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

ITA 3827/MUM/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax, Central Circle 5(3), Mumbai as the appellant and Indiafirst Life Insurance Company Limited as the respondent. The dispute arose from the assessment order for the Assessment Year 2017-2018, where the CIT(A) had partly allowed the appeal of the assessee against the assessment order. The Revenue challenged the CIT(A)'s decision on several grounds, including the interpretation of Section 44 of the Income Tax Act in conjunction with various insurance regulations, and the applicability of exemptions under Section 10(23AAB). The Tribunal's decision primarily focused on the interpretation and application of Section 14A concerning insurance companies, referencing previous Tribunal decisions that supported the assessee's position.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474906 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: SBI Life Insurance Co. Vs. JCIT, ICICI Prudential Insurance v/s. ACIT, IDBI Federal Life Insurance Co. Ltd., Birla Sunlife Insurance Co. Ltd.
• Laws Referred To: Income Tax Act, 1961, Insurance Act, 1938, Insurance Regulatory and Development Authority Act, 1999
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE; FOLLOWING
• Keywords: Initiation of penalty proceedings; Rule 8D
• Section: 143(3); 250; 10; 14A

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER ITA No. 3827/MUM/2024 (Assessment Year: 2017-2018) Deputy Commissioner of Income Tax Central Circle 5(3), Mumbai Room No. 426, Kautilya Bhawan, BKC road, Mumbai- 400051. Maharashtra …………. Appellant Indiafirst Life Insurance Company Limited 12th and 13th Floor Building No. 4, Nesco IT Park Western Express Highway, Goregaon East S.O. Mumbai-400062 Maharashtra [PAN:AADCB6215G] Vs …………. Respondent Appearance For the Appellant/Department For the Respondent/Assessee : : Shri R.A.Dhyani Shri Farookh Irani Date Conclusion of hearing Pronouncement of order : : 06.02.2025 28.03.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Revenue is directed against the order, dated 08/05/2024, passed by the Commissioner of Income Tax CIT(A)-54, Mumbai [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had partly allowed the appeal against the Assessment Order, dated 21/11/2019, passed under Section 143(3) of the Act for the Assessment Year 2017-2018. ITA No.3827/Mum/2024 Assessment Year 2017-18 2 2. The Revenue has raised following grounds of appeal : “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 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 the facts and in the circumstance of the case and in law, the Ld.CIT(A) erred in holding that the exemption under section 10(23AAB) of the Act was allowable to the assessee while calculating its income under section 44 read with First Schedule of the Act 3. Whether on the facts & circumstances of the case and in law, the Ld.CIT(A) erred in holding that the exemption u/s. 10(23AAB) of the Act is to be provided on the amount of dividend earned and not on the net basis as the provisions of section 14A are not applicable to the insurance companies 4. 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 i.e. 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 5. 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 rule 2 of the First Schedule of the I.T Rules 6. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) was justifled in holding that provisions of section 14A of the Act did not apply to Insurance business, even when the assessee has claimed exempted income u/s. 10(34) of the Act” 3. Relevant facts in brief that the return of income filed by the Assessee, a life insurance company, for the Assessment Year 2017- 2018 was selected for regular scrutiny and Assessment Order under Section 143(3) of the Act was passed on 21/11/2019 assessing the ITA No.3827/Mum/2024 Assessment Year 2017-18 3 total income of the Assessee at INR.97,77,87,780/-. The Assessee had filed the appeal against the above Assessment Order before the CIT(A) raising five grounds. Ground No. 1 raised by the Assessee was general in nature; Ground No.2 pertained to disallowance under Section 14A of the Act; Ground No. 3 pertained to carry forward of losses; Ground No. 4 pertained to levy of interest under Section 234B/C of the Act; and Ground No.5 pertained to initiation of penalty proceedings under Section 270(A) of the Act. Vide order, dated 08/05/2024, the CIT(A) disposed off the appeal preferred by the Assessee as party allowed. The CIT(A) concluded that Ground No.1 being general in nature did not require separate adjudication. Ground No. 2 raised by the Assessee was allowed following the decision of the Tribunal in the case of the Assessee pertaining to Assessment Year 2016-2017 [ITA No. 6725/Mum/2019, dated 30/08/2021]. Ground No. 3 raised by the Assessee was allowed for statistical purposes as the Assessing Officer was directed to verify the records and allow set off of the losses as per law. Ground No. 4 relating to levy of interest under section 234B/C of the Act and Ground No.5 relating to initiation of penalty proceedings under section 270(A) of the Act, was dismissed. Being aggrieved, the Revenue has preferred the present appeal before this Tribunal on the grounds reproduced in paragraph 2 above. 4. We have heard both the sides and have perused the material on record. Ground No. 1 to 5 5. On perusal of the orders passed by authorities below, we find that Ground No. 1, 2, 3, 4 and 5 raised by the Revenue do not rise from the order passed by the Assessing Officer and/or the order passed by the CIT(A). Accordingly, the same are dismissed and being misconceived. ITA No.3827/Mum/2024 Assessment Year 2017-18 4 Ground No. 6 6. As regards, Ground No. 6 raised by the Revenue challenging the order passed by the CIT(A) deleting the disallowance/addition made by Assessing Officer under Section 14A of the Act is concerned, we find that the issues is squarely covered in the favour of the Assessee by the decision of Co-ordinate Bench of the Tribunal in the case of the Assessee for the Assessment Year 2016–17. We find that the CIT(A) has granted relief to the Assessee by following the aforesaid decision of the Tribunal. The relevant extract of the order passed by CIT(A) reads as under: “6.2 In this regard it is seen that with reference to disallowance u/s 14A of the Act read with rule 8D, reliance has been placed on appellant’s own Hon’ble ITAT Mumbai order for AY 2016-17 dated 30.08.2021 wherein the issue is squarely covered and allowed in favour of the appellant. The relevant extracts are reproduced herein below: “7. In ground no.3 of appeal, the Revenue has assailed the findings of CIT(A) in deleting disallowance made under section 14A of the Act. We find that in the case of SBI Life Insurance Co. Vs. JCIT (supra) one of the issue before the Tribunal was applicability of provisions of section 14A of the Act to Insurance Companies. The co- ordinate bench after considering various decisions and examining the facts concluded as under: “17. We have heard both the parties and perused the orders of the Revenue Authorities as well as the decisions of the Tribunal cited before us. On perusal of the decision of the ITAT in the case of ICICI Prudential Insurance (supra) as well as another decision in the case of HDFC Standard Life Insurance Company (supra), we find revenue raised the arguments revolving around the applicability of the judgment in the case of Godrej & Boyce Mfg Co Ltd, supra. Despite the same, the Tribunal considered the said judgment and still allowed ITA No.3827/Mum/2024 Assessment Year 2017-18 5 the claim of the assessee. Therefore, in view of the special provisions applicable to the insurance companies, we are of the opinion that the provisions of section 14A r.w.r. 8D were held not applicable to the insurance companies i.e., ICICI Prudential Insurance, HDFC Standard Life Insurance Company. Therefore, the SBI Life Insurance Company Limited assessee in the present case should not be any exception. Considering the settled nature of the issue vide decisions of the Tribunal’s order (supra), ground no.3 raised by the assessee for the AY 2006-07 is allowed.” 8. We find similar view has been taken in the case of ICICI Prudential Insurance v/s. ACIT (supra), IDBI Federal Life Insurance Co. Ltd. (supra) and Birla Sunlife Insurance Co. Ltd. (supra). No contrary decision has been brought to our notice by the Revenue. Therefore, in the light of above decisions, we hold that the provisions of section 14A are not attracted in the case of Insurance Companies. The ground No.3 of appeal is dismissed, accordingly.” 6.3 Therefore, respectfully following the Hon’ble Mumbai ITAT in the appellant’s own case, the addition made is deleted and Ground No. 2 of the appeal is allowed.” 6.1. Since the CIT(A) has granted relief to the Assessee by following binding decision of the Tribunal, we do not find any infirmity in the order passed by the CIT(A) deleting the additions/disallowance under Section 14A of the Act. 6.2. The Assessee has also placed on record copy of the order, dated 28/07/2022, passed by the Co-ordinate Bench of the Tribunal in the case of the Assessee in appeal [ITA No.6364/Mum/2019] pertaining to Assessment Year 2015-2016 which also supports the aforesaid decision of the CIT(A). 6.3. In view of the above, respectfully following the decisions of the ITA No.3827/Mum/2024 Assessment Year 2017-18 6 Tribunal in the case of the Assessee we dismissed Ground No. 6 raised by the Revenue. 7. In result, the present appeal preferred by the Revenue is dismissed. Order pronounced on 28.03.2025. Sd/- Sd/- (Omkareshwar Chidara) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated : 28.03.2025 Disha Raut ,Stenographer ITA No.3827/Mum/2024 Assessment Year 2017-18 7 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai "