DCIT-CC 5(3), MUMBAI, MUMBAI V. INDIAFIRST LIFE INSURANCE COMPANY LIMITED, MUMBAI

ITA 3825/MUM/2024

AI Insights

The case involves Indiafirst Life Insurance Company Ltd., which appealed against the order of the Ld. Commissioner of Income-tax (Appeals) - 54, Mumbai, concerning the assessment year 2011-12. The primary issue was the interpretation of Section 44 of the Income Tax Act, 1961, in conjunction with the Insurance Act, 1938, and the Insurance Regulatory and Development Authority Act, 1999. The Revenue challenged the CIT(A)'s decision allowing adjustments from the actuarial surplus, while the assessee contested the validity of the reassessment order passed by the Deputy Commissioner of Income-tax. The Tribunal's decision was influenced by previous rulings and the specific provisions applicable to life insurance companies.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471389 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-10-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 31-07-2024
• Other Referred Cases: Goetze India Ltd. (2006) 157 Taxman 1 (SC), CIT v. Pruthvi Brokers and Shareholders Pvt. Ltd. 349 ITR 336 (Bom.), LIC of India (338 TR 212)
• Laws Referred To: Income Tax Act, 1961, Insurance Act, 1938, Insurance Regulatory and Development Authority Act, 1999
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.A. DHYANI; MY LD PREDECESSOR A; MY LD PREDECESSOR A; MY LD PREDECESSOR A
• Assessee Lawyers: FARROKH V. IRANI
• Keywords: Reassessment proceedings
• Section: 147; 148; 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 3825/MUM/2024 Assessment Year: 2011-12 DCIT-CC-5(3), Room No. 426, Kautilya Bhavan, BKC Road, Mumbai-400051. Vs. Indiafirst Life Insurance Company Ltd., 12th and 13th Floor, Building No. 4, Nesco IT Park Western Express Highway Goregaon E, Mumbai-400063. PAN NO. AADCB 6215 G Appellant Respondent CO No. 206/MUM/2024 (Arising out of ITA No. 3825/MUM/2024) Assessment Year: 2011-12 Indiafirst Life Insurance Company Ltd., 12th and 13th Floor, Building No. 4, Nesco IT Park Western Express Highway Goregaon E, Mumbai-400063. Vs. DCIT-CC-5(3), Room No. 426, Kautilya Bhavan, BKC Road, Mumbai-400051. PAN NO. AADCB 6215 G Appellant Respondent Assessee by : Mr. Farrokh V. Irani Revenue by : Mr. R.A. Dhyani, CIT-DR Date of Hearing : 01/10/2024 Date of pronouncement : 29/10/2024 PER OM PRAKASH KANT, AM This appeal by the Revenue and cross assessee are directed against order dated 08.05.2024 passed by the Ld. Commissioner of Income ‘the Ld. CIT(A)’] for assessment year 2011 2. The grounds raised reproduced as under: 1. \"Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) erred in interpreting the provisions of Section 44 of the Income Tax Act, 1961 [\"the Act\"] read with Rule 2 of the First Sche 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 the fa law, the Ld.CIT(A) erred in interpreting that * on account of \"legislation by incorporation\" 'only' the \"un Insurance Act 1938 and the Regulations there under became part of section 44 r.w.r. rule 2 of the Fi of the I.T Rules?\" 3. \"Whether on the facts & circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the facts that the valuation of the insurance companies is done under the Insurance Act, therefore, what can be reduced is is specifically provided in schedule 1 Rule 2 and nothing else. Therefore, exemption under section 10(23AAB) cannot be granted to an assessee engaged in business of life insurance where income is computed u/s 44 of the I.T Act\"? 4. \"Whether on the law, the Ld.CIT(A) erred in ignoring the fact that even the assessee insurance company uses the nomenclature expenses \"other than those directly related to insurance business\" while computing th account and treating it as part of Insurance Business.? Indiafirst Life Insurance Company Ltd ITA No. 3825 ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue and cross-objection by the assessee are directed against order dated 08.05.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – 54, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2011-12. The grounds raised by the Revenue in its appeal are reproduced as under: \"Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) erred 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'\"? \"Whether on the facts & circumstances of the case and in law, the Ld.CIT(A) erred in interpreting that * on account of \"legislation by incorporation\" 'only' the \"un-amended' Insurance Act 1938 and the Regulations there under became part of section 44 r.w.r. rule 2 of the First Schedule of the I.T Rules?\" \"Whether on the facts & circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the facts that the valuation of the insurance companies is done under the Insurance Act, therefore, what can be reduced is only what is specifically provided in schedule 1 Rule 2 and nothing else. Therefore, exemption under section 10(23AAB) cannot be granted to an assessee engaged in business of life insurance where income is computed u/s 44 of the I.T Act\"? \"Whether on the facts & circumstances of the case and in law, the Ld.CIT(A) erred in ignoring the fact that even the assessee insurance company uses the nomenclature expenses \"other than those directly related to insurance business\" while computing the surplus in the share holders account and treating it as part of Insurance Business.? Indiafirst Life Insurance Company Ltd 2 & CO No. 206/MUM/2024 objection by the assessee are directed against order dated 08.05.2024 passed by the 54, Mumbai [in short by the Revenue in its appeal are \"Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) erred in interpreting the provisions of Section 44 of the Income Tax Act, 1961 [\"the Act\"] read with dule 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 cts & circumstances of the case and in law, the Ld.CIT(A) erred in interpreting that * on account of amended' Insurance Act 1938 and the Regulations there under rst Schedule \"Whether on the facts & circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the facts that the valuation of the insurance companies is done under the only what is specifically provided in schedule 1 Rule 2 and nothing else. Therefore, exemption under section 10(23AAB) cannot be granted to an assessee engaged in business of life insurance where income is computed u/s 44 of the I.T Act\"? facts & circumstances of the case and in law, the Ld.CIT(A) erred in ignoring the fact that even the assessee insurance company uses the nomenclature expenses \"other than those directly related to insurance e holders account and treating it as part of Insurance Business.? 2.1 The grounds raised by the assessee in its cross reproduced as under: On the facts and circumstances of the case and in law, IndiaFirst Life Insurance Company Limited ('IFLI 'Company') respectfully submits that the Learned Commissioner of Appeals -54, Mumbai {CIT(A)} ought to have held that Reassessment Order dated December 20, 2016 passed by Deputy Commissioner of Income-tax, Circle 14(2)(1), Mumbai {'Le 143(3) read with section 147 of Income invalid, without jurisdiction, void and bad in law. 3. The cross-objection of 24 days. Before us, the Ld. counsel for the the application of the assessee for condoning the delay in filing the cross-objection and submitted that during the relevant period, the company had undergone personnel changes in tax team resulting into inadvertently non issue was brought to the notice of the respondent by the Senior Counsel, immediately the cross assessee. Looking to the sufficient cause for delay in filing cross objection, we admit adjudication. 4. Briefly stated facts of the case are that the assessee filed its return of income on 24.09.2011 declaring total income at Rs.( 52,02,02,239/- which was subsequently revised 66,59,72,891/- on 29.09.2012 10(23AAB) of the Income amount of Rs.14,56,69,652/ assessee was selected for scrutiny and assessment u/s 143(3) Indiafirst Life Insurance Company Ltd ITA No. 3825 The grounds raised by the assessee in its cross reproduced as under: On the facts and circumstances of the case and in law, IndiaFirst Life Insurance Company Limited ('IFLIC' or 'Respondent' or 'Company') respectfully submits that the Learned Commissioner of 54, Mumbai {CIT(A)} ought to have held that Reassessment Order dated December 20, 2016 passed by Deputy Commissioner of tax, Circle 14(2)(1), Mumbai {'Learned AO'} under section 143(3) read with section 147 of Income-tax Act, 1961 ('Act') was invalid, without jurisdiction, void and bad in law. objection has been filed by the assessee with a delay of 24 days. Before us, the Ld. counsel for the assessee referred to the application of the assessee for condoning the delay in filing the objection and submitted that during the relevant period, the company had undergone personnel changes in tax team resulting non meeting compliance deadlines and when issue was brought to the notice of the respondent by the Senior immediately the cross-objection had been filed by the assessee. Looking to the sufficient cause for delay in filing cross it the cross-objection of the assessee for Briefly stated facts of the case are that the assessee filed its return of income on 24.09.2011 declaring total income at Rs.( which was subsequently revised on 29.09.2012 after claiming exemption u/s of the Income-tax Act, 1961 (in short ‘the Act’) amount of Rs.14,56,69,652/-. The return of income filed by the assessee was selected for scrutiny and assessment u/s 143(3) Indiafirst Life Insurance Company Ltd 3 & CO No. 206/MUM/2024 The grounds raised by the assessee in its cross-objection are On the facts and circumstances of the case and in law, IndiaFirst C' or 'Respondent' or 'Company') respectfully submits that the Learned Commissioner of 54, Mumbai {CIT(A)} ought to have held that Reassessment Order dated December 20, 2016 passed by Deputy Commissioner of arned AO'} under section tax Act, 1961 ('Act') was filed by the assessee with a delay assessee referred to the application of the assessee for condoning the delay in filing the objection and submitted that during the relevant period, the company had undergone personnel changes in tax team resulting iance deadlines and when issue was brought to the notice of the respondent by the Senior objection had been filed by the assessee. Looking to the sufficient cause for delay in filing cross- objection of the assessee for Briefly stated facts of the case are that the assessee filed its return of income on 24.09.2011 declaring total income at Rs.(-) which was subsequently revised to Rs.(-) fter claiming exemption u/s tax Act, 1961 (in short ‘the Act’) for an . The return of income filed by the assessee was selected for scrutiny and assessment u/s 143(3) of the Act was completed on 31.03.2014 determining loss at Rs.( 64,75,24,751/- after disallowance of dividend income of Rs.1,84,48,140/- by treating the same as sources’ for life insurance company. 4.1 The assessment was reopened by way of issue of notic 31.03.2016 u/s 148 of the Act. In the reassessment proceedings, the Assessing Officer observed that assessee had claimed loss of Rs.14,56,69,652/- from pension policies/funds u/s 10(23AAB) of the Act. According to the Assessing Officer loss or pension scheme should not be adjusted against the taxable profit or other scheme. The Assessing Officer stated in the assessment order that assessee had claimed the said income by filing revising computation of income without revising return of in the Assessing Officer Court in the case of Goetze India Ltd. (2006) 157 Taxman 1 (SC) and disallowed the claim of the loss from pension fund and added Rs.14,56,69,652/- to the total income of th 5. On further appeal, the Ld. CIT(A) following the decision of the Hon’ble Bombay High Court in the case of and Shareholders Pvt. Ltd. 349 ITR 336 (Bom.) decisions cited in the order admission of the claim by the Ld. CIT(A) has the Revenue before us. of the Ld. CIT(A) on the merit. Indiafirst Life Insurance Company Ltd ITA No. 3825 eted on 31.03.2014 determining loss at Rs.( after disallowance of dividend income of by treating the same as ‘income from other for life insurance company. The assessment was reopened by way of issue of notic 31.03.2016 u/s 148 of the Act. In the reassessment proceedings, the Assessing Officer observed that assessee had claimed loss of from pension policies/funds u/s 10(23AAB) of the Act. According to the Assessing Officer loss or pension scheme should not be adjusted against the taxable profit or other scheme. The Assessing Officer stated in the assessment order that assessee had claimed the said income by filing revising computation of income without revising return of in the Assessing Officer followed the decision of the Hon’ble Supreme Goetze India Ltd. (2006) 157 Taxman 1 (SC) disallowed the claim of the loss from pension fund and added to the total income of the assessee. On further appeal, the Ld. CIT(A) following the decision of the Hon’ble Bombay High Court in the case of CIT v. Pruthvi Brokers and Shareholders Pvt. Ltd. 349 ITR 336 (Bom.) decisions cited in the order, admitted the claim of the a on of the claim by the Ld. CIT(A) has not been disputed by the Revenue before us. The Revenue has only dispu ) on the merit. Indiafirst Life Insurance Company Ltd 4 & CO No. 206/MUM/2024 eted on 31.03.2014 determining loss at Rs.(-) after disallowance of dividend income of income from other The assessment was reopened by way of issue of notice dated 31.03.2016 u/s 148 of the Act. In the reassessment proceedings, the Assessing Officer observed that assessee had claimed loss of from pension policies/funds u/s 10(23AAB) of the Act. According to the Assessing Officer loss or deficit from pension scheme should not be adjusted against the taxable profit or other scheme. The Assessing Officer stated in the assessment order that assessee had claimed the said income by filing revising computation of income without revising return of income therefore, the decision of the Hon’ble Supreme Goetze India Ltd. (2006) 157 Taxman 1 (SC), disallowed the claim of the loss from pension fund and added e assessee. On further appeal, the Ld. CIT(A) following the decision of the CIT v. Pruthvi Brokers and Shareholders Pvt. Ltd. 349 ITR 336 (Bom.) and other admitted the claim of the assessee. The not been disputed by Revenue has only disputed the finding 6. We have heard rival submission of the parties and perused the relevant material on record. In the case, the Ld. CIT(A) has followed binding decision of the Hon’ble Bombay High Court and decision of the Co-ordinate Bench of the Tribunal in the case of the assessee in ITA No. 7276/Mum/2014 for assessment year 2010 relevant finding of the Ld. CIT(A) is reproduced as under: “6.4 As regards the merits of the case, it is seen that the issue has been decided in favour of the appellant by my Ld predecessor CIT(A) in his order dated 01.09.2014 relying on the decision of the Hon'ble Bombay High Court in the case of CIT v Life Insurance Corporation of India Ltd [2011] 12 taxmann.com 388 (Bom). The relevant extracts of the Hon'ble High Court decision are as under: \"17.............. The fact that the income from such fund has been exempted under section 10(23AAB) with effect from 1st April, 1997, does not mean that insurance business, so as to fall outside the purview of the insurance business covered under section 44 of the Income Act, 1961.. \"18. The object of inserting section 10(23AAB) as per the Board Circular No.762 dated 18th February 1998 was to enable the assessee to attractive terms to the contributors. Thus, the object of inserting section 10(23AAB) was not with a view to treat the pension purview of insurance business but to promote insurance business by exempting the income from such fund...\" 6.4.1 The order dated 01.09.2014 of the Ld CIT(A) was upheld by the Hon'ble Mumbai ITAT in the appellant' 7276/M/2014 order dated 11.01.2017, where the Hon'ble ITAT dismissed the revenue's appeal regarding disallowance of claim of loss from pension fund business. The relevant extracts are as under: .......we find that the finding of the C fair and reasonable. As such, the judgment of the Hon'ble High Court of Bombay in the case of LIC of India directly on the issue. Accordingly, the claim of loss of Pension Fund is an allowable claim. We approve th by the CIT(A) vide para 4.3 of his order on this issue. Thus, Ground no. 1 raised by the Revenue is dismissed.\" 6.5 In view of above, respecily rolying the thon be jurisdictional High Court an also the Hon'ble jurisdictional IT AT in Indiafirst Life Insurance Company Ltd ITA No. 3825 We have heard rival submission of the parties and perused the ial on record. In the case, the Ld. CIT(A) has followed binding decision of the Hon’ble Bombay High Court and decision of ordinate Bench of the Tribunal in the case of the assessee in ITA No. 7276/Mum/2014 for assessment year 2010 inding of the Ld. CIT(A) is reproduced as under: 6.4 As regards the merits of the case, it is seen that the issue has been decided in favour of the appellant by my Ld predecessor CIT(A) in his order dated 01.09.2014 relying on the decision of the Hon'ble Bombay High Court in the case of CIT v Life Insurance Corporation of India Ltd [2011] 12 taxmann.com 388 (Bom). The relevant extracts of the Hon'ble High Court decision are as under: \"17.............. The fact that the income from such fund has been exempted under section 10(23AAB) with effect from 1st April, 1997, does not mean that the pension fund ceases to be insurance business, so as to fall outside the purview of the insurance business covered under section 44 of the Income Act, 1961.. The object of inserting section 10(23AAB) as per the Board Circular No.762 dated 18th February 1998 was to enable the assessee to attractive terms to the contributors. Thus, the object of inserting section 10(23AAB) was not with a view to treat the pension fund like Jeevan Suraksha Fund outside the purview of insurance business but to promote insurance business by exempting the income from such fund...\" 6.4.1 The order dated 01.09.2014 of the Ld CIT(A) was upheld by the Hon'ble Mumbai ITAT in the appellant's own case in ITA No. 7276/M/2014 order dated 11.01.2017, where the Hon'ble ITAT dismissed the revenue's appeal regarding disallowance of claim of loss from pension fund business. The relevant extracts are as under: .......we find that the finding of the CITA) on the first issue is fair and reasonable. As such, the judgment of the Hon'ble High Court of Bombay in the case of LIC of India (338 TR 212) is directly on the issue. Accordingly, the claim of loss of Pension Fund is an allowable claim. We approve the conclusions drawn by the CIT(A) vide para 4.3 of his order on this issue. Thus, Ground no. 1 raised by the Revenue is dismissed.\" 6.5 In view of above, respecily rolying the thon be jurisdictional High Court an also the Hon'ble jurisdictional IT AT in-the-appellants own Indiafirst Life Insurance Company Ltd 5 & CO No. 206/MUM/2024 We have heard rival submission of the parties and perused the ial on record. In the case, the Ld. CIT(A) has followed binding decision of the Hon’ble Bombay High Court and decision of ordinate Bench of the Tribunal in the case of the assessee in ITA No. 7276/Mum/2014 for assessment year 2010-11. The inding of the Ld. CIT(A) is reproduced as under: 6.4 As regards the merits of the case, it is seen that the issue has been decided in favour of the appellant by my Ld predecessor CIT(A) in his order dated 01.09.2014 relying on the decision of the Hon'ble Bombay High Court in the case of CIT v Life Insurance Corporation of India Ltd [2011] 12 taxmann.com 388 (Bom). The relevant extracts of \"17.............. The fact that the income from such fund has been exempted under section 10(23AAB) with effect from 1st April, the pension fund ceases to be insurance business, so as to fall outside the purview of the insurance business covered under section 44 of the Income-tax The object of inserting section 10(23AAB) as per the Board Circular No.762 dated 18th February 1998 was to enable the assessee to attractive terms to the contributors. Thus, the object of inserting section 10(23AAB) was not with a view to fund like Jeevan Suraksha Fund outside the purview of insurance business but to promote insurance business by exempting the income from such fund...\" 6.4.1 The order dated 01.09.2014 of the Ld CIT(A) was upheld by the s own case in ITA No. 7276/M/2014 order dated 11.01.2017, where the Hon'ble ITAT dismissed the revenue's appeal regarding disallowance of claim of loss from pension fund business. The relevant extracts are as under: ITA) on the first issue is fair and reasonable. As such, the judgment of the Hon'ble High (338 TR 212) is directly on the issue. Accordingly, the claim of loss of Pension e conclusions drawn by the CIT(A) vide para 4.3 of his order on this issue. Thus, 6.5 In view of above, respecily rolying the thon be jurisdictional High appellants own case, the issue is decid made by the AO is deleted. This ground of appeal is accordingly allowed.” 6.1 Since, the Ld. CIT(A) has followed the binding precedent on the issue in dispute, therefore, we do not find any infirmity in the order of the Ld. CIT(A) and accordingly raised by the Revenue are accordingly dismissed. 6.2 In the cross-objection, the assessee has raised the ground challenging the validi dismissed the appeal of the Revenue challenging the merit of the addition and therefore, the grounds raised by rendered merely academic and and same are left open required. 7. In the result, both the appeal of the Revenue as well as cross objection of the assessee are dismissed. Order pronounced in the open Court on Sd/ (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 29/10/2024 Rahul Sharma, Sr. P.S. Indiafirst Life Insurance Company Ltd ITA No. 3825 case, the issue is decided in favor of the appellant and the addition made by the AO is deleted. This ground of appeal is accordingly Since, the Ld. CIT(A) has followed the binding precedent on the therefore, we do not find any infirmity in the order of the Ld. CIT(A) and accordingly, we uphold the same. The grounds raised by the Revenue are accordingly dismissed. objection, the assessee has raised the ground challenging the validity of the reassessment. Since, we have already dismissed the appeal of the Revenue challenging the merit of the addition and therefore, the grounds raised by the assessee are rendered merely academic and hence, we are not adjudicating upon t open to be adjudicated at appropriate stage In the result, both the appeal of the Revenue as well as cross objection of the assessee are dismissed. nounced in the open Court on 29/10/2024. Sd/- (SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Indiafirst Life Insurance Company Ltd 6 & CO No. 206/MUM/2024 the addition made by the AO is deleted. This ground of appeal is accordingly Since, the Ld. CIT(A) has followed the binding precedent on the therefore, we do not find any infirmity in the order uphold the same. The grounds objection, the assessee has raised the ground ty of the reassessment. Since, we have already dismissed the appeal of the Revenue challenging the merit of the the assessee are , we are not adjudicating upon to be adjudicated at appropriate stage if so In the result, both the appeal of the Revenue as well as cross- /10/2024. Sd/- PRAKASH KANT) ACCOUNTANT MEMBER Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Indiafirst Life Insurance Company Ltd ITA No. 3825 Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Indiafirst Life Insurance Company Ltd 7 & CO No. 206/MUM/2024 BY ORDER, (Assistant Registrar) ITAT, Mumbai "