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TMI Blog2024 (6) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... d on this issue is rejected. Rate of tax applicable - according to the assessee isro 12.5% as per section 115B instead of the rate of tax levied @ 30% - according to the assessee, the assessee s income is admittedly from Life Insurance Business, therefore, it needs to be computed as per Rule-2 of the First Schedule to the Act in accordance with the Regulations contained in Part-I and Part-II of the Fourth Schedule of the un-amended Insurance Act, 1938 and rate of taxation is as per section 115B @ 12.5% - HELD THAT:- We note that the assessee carries on Life Insurance Business in India as stipulated by Insurance Regulatory and Development Authority of India (IRDA). On the strength of the license issued from the IRDA, assessee is carrying on the Life Insurance business in India. And therefore, it s income has to be computed as per section 115B of the Act. And we note that in the earlier years there was no dispute on this issue and the AO himself has applied the rate of tax @ 12.5% in accordance with section 115B of the Act. In such a scenario, the AO ought to have levied tax @ 12.5% as per section 115B of the Act. This ground of assessee is allowed. Addition u/s 80(JJAA) - according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment has not accepted the said decision and is in appeal before the Hon'ble Bombay High court?" 3. "Whether, on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in disregarding the AO's contention that if the claim of exemption of the assessee u/s 10(34) for dividend income earned is allowed during appellate proceedings then the provision of sec14A shall apply?" 4. Whether, on the facts and circumstances of the case and in law, the Ld CITA) has erred in interpreting that the applicability of Section 14A to the Insurance Companies based on the decision of Hon'ble Tribunal, Mumbai in assessee's own case for A.Y. 2014-15, when the Department has not accepted the said decision and is in appeal before the Hon'ble Bombay High court?" 5. "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A} has erred in allowing the appeal of assessee relying on the decision of Hon'ble Tribunal, Mumbai in assessee's own case for A.Y. 2014-15, whereas the Department has not accepted the decision of Hon'ble Tribunal and filed further appeal before the Hon'ble High Court?" 6. "Whether, on the facts-and circumstances of the case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) rather than directing the learned AO to verify the errors pointed out by the Appellant. While directing the learned AO to verify the errors pointed by the Appellant in computation of income, the learned CIT(A) erred in issuing such directions under section 251(1)(c) instead of section 251(1)(a) of the Act applicable in case of an appeal against the assessment order. 3. On the facts and circumstances of the case and in law, having allowed ground nos. 2 and 3 raised before him and having held that entire income of the Appellant is taxable as income from life insurance business to be computed as per Rule 2 in the First Schedule to the Act in accordance with the regulations contained in Part-I and Part-Il of the Fourth Schedule of the unamended Insurance Act, 1938, while deciding on ground no. 6 raised before him, the 'learned CIT(A) ought to have categorically held that the rate of tax applicable in the Appellant's case is 12.5% as per provisions of section 115B instead of the rate of tax of 30% applied by the learned AO. While directing the learned AO to verify and apply correct rate of tax as per the provisions of the Act, the learned CIT(A) erred in issuing such dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the Valuation Balance Sheet (i.e. Old Form) prepared in accordance with the Regulations contained in Part-I and Part-II of the Fourth Schedule of the un-amended Insurance Act, 1938. From the taxable surplus of INR 2,37,58,97,933/- the assessee claimed exemption in respect of the dividend income of INR 91,82,72,148 and the income from pension business of INR 39,44,22,207 under section 10(34) and section 10(23AAB) of the Act, respectively, to arrive at the gross total income of INR 1,06,32,03,378/- for the year. The assessee also claimed deduction of INR 2,13, 95, 768/- under section 80(JJAA) of the Act to determine the taxable income of INR 1,04, 18,07,670/- for the year. Based on the aforesaid computation, the assessee offered income of INR 1,04,18,07,610 in the return of income. 7. However, the methodology adopted by the AO while framing the assessment order for computing the taxable surplus as per section 44 read with Rule 2 of the First Schedule to the Act was different as compared to the methodology adopted by the assessee in filing the return of income, which resulted in taxable surplus of INR 2,37, 58, 97, 933 by holding as under: - 7.11 The submission of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NR 39,44,22,207 in respect of surplus from pension business claimed by the Appellant under section 10(23AAB) of the Act; and assailed the action of AO computing Rs. 2,37,58,97,733/- as income from Life Insurance Business. 11. On appeal, the Ld. CIT(A) was pleased to partly allow the appeal of assessee. In respect of manner of computation of income as done by assessee vis-à-vis that by AO, the Ld. CIT(A) noted that the issue of "manner of computation" of assessee's income was covered in favour of assessee in assessee's own case for AY. 2002-03 to AY. 2008-09 (dated 21.09.2016) and for AY. 2014-15 (dated 16.03.2023) and accordingly he allowed it. 12. Aggrieved by the aforesaid action of Ld. CIT(A), the revenue is before us and has preferred ground no. 1 and ground no. 8. By preferring ground no. 1, according to Ld DR for revenue, the Ld. CIT(A) has not correctly interpreted section 44 of the Act read with Rule-2 of the First Schedule along with Insurance Act, 1938, IRDA Act, 1999 and Regulation made therein. And ground no. 8 is regarding the action of Ld. CIT(A) holding that the capital contribution of share holders account to policy holders accounts has to be reduced while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... integra. And drew our attention to the assessee's own case in earlier years (supra) wherein similar grounds were raised by revenue, and the Tribunal followed the ratio of the decision on these issues in the case of M/s. ICICI Prudential Insurance (supra) wherein at para 47, this Tribunal has adjudicated similar grounds of appeal of the revenue and held as under: - "47. The Revenue in its appeal has raised the following grounds: "1. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in deleting the deficit from pension schemes of Rs. 63,09,19,492/- ignoring the facts that the surplus of pension schemes do not form part of total income as per section 10(23AAB), so the deficit would also not form part of total income. 2. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in holding that the income from surplus of participating annuities business represent surplus from "Participating Pension Business" and accordingly allowing the relief to assessee of Rs. 21.34 crores". 3. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in allowing the dividend inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A) was that the assessee was not eligible for deduction under section 10, once the incomes are brought to tax under section 44 r.w. Rule 5 of First Schedule to the Income Tax Act, 1961. 8. There is no need to consider the arguments of the CIT (A) and how he has arrived at that conclusion in this order as this issue was decided by the Hon'ble Bombay High Court in favour of the assessee in writ petition No.2560 of 2011 in the assessee's own case dated 1.12.2011. Consequent to the findings of the CIT(A) in AY 2007-08 (impugned AY ) the Assessing Officer seems to have issued notice under section 148 for reopening the assessment for the AY 2006-07 on the reason that the assessee was not eligible for claiming income as exempt under sub-sections 15, 23G, 34 and 38 of Section 10 and assessee challenged the issue by way of writ petition. The Hon'ble Bombay High Court not only disapproved the reopening of the assessment but gave the findings on merit also which are as under:- "11. Section 44 of the Income Tax Act, 1961 stipulates as follows: "44. Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim to exemption under section 10(15) and section 19(1). In a reference before the Court, the questions referred included whether in computing the profits and gains of the business of insurance under section 44 read with the First Schedule certain items which were ordinarily not includible in the total income were rightly included in the taxable surplus. The Division Bench of this Court held as follows: "The question which essentially falls to be determined in this reference is whether, in view of the provisions in section 44 or rule 2 of the first Schedule, the Life Insurance Corporation will not be entitled to claim the deductions which are otherwise admissible in the case of an assessee, computation of whose income is governed by the other provisions of the Act. The argument of Mr. Kolah for the Life Insurance Corporation is that unless there are express provisions which disable the Corporation from claiming the deductions referred to above, the Corporation cannot be deprived of the benefit of the provisions referred to in the questions Nos. 1 to 6. Section 44, which deals with computation of profits and gains of business of insurance, begins with a non-obstante clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Bench dealt inter alia with the provisions of section 19(7) of the Income Tax Act, 1922. The questions referred to this Court included whether the assessee was entitled to claim an exemption from tax under section 15B and 15C (4) and in respect of interest on a government loan under a notification issued under section 60. Section 10(7) of the Income Tax Act, 1922 provided that notwithstanding anything to the contrary contained in section 8,9,10,12 or 18, the profits and gains of any business of insurance and the tax payable thereon shall be computed in accordance with the rules contained in the Schedule to the Act. The Division Bench held that upon the language of sub-section (7) of section 10 read along with rule 6 it was impossible to hold that the provisions relating to exemptions stood excluded from operation. In that context the Division Bench held as follows: "It is only after the profits and gains of a business are computed that any question of granting exemptions arises and if the latter stage were intended to be excluded by the law we should have thought that a clearer provision than is made in sub-section (7) of section 10 and in rule 6 would have been made" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts of an insurance business and undo the entries made therein". The question whether an assessee who carries on general insurance business would be entitled to avail of an exemption under section 10 did not arise. The issue as to whether the assessee which carries on the business of general insurance would be entitled to the benefit of an exemption under clauses (15), (23G) and (33) of section 10 is directly governed by the decision rendered by the Division Bench in Life Insurance Corporation v. Commissioner of Income-tax (Supra) following the earlier decision in Commissioner of Income-tax v. New India Assurance Co. Ltd (supra). The Assessing Officer could not have ignored the binding precedent contained in the two Division Bench decisions of this Court. Moreover, the Assessing Officer in allowing the benefit of the exemption in the order of assessment under section 143(3) specifically relied upon the view taken by the CBDT in its communication dated 21 February 2006 to the Chairman of IRDA. The communication clarifies that the exemption available to any other assessee under any clauses of section 10 is also available to a person carrying on non-life insurance bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not applicable to Life Insurance Company. The Tribunal has reiterated the same view in the above cases that provisions of section 14A will not apply to Insurance companies, whose income are strictly assessable in terms of Rules of the Insurance Act. Thus, respectfully following the same, we affirm the order of the CIT(A) and dismissed the ground raised by the revenue. Accordingly, grounds raised by the revenue are dismissed." 20. Respectfully following the order of the Tribunal (supra), these grounds of revenue stands dismissed. 21. Ground no. 5 of the revenue is against the action of the Ld. CIT(A) relying on the decision of this Tribunal in assessee's own case for earlier years, even though the revenue has preferred an appeal before the Hon'ble Bombay High Court against the decision of Tribunal. This ground does not require any adjudication because the action of the Ld. CIT(A) is in consonance with the judicial discipline. So this ground of revenue stands dismissed. 22. Ground no. 9 is general in nature so does not require any adjudication. 23. Coming next to the appeal of the assessee for AY. 2018-19, the Ld. AR points out that ground no. 1 is general in nature and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it without giving any reason. And the Ld. CIT(A) has directed the AO to verify and pass speaking order on this claim. We note that the assessee has filed Form-10DA as required by statute to make the claim of deduction u/s 80(JJAA) of the Act and AO without any contrary material has disallowed the same without any whisper/reason for disallowing the same. In such a scenario, we direct the AO to verify the claim of the assessee and consider the claim in accordance to law after giving opportunity to assessee. 26. In the result, appeal of the revenue is dismissed and appeal of the assessee is allowed partly for statistical purposes. 27. Grounds of appeal of the revenue for AY. 2013-14 are as under:- "1. "Whether on the facts & circumstances of the case and in law, the Hon'ble ITAT was correct in interpreting the provisions of Section 44 of the Income Tax Act, 1961 ['the Act'] read with Rule 2 of the First Schedule along with provisions of Insurance Act, 1938, insurance Regulatory and Development Authority Act, 1999 and regulations made there under and accordingly allowing adjustment from the 'surplus' worked out as per "actuarial valuation"? 2. "Whether, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. 'The appellant craves leave to amend or alter any ground or add a new ground that may be necessary." 28. Cross Objection of the assessee for AY. 2013-14 are as under: - "1. As across objection to ground no. 4 raised by the Appellant in its appeal, the Respondent prays that where the surplus as per the Form I prepared in accordance with the provisions of the Insurance Regulatory and Development Authority Act, 1999 [i.e., 'new Form I'] is considered, the amount of Rs. 2,30,35,570/- transferred from the Shareholders' Account to the Policyholders' Account should be reduced from the said surplus. This ground is without prejudice to the conclusion by the Commissioner of Income-tax (Appeals) that incremental surplus as per the Form I prepared in accordance with Unamended Insurance Act, 1938 ['old Form I'], after allowing exemption under section 10 of the Act, should be the income of the Respondent. 2. The Respondent craves leave to add to or alter by deletion, substitution or otherwise of the above grounds of cross-objections at or before the hearing of the appeal." 29. Ground no. 1 & 5 of revenue are identical as that of the revenue's ground no 1 & 8 for AY. 2018-19 (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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