, assessee preferred an appeal before the CIT(A). The CIT(A) considered this issue and relying on the Tribunal decision in assessee s case for assessment years 2009- 10 2010-11 in ITA Nos. 6282/Mum/2012, 6281/Mum/2012, 5567/Mum/2014 (assessee s appeal) ITA Nos. 6306/Mum/2012 5378/Mum/2014 (Revenues appeal) treated the increase in negative reserve as non taxable surplus as actuarial valuation for the purpose of determining the profit and gains of the business of the life insurance business of the assessee. The CIT(A) after considering the submissions of the assessee directed the AO vide Para 59 as under: - 59. In this regard, it is seen that the AO was directed not to include the increase in the negative reserves in the surplus to be taxed as profits and gains of the business of the Life Insurance in the appeal order passed by the CIT(A) in the case of the appellant for assessment year 2011-12 by relying on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, such as for following IRDA guidelines, insurers may not treat policies as assets and they set any negative reserves to zero. For example, if an insurer had two policies, one with a reserve of 100 and the other with a reserve of - 10, it might think of its liabilities at100 rather than 90 to take into account the eventuality in case the second policy lapsed. This process is called eliminating negative reserves. As mentioned 21 ITA No. 2203/Mum/2012 Ors. HDFC Standard Life Insurance Company Ltd earlier, a policy which has a negative reserve is in nature of an asset. We find that in the case of ICICI Prudential Insurance Co.(supra), AO had disallowed negative reserve related to Life Insurance business of the assessee. In appellate proceedings FAA allowed the appeal of the assessee.AO challenged the order of the FAA before the Tribunal. We find that AO has raised the following ground of appeal in the appeal filed by him for AY 2006-07. On the facts and in the circumstances of the case and in law, the learned CIT(A)erred in not subjecting the negative reserve amounting to ₹ 27.27 Crores ignoring the facts that negative reserves has impact of reducing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the ratio of the Apex Court in the case of LIC vs CIT 51 ITR 778 without appreciating the fact that these decisions are not accepted by the Department and further appeals have been filed. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in giving relief to the assessee following the decision of Hon'ble ITAT in the case of ICICI Prudential Life Insurance CO. Ltd. for the earlier years and in the case of IDBI Federal Life Insurance CO. Ltd. for A.Y. 2009-10 and 2010-11 respectively, in concluding that transfer between shareholders Account and Policy Holders Account is tax neutral and not taxable u/s 44 of the Act r.w. Rule 2 of the First Schedule, without appreciating the fact that this decision of the ITAT were not accepted by the department and further appeals have been filed. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made on account of claim of 100% depreciation ignoring the facts that Actuarial surplus is determined on the basis of the total assets of the company and therefore by not capitalizing the above assets, the assets of the assessee company are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prays that the order of the Ld. CIT (A) on the above grounds be set aside to the file of the AO or confirm the order of the AO. 27. It was a common point between the parties that the facts and circumstances in ITA No. 71/mum/2018 6948/Mum/2017 for assessment years 2013-14 to 2014-15 are pari-materia to those considered by us in ITA No. 70/Mum/2018 for assessment year 2012-13, thus, our decision therein shall apply mutatis mutandis in these appeals also. ITA No.1045/MUM/2018 ITA No.6970/MUM/2017: 28. Now we may take up the appeals of the assessee for assessment years 2013-14 2014-15. Since the Grounds raised by the assessee for both assessment years are identical, the grounds raised for assessment year 2013-14 are reproduced below:- The Appellant submits the following grounds of appeal, which are independent and without prejudice to one another: 1. Deduction for decrease in negative reserve On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in not directing the Assistant Commissioner of Income tax ( ACIT or AO ) to allow deduction for an amount of ₹ 50,78,22,283 representing the decrease in the Negative Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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