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TMI Blog2017 (9) TMI 1994X X X X Extracts X X X X X X X X Extracts X X X X ..... 0(34) - As identical issued is covered by the decision in the case of ICICI Prudential Insurance Co. Ltd. [ 2012 (11) TMI 13 - ITAT MUMBAI] therefore, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), resultantly, this ground of the Revenue is also fails. Whether negative reserves has an impact of reducing the taxable surplus, as per form-1 therefore, corresponding adjustment for negative reserves need to be made to arrive a taxable surplus? - HELD THAT:- Issue decided in favour of assessee as relying on own case High Court vide order dated [ 2015 (9) TMI 1718 - BOMBAY HIGH COURT] . Assessing Officer had no power to modify its accounts after Actuarial valuation is done. Addition made on account of interim bonus paid - Whether no deduction on account of interim bonus is required to be made from the total surplus as per the regulation of IDRA, the provisions of Act are not applicable in the case of the assessee? - HELD THAT:- If section 28 of the Life Insurance Corporation Act, 1956 is analyzed, with respect to surplus from life insurance business and its utilization, it is clear that 95% of such surplus or such higher percentage there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up appeal of the Revenue in ITA No.4459/Mum/2015, wherein, the first and second ground raised pertains to deleting the addition made on account of loss from Jeevan Suraksha Fund ignoring the settled position of law that income includes loss thus the loss form Jeevan Suraksha Fund can be set off against taxable income of the assessee corporation despite the fact that Jeevan Suraksha is covered u/s 10(23AAB) of the Income Tax Act, 1961 (hereinafter the Act) and further ignoring the fact that non-obstante clause in section 44 of the Act is not extended to section 10(23)AAB of the Act. 2. During hearing of these appeals, the ld. counsel for the assessee, Shri F.V. Irani, contended that the impugned issue is covered in favour of the assessee in its own case by the decision of Hon'ble Bombay High Court in Income Tax Appeal Nos.3693, 3623, 3691, 3692 and 5001 of 2010 for the Assessment Years 2002-03 to 2006-07, vide order dated 02/08/2011 and also by the decision of the Tribunal in ITA No.4874/Mum/2014, vide order dated 24/02/2016. The Ld. CIT-DR, Shri R.P. Meena, though defended the addition but did not controvert the assertions made by the assessee to the effect that the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the decision of the Coordinate Bench, we don t find any infirmity in the conclusion of the First Appellate Authority. Thus, the impugned grounds are dismissed. 3. The next ground pertains to dividend income of the assessee hold as exempt u/s 10(34) of the Income Tax Act, 1961 (hereinafter the Act). Ld. CIT-DR advanced argument which is identical to the ground raised by contending that since the assessee is engaged in the business of life insurance, it has to be computed under the non-obstante clause of section 44 of the Act. On the other hand, the ld. counsel for the assessee, claimed that this issue is covered in favour of the assessee in its own case by the decision of the Tribunal in ITA No.6221, 3702 3703/Mum/2012 vide order dated 03/04/2013 and also by Hon'ble Bombay High Court in Income Tax Appeal Nos.1759 of 2013, 116 of 2014 and 2162 of 2013 vide order dated 15/09/2015, wherein, the appeal of the Revenue was dismissed against the aforesaid order of the Tribunal. 3.1. In view of the above, we are reproducing the relevant paras of the order of the Tribunal for ready reference and analysis:- 3.4. We find that the issue of admissibility of provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins of any business of insurance of a mutual insurance company shall be computed in accordance with the rules in the First Schedule. Part A of the First Schedule containing Rules I to 4 deals with profits of life insurance business while Part B consisting of Rule 5 deals with computation of profits and gains of Other insurance business. Rule 5 provides as follows: 5. The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the Insurance Act, 1938 (4 of 1938), to be furnished to the Controller of Insurance subject to the following adjustments: (a)Subject to the other provisions of this rule, any expenditure or allowance (including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed) which is not admissible under the provisions of section 30 to (43B) in computing the profits and gains of a business shall be added back; (b)( ) (c) Such amount carried over to a reserve for unexpired risks as may be prescribed in this behalf shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to computation of income chargeable under the four heads mentioned in section 44. The only other overriding effect of section 44 is that its provisions operate notwithstanding the provisions of section 191 and of section 28 to 43A. Thus, the only effect of section 44 is that the operation of the provisions referred to therein is excluded in the case of an assessee who carried on insurance business and in -whose case the provisions of rule 2 of the First Schedule are attracted. If the deductions which are claimed by the assessee do not fall within the provisions which are referred to in section 44, it will have to be held that the applicability of those provisions in the case of an assessee whose assessment is governed by section 44 read with rule 2 in the First Schedule- is not excluded . This judgment is sought to be distinguished by the Assessing Officer while disposing of the objections on the ground that the decision was rendered in the context of an assessee which- carried on life insurance business to whom Rules 1 to 4 of the First Schedule applied whereas in the case of the assessee in this case which carries on general insurance business Rule 5 could apply. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. Accordingly, the decision of Life Insurance Corporation (Supra)could not have- been ignored by the Assessing- Officer on the supposition that the decision was rendered in the context of an assessee who carried on life insurance business and was, therefore, not available to an assessee which carries on general insurance business. 12.In General Insurance Corporation of India v. Commissioner of Income- Tax, the Supreme Court considered in an appeal arising out of a judgment of the High Court the issue as to whether a sum of Rs.3 crores, being a provision, for redemption of preference shares, was not liable to be added back in the total income of the assessee for AY 1977-78?. The Supreme Court held that a plain reading of rule 5(a) of the First Schedule made it clear that in order to attract the applicability of the provision the amount should firstly be an expenditure or allowance and secondly it should be one not admissible under the provisions of section 30 to 43A.The Supreme Court held that the sum of Rs.3 crores in that case which was set apart as a provision for redemption of preference shares could not have been treated as an expenditure and hence could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer above all was bound by the communication of the CBDT. Having followed that in the order under section 143(3) he could not have taken a different view while purporting to reopen the assessment. Having applied his mind specifically to the issue and having taken a view on the basis of the communication noted earlier, the act of reopening the assessment would have to be regarded as a mere change of opinion which has also not been based on any tangible material. Consequently, we hold that the reopening of the assessment is contrary to law. The Petition would have, therefore, to be allowed . Respectfully following the above, we hold that the assessee is entitled for exemption under section 10.. Respectfully following the order of the Hon ble jurisdictional High Court and taking note of the decision of the coordinating bench (F Bench in the case of ICICI Prudentail Insurance Co.), we reverse the order of the FAA and decide Ground No.1 in favour of the assessee. 3.2. It is also noted that the Hon'ble High Court dismissed the appeal of the Revenue by observing/holding as under:- 5. Mr.Suresh Kumar learned counsel for the revenue very fairly states ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal reserve is a part of Actuarial valuation and the surplus as discussed in Form-I under Regualtion 4 takes in to consideration this mathematical reserve also. Therefore the order of the order of the CIT(A) is approved. Moreover the Assessing Officer has no power to modify the amount after actuarial valuation was done, which was the basis for assessment under Rule 2 of 1st Schedule r.w.s.44 of the I.T. Act. The principle laid down by the Hon ble Supreme Court in LIC vs.CIT 51ITR773 about the power of the Assessing Officer also restricted the scope and adjustment by the AO. In view of this uphold the order of the CIT(A) and dismiss the Revenue s ground. Respectfully following the above order of the Coordinating Bench we decide Ground No.2 in favour of the assessee. 4.3. Similarly, the Hon'ble High Court vide order dated 15/09/2015 dismissed the appeal of the Revenue. The relevant portion from the order is reproduced hereunder:- 6. In so far as question (B) is concerned, we find that the order of the ITAT has allowed the respondent-assessee's appeal by following its decision in ICICI Prudential Insurance Co. Ltd rendered in respect of Assessment year 2006-07. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 28 of the Life Insurance Corporation Act, 1956 for ready reference:- 28. Surplus from life insurance business how to be utilized.-- If as a result of any investigation undertaken by the Corporation under section 26 any surplus emerges, ninety-five per cent of such surplus or such higher percentage thereof as the Central Government may approve shall be allocated to or reserved for the life insurance policy-holders of the Corporation and after meeting the liabilities of the Corporation, if any, which may arise under section 9, the remainder shall be paid to the Central Government or, if that Government so directs, be utilised for such purposes and in such manner as that Government may determine.] [28A. Profits from any business (other than life insurance business) how to be utilized.-- If for any financial year profits accrue from any business (other than life insurance business) carried on by the Corporation, then, after making provision for reserves and other matters for which provision is necessary or expedient, the balance of such profits shall be paid to the Central Government.] If section 28 is analyzed, with respect to surplus from life insurance bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 3. Briefly the facts of the case are that the Assessing Officer passed the order u/s 115-Q read with section 115-O of the Income Tax Act, 1961 determining the distributed dividend at Rs.621,77,05,609/- thereby raising the liability u/s 115-O at Rs.69,76,26,569/- by holding the corporation as deemed to be in default to discharge its liability u/s 115-O on distributed dividend for the income earned from life insurance business. The assessee filed appeal before the CIT(A), who held as under:- 4. I have gone through the order u/s 115Q r.w.s 115-O as well as the ITAT Order dt. 18.12.2006. The facts of the case under reference are similar to those of A.Y. 1998-99 and 2004-05. While deciding the appeal for AY. 2004-05 vide my order in appeal No. CIT(A)-I/IT/170/2004-05 dt. 14.3.2007, the appeal for AY 2004-05 has been allowed, following the order of Hon ble ITAT, Mumbai holding that the capital of the company is not divided into shares and therefore Central Government cannot be said to be a share holder. The position of Central Government is akin to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by AO on account of loss from Jeevan Suraksha Fund ignoring the settled position of law that income includes loss and that the loss from Jeevan Suraksha Fund can be set off against taxable income of the assessee corporation despite the fact that Jeevan Suraksha Fund is covered u/s. 10(23AAB) of the IT Act whereby the income including the loss is not includible in the total income. 1.1 Whether on the facts and in circumstances of the case and in law, the ld. CIT(A) is justified in igniting the fact that the non obstante clause in section 44 is not extended to section 10(23AAB) of Income tax Act. 2. Whether on the facts and in circumstances of the case and in law, the ld. CIT(A) was correct in law in holding that provision of 115O read with section-Q of the Act are not applicable in the case of Assessee. 2. Briefly stated, it is the case of the AO that the assessee corporation declared its income on the basis of actuarial valuation surplus. The assessee claimed set off of deficit of Rs.98,95,87,89,023/- from Jeevan Suraksha Fund. The AO has taken a stand that the income from Jeevan Suraksha Fund does not form part of the total income as per section 10(23AAB) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statutory obligation is not in the nature of the dividend. Respectfully following the orders of the ITAT,Mumbai Benches in assessee s own case as mentioned above, CIT(A) took the view that the provisions of section 115-0 are not applicable in the case of the assessee corporation. The Assessing Officer was directed to delete the addition made on this issue. 4. Since the issue was crystallized in favour of the assessee in earlier years by the decision of the co-ordinate Benches and as the ld. CIT(A) relied on the same while giving relief, we do not see any reason to differ from the findings of the CIT(A). Accordingly ground No.2 is rejected. 5. In the result, appeal is dismissed. ITA No.3939/Mum/12 for Assessment year 2008-09: 6. Similar issues were raised in ground No.1 and 2 in this year also. The ld. CIT(A) following the order in assessment year 2007-08 deleted the additions. Since these two issues are decided in the other appeal in ITA No.3938/Mum/12, for the reasons stated therein, there is no merit in the grounds raised by the Revenue. Accordingly, they are dismissed. 7. In the result, both the appeals of Revenue are dismissed. 6.3. In the aforesaid orders, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel of the assessee fairly conceded that ground no. (i) and (ii) are already decided against the assessee by the decision of this Tribunal in assessment year 2009-10 by order dated 03.04.2013 in ITA No. 6221 others in assessee s own case. 4. As regards ground no. (iii) Ld. Counsel of the submitted that he shall not be pressing for this ground. 5. Upon here in both the Counsel of perusing the record we find that ground no. (i) and (ii) are decided by the Tribunal in assessee own case in the order cited above vide para 5 thereof. We may gainfully referred to the concluding portion of the ITAT order as under: 1) We have rival submissions and perused the material on record. Basic question to be decided by us is whether the income respect of shareholders account should be taxed in the hands of the assessee or not? The undisputed facts relevant for deciding the issue can be summarised as under: i) LIC was established by the LIC Act,1956, ii) In that year Government of India had contributed Rs. 5 Crores towards capital of the Corporation. iii) No shares were issued by the LIC to Government of India. iv) Assessee corporation had prepared its accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f non-payment of tax on distributed profits u/s.115- O of the Act in respect of payment made to central government out of the surplus profit. After discussing facts of the case and the provisions of the sections 115-O and 115-Q of the Act, Tribunal held that payment made by the assessee to the Central Government could not be treated as dividend within the ambit of definition clause 2(22) of the Act, that provisions of section 115-O of the Act were not applicable, that assessee could not be declared as assessee in default u/s.115 Q of the Act. In our opinion, in the case relied upon by the AR of the assessee, question of taxability of particular items of income under the head income from other sources was not before the Tribunal. Therefore, upholding the order of the FAA we decide Ground of appeal no.3 against the assessee. 6. Since facts are identical following the above precedent we uphold the order of Ld. CIT-A. Hence the ground raised in this regard stand dismissed. 7. Ground no. 3 is dismissed as not pressed. In the result this appeal file by the assessee stands dismissed. 7.3. In the aforesaid order, the Tribunal has already considered the factual matrix and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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