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TMI Blog2022 (11) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in respect of the earlier assessment years i.e., 2000-01, 2001-02 and 2005-06. Adjustment of negative reserve - Mathematical reserves is a part of the Actuarial valuation and the surplus takes into account the mathematical reserve also. Besides the impugned order follows the decision of the Apex Court in LIC of India [ 1963 (12) TMI 5 - SUPREME COURT] wherein the Apex Court has held that the Assessing Officer has no power to modify the account after Actuarial valuation is done. It is also pertinent to note that for the Assessment Year 2007-08, the Assessing Officer had raised an identical issue during the assessment proceedings and thereafter by the assessment order dated 30 December 2009 held that no adjustment of the Actuarial valuation is to be done by following the decision of the Apex Court in LIC of India's case (supra). Therefore we find no substantial question of law arising for our consideration. Allowance of exemption u/s 10 (34) - Tribunal is correct in allowing the dividend income of assesee as exempt u/s. 10(34) as relying on ICICI Prudential life insurance Co Ltd [ 2015 (7) TMI 1346 - BOMBAY HIGH COURT] - ITA No. 2046/MUM/2022 And ITA No. 2047/MUM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012 13 which is still pending in the honourable High Court for finality iv. whether on the facts and circumstances of the case, and on law, the learned CIT (A) is correct in deleting the addition on account of negative reserves amounting to ₹ 63,203,000/ which was made by the assessing officer, without appreciating the provisions of the insurance act 1938 and IRDA regulations and ignoring the fact that the Department has contesting the assessee s own case (ITA number 1179/2022) for assessment year 2012 13 and (ITA number 1507/2022) for assessment year 2013 14 which is still pending in honourable High Court for finality. 03. Issues in other appeals for assessment year 2015 16 to 2018 19 are also similar. 04. Facts emerging for assessment year 2014 15 shows that assessee is a company licensed by insurance and regulatory development authority to carry on the business of life insurance. As the assessee is engaged in the business of life insurance the computation of total income is required to be made Under the provisions of Section 44 of the income tax act. The part A of the first schedule of the income tax act 1961 defines the method for computation of prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income chargeable to tax can be computed. c. The learned assessing officer was of the view that computation of income in the case of insurance business is as per provisions of Section 44 of the IT act. This action is starting with a non-obstante clause therefore dividend income Under the head income from other sources cannot be taken as separate from the profit and gains of insurance business accordingly the dividend income which falls Under that income from other sources cannot be computed separately to claim exemption u/s 10 (34) of the act as it would amount to violation of provisions of Section 44 of the act. Accordingly the learned assessing officer rejected the claim for deduction of dividend income from the surplus determined by the actuary and made the addition to the extent of ₹ 6,696,593/ to the total income of the assessee. d. The learned AO further noted that the assessee has claimed dividend income exempt u/s 10 (34) of the act of ₹ 66 6,96,593 however did not make any disallowance u/s 14 A of the act and therefore the assessee was asked to explain why the disallowance should not be made u/s 14 A hundred with rule 8D of the IT act. e. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an addition of ₹ 63,203,000/ . 06. Accordingly assessment order u/s 143 (3) of the income tax act was passed on 1/12/2016 determining the assessed total income of the assessee at a loss of ₹ 580,694,643 against the income from business as per the computation of the assessee at a loss of 65,05,94,236/ . 07. Assessee aggrieved with the order of the learned AO preferred an appeal before the learned CIT A. It was submitted before the learned and CIT A that all the 3 issues in this appeal is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee s own case for assessment year 2012 13 in ITA number 2715/M/2019. The learned and CIT A referred to that order of the coordinate bench and deleted the addition of ₹ 6,696,593 being exempt income u/s 10 (34) of the act, disallowance of ₹ 3,895,297 made on protective basis by the learned assessing officer u/s 14 A of the act and further deleted the addition of ₹ 63,203,300/ being negative reserve. Accordingly appeal of the assessee was allowed. 08. The learned assessing officer is aggrieved with the order of the learned CIT A and is in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputation of income of an insurance company. We have examined the relevant provisions. Section 44 begins with a non-obstante clause and overrides the other provisions of the Act as mentioned therein including Section 14A. We are not convinced with the submission of Mr. Ajit Sharma that Section 14A would be applicable in respect of the Respondent. Section 14A does not have independent legs to stand on. Section 14A inter alia begins with the words for the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of expenditure incurred................ . The chapter in question is chapter IV. This chapter also contains the provisions relating to computation of profits and gains of business or profession. Section 44 specifically excludes the provisions of the Act relating to computation of income, inter alia, those contained in Section 28 to 43B . Thus, the exclusion would take within its sweep Section 14A which is an exemption for deductions as allowable under the Act, as provided under Section 28 to 43B. Further, Section 44 is a special provision applicable in the cases of insurance companies and applies, notwithstanding anything to the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive reserve has an impact of reducing the 'taxable surplus' as per Form-I and therefore corresponding adjustment for negative reserve need to be made to arrive at taxable surplus ? The Honourable High court held as under: - 4. So far as Question No. 6 is concerned, the grievance of the revenue is that the Tribunal after having taken total surplus as arrived by Actuarial valuation ought to have reduced negative reserve amount of Rs. 27.27 crores while determining respondent- assessee's income under Section 44 of the Act. The impugned order records that the mathematical reserves is a part of the Actuarial valuation and the surplus takes into account the mathematical reserve also. Besides the impugned order follows the decision of the Apex Court in LIC of India v. CIT [1964] 51 ITR 773, wherein the Apex Court has held that the Assessing Officer has no power to modify the account after Actuarial valuation is done. It is also pertinent to note that for the Assessment Year 2007-08, the Assessing Officer had raised an identical issue during the assessment proceedings and thereafter by the assessment order dated 30 December 2009 held that no adjustment o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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