DEPUTY COMMISSIONER OF INCOME TAX 1(3)(1), MUMBAI V. SBI LIFE INSURANCE COMPANY LIMITED, MUMBAI

ITA 1025/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4532 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2013-2014
• Appeal Filed On: 21-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B B RAJENDRA PRASAD
• Assessee Lawyers: FARROKH J IRANIAR
• Keywords: Capital asset; Business income
• Section: 143(3); 14A; 201; 10

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 1025/MUM/2018 (ASSESSMENT YEAR 2013-14 ) ITA NO. 1068/MUM/2018 (ASSESSMENT YEAR 2014-15 ) DCIT-1(3)(1) ROOM NO. 450, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S SBI LIFE INSURANCE COMPANY LTD., NATRAJ M. V. ROAD, WESTERN EXPRESS HIGHWAY JUNCTION, ANDHERI(E), MUMBAI-400069 . PAN: AAFCS2530P APPELLANT RESPONDE NT APPELLANT BY : SHRI B.B. RAJENDRA PRASAD (CIT-DR) RESPONDENT BY : S HRI FARROKH J. IRANI(AR) DATE OF HEARING : 14.03.2019 DATE OF PRONOUNCEMEN T : 14.03.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE APPEALS BY REVENUE UNDER SECTION 253 OF INCOM E-TAX ACT (ACT) ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-3, HEREINAFTER REFERRED AS LD CIT (A), MU MBAI DATED 25.10.2017 & 30.10.2017 FOR ASSESSMENT YEAR 2013-14 & 2014-15 RESPECTIVELY. THE REVENUE HAS RAISED IDENTICAL GROU NDS OF APPEAL FOR BOTH THE ASSESSMENT YEARS, THUS, WITH THE CONSENT OF THE PARTIES THE APPEAL WERE CLUBBED, HEARD AND ARE DECIDED BY COMMON ORDER . FOR THE APPRECIATION OF FACTS WE ARE REFEREEING THE GROUNDS OF APPEAL IN AY 2013-14 IN ITA NO. 1025/MUM/2018, ITA NO. 1025 & 1068 MUM 2018-M/S SBI LIFE IN SURANCE COMPANY LTD. 2 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) WAS CORRECT IN CONCLUDING THAT TRANSFER FROM SHAREHOLDER'S ACCOUNT TO POLICY ACCOUNT AND SHOWN AS PART OF 'SUR PLUS' IN THE ACTUARIAL VALUATION WAS ONLY TRANSFER OF CAPITAL ASSET AND NO T TAXABLE U/S 44 OF THE ACT READ WITH RULE 2 OF THE FIRST SCHEDULE?' 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) WAS CORRECT IN ALLOWING RELIEF TO THE AS SESSEE BY HOLDING THAT 'SURPLUS' AVAILABLE BOTH IN POLICY HOLDERS ACCOUNT AND SHARE HOLDER'S ACCOUNT IS TO BE CONSOLIDATED AND ONLY 'NET SURPLUS ' IS TO BE TAXED AS INCOME FROM INSURANCE BUSINESS ?' 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT TAKING TH E VALUE OF NEGATIVE RESERVE AT ZERO HAS AN IMPACT OF REDUCING THE TAXAB LE SURPLUS AS PER FORM-I AND THEREFORE, CORRESPONDING ADJUSTMENT FOR NEGATIV E RESERVE NEED TO BE MADE TO ARRIVE AT TAXABLE SURPLUS.' 4. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE CLAIM OF THE ASSESSEE THAT ITS DIVIDEND INCOME IS EXEMPT UNDER SECTION 10(34) OF T HE I. T. ACT 1961. 5. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF T HE ASSESSEE THAT ITS DIVIDEND INCOME IS EXEMPT UNDER SECTION 10(34) OF T HE I. T. ACT 1961 MADE BY THE ASSESSEE, IGNORING THE FACT THAT DIVIDEND IN COME IS CONSIDERED AS PART OF INCOME OF THE LIFE INSURANCE BUSINESS AND IS INC LUDED AS AN INCOME BY THE ACTUARY' 6. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION M ADE BY THE AO ON THE EXEMPTION OF INCOME FROM PENSION FUND U/S 10(23AAB) AND THAT THE INCOME FROM PENSION FUND DOES NOT FORM PART OF THE TOTAL I NCOME OF THE ASSESSEE U/S 10(23AAB) OF THE I.T. ACT 1961?' 7. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD: CIT(A) WAS JUSTIFIED IN IGNORING THE FACT THAT THE NON OBSTANTE CLAUSE IN IS NOT EXTENDED TO SECTION 10(23AAB) OF THE I. T. A CT 1961.' ITA NO. 1025 & 1068 MUM 2018-M/S SBI LIFE IN SURANCE COMPANY LTD. 3 2. AT THE OUTSET OF HEARING THE LD AR FOR THE ASSESSEE SUBMITS THAT ALL THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE COVERED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE BY THE ORDERS OF THE T RIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 VIDE ITA NO. 2 557/MUM/2017 DATED 07/09/2018. THE LD AR FURTHER SUBMITS THAT WH ILE PASSING THE ORDER FOR ASSESSMENT YEAR 2011-12, THE TRIBUNAL RELIED ON THE ORDER FOR ASSESSMENT YEARS 2002-03, 07-08 TO 2010- 2011 DATED 23.12.2016. THE LD AR FOR THE ASSESSEE ALSO FURNISHED A TABULATED CHAR TS SHOWING/ NARRATING THE GROUNDS OF APPEALS AND THE RELEVANT PART OF THE ORDER OF THE TRIBUNAL FOR EARLIER YEARS. 3. THE LD. DR FOR THE REVENUE AFTER GOING THROUGH THE DETAILS FURNISHED BY ASSESSEE FAIRLY SUBMITS THAT ALTHOUGH ALL THE GROUN DS OF THE APPEAL ARE COVERED AGAINST THE REVENUE YET HE IS RELYING ON TH E FINDINGS OF THE ASSESSING OFFICER. 4. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. PERUS AL OF GROUNDS OF APPEALS AND THE ORDERS FOR EARLIER YEARS REVEALS TH AT ALL THE GROUNDS OF THE APPEAL RAISED BY THE REVENUE ARE SQUARELY COVERED B Y THE DECISIONS OF TRIBUNAL IN EARLIER YEARS. FOR COMPARISON OF GROUND S AND FACTS AND THE ORDERS OF EARLIER YEAR, THE ENTIRE ORDER FOR AY 201 1-12 ALONG WITH THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS EXTRACTE D BELOW. ITA NO. 1025 & 1068 MUM 2018-M/S SBI LIFE IN SURANCE COMPANY LTD. 4 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-3 [CIT(A)],MUMBAI, APPEAL NO. CIT(A)-3/IT-112?ADD.CIT -1(3)/14-15 DATED 31/01/2017 BY RAISING THE FOLLOWING GROUNDS O F APPEAL : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT(A) WAS CORRECT IN CONCLUDING THAT TRANSF ER FROM SHAREHOLDERS ACCOUNT TO POLICY ACCOUNT AND SHOWN A S PART OF SURPLUS IN THE ACTUARIAL VALUATION WAS ONLY TRANS FER OF CAPITAL ASSET AND NOT TAXABLE U/S 44 OF THE ACT READ WITH R ULE 2 OF THE FIRST SCHEDULE? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT(A) WAS CORRECT IN ALLOWING RELIEF TO THE ASSESSEE BY HOLDING THAT 'SURPLUS' AVAILABLE BOTH IN POLICY HOL DERS ACCOUNT AND SHARE HOLDER'S ACCOUNT IS TO BE CONSOLIDATED AND ON LY 'NET SURPLUS' IS TO BE TAXED AS INCOME FROM INSURANCE BUSINESS? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT TAKING THE VALUE OF NEGATIVE RESERVE AT ZERO HAS AN IMPACT OF REDUCI NG THE TAXABLE SURPLUS AS PER FORM-I AND THEREFORE, CORRESPONDING ADJUSTMENT FOR NEGATIVE RESERVE NEED TO BE MADE TO ARRIVE AT TAXAB LE SURPLUS. 4. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE CLAIM OF THE ASSESSEE THAT ITS DIVIDEND INCOME IS EXEMPT UNDER S ECTION 10(34) OF THE I.T.ACT 1961. 5. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE C LAIM OF THE ASSESSEE THAT ITS DIVIDEND INCOME IS EXEMPT UNDER S ECTION 10(34) OF THE I.T. ACT 1961 MADE BY THE ASSESSEE, IGNORING TH E FACT THAT DIVIDEND INCOME IS CONSIDERED AS PART OF INCOME OF THE LIFE INSURANCE BUSINESS AND IS INCLUDED AS AN INCOME BY THE ACTUARY. 6. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW. THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE AD DITION MADE BY THE AO ON THE EXEMPTION OF INCOME FROM PENSION FUND U/S 10(23AAB) AND THAT THE INCOME FROM PENSION FUND DOE S NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE U/S 10(23A AB) OF THE I.T.ACT 1961. 7. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN IGNORING THE F ACT THAT THE NON OBSTANTE CLAUSE IN SECTION 44 IS NOT EXTENDED TO SE CTION 10(23AAB) OF THE ACT 1961. 8. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT S ECTION 14A IS NOT APPLICABLE TO INCOME OF INSURANCE BUSINESS COMPUTED U/S 44 OF THE ACT WHEN THE ITAT ITSELF HAS HELD THAT THE PROVISIO NS OF SECTION 10 ARE APPLICABLE TO INCOME OF INSURANCE BUSINESS COMP UTED U/S 44 OF THE ACT. ITA NO. 1025 & 1068 MUM 2018-M/S SBI LIFE IN SURANCE COMPANY LTD. 5 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. AS SISTANT COMMISSIONER OF INCOME TAX RANGE-1(3) U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 24/03/2014 WHEREIN THE INCOME OF THE A SSESSEE HAS BEEN ASSESSED AT RS.387.08 CRORES AFTER CERTAIN ADJUSTME NTS / DISALLOWANCES AS AGAINST RETURNED INCOME OF RS.150.47 CRORES E-FI LED BY THE ASSESSEE ON 17/11/2011. DURING IMPUGNED AY, THE ASSESSEE BEI NG RESIDENT CORPORATE ASSESSEE WAS ENGAGED IN THE BUSINESS OF L IFE INSURANCE. 2.1 THE MATERIAL ON RECORD REVEALS THAT IN TERMS OF INSURANCE REGULATORY & DEVELOPMENT AUTHORITY [IRDA] REGULATIO NS, THE ASSESSEE MAINTAINS TWO SEPARATE PROFIT & LOSS ACCOUNT I.E. P OLICY HOLDERS ACCOUNT (TECHNICAL ACCOUNT) IN FORM A-RA [IN SHORT PHA] AND SHAREHOLDERS ACCOUNT (NON-TECHNICAL ACCOUNT) FORM A -PL [IN SHORT SHA]. THE ASSESSEE REFLECTED PROFIT / SURPLUS OF RS.370.45 CRORES IN SHA ACCOUNT WHICH INCLUDED TRANSFER OF SURPLUS FROM PHA FOR RS.335.52 CRORES AND CONTRIBUTION TO PHA FROM SHA A T RS.35.41 CRORES. THUS THE NET INCOME IN THE ACCOUNT WAS RS.7 0.35 CRORES. THE LD. AO OPINED THAT INCOME FROM PHA IS THE INCOME FR OM LIC BUSINESS BEING TAXABLE AT SPECIAL RATE OF 12.5% AS PER SECTION 44 OF THE INCOME TAX ACT, 1961 READ WITH RULE 2 OF SCHEDULE-1 . HOWEVER, THE INCOME FROM SHA ACCOUNT WAS ON ACCOUNT OF CARRYING ON BUSINESS ACTIVITY, OTHER THAN LIFE INSURANCE AND THEREFORE, THE SAME DID NOT FORM PART OF INSURANCE BUSINESS AND SEPARATELY TAXABLE @ 30%. ACCORDINGLY, THE NET SURPLUS / INCOME IN SHA ACCOUNT AMOUNTING T O RS.70.35 CRORES WAS ASSESSED AS BUSINESS INCOME BEING TAXABLE AT NO RMAL RATE OF 30%. 2.2 ANOTHER ISSUE IS RELATED WITH TAXABILITY OF DIV IDEND INCOME OF RS.158.30 CRORES AS CLAIMED EXEMPT BY THE ASSESSEE U/S 10(34). THE SAME HAS BEEN DENIED BY LD. AO ON THE PREMISE THAT THE BENEFIT OF PROVISIONS OF SECTION-10 WAS NOT APPLICABLE TO AN A SSESSEE ENGAGED IN INSURANCE BUSINESS WHO IS GOVERNED BY SPECIAL COMPU TATIONAL PROVISIONS OF SECTION 44. ON THE SIMILAR REASONING, THE EXEMPTION OF ITA NO. 1025 & 1068 MUM 2018-M/S SBI LIFE IN SURANCE COMPANY LTD. 6 INCOME OF RS.80.50 CRORES, EARNED FROM PENSION SEGM ENT AND CLAIMED EXEMPT U/S 10(23AAB) BY THE ASSESSEE, WAS DENIED TO THE ASSESSEE. 2.3 THE THIRD ISSUE IS RELATED WITH ADDITION OF INC REMENTAL NEGATIVE RESERVES OF RS.1.03 CRORES AS PER ACTUARIAL REPORT WHICH HAS BEEN MADE BY FOLLOWING THE DECISION IN EARLIER YEARS. 3. AGGRIEVED, THE ASSESSEE CONTESTED ALL THE ADDITI ONS WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 31/01/2 017 WHEREIN THE ADDITIONS HAVE BEEN DELETED BY FOLLOWING THE ORDERS OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2002-03, 2007-08 TO 201 0-11. THE ORDERS OF LD. FIRST APPELLATE AUTHORITY ALSO PLACES RELIAN CE ON CATENA OF OTHER JUDGMENTS RENDERED BY THIS TRIBUNAL OR VARIOUS HIGH ER JUDICIAL AUTHORITIES IN THE CASE OF OTHER ASSESSEES ENGAGED IN SIMILAR LINE OF BUSINESS. 4. THE LD. SENIOR COUNSEL FOR ASSESSEE [AR], SHRI F ARROKH V.IRANI SUBMITTED THAT THE ISSUES UNDER APPEAL STOOD SQUARE LY COVERED IN ASSESSEES FAVOR BY THE ORDER OF THIS TRIBUNAL FOR EARLIER YEARS AS RELIED UPON BY LD. FIRST APPELLATE AUTHORITY. THE LD. CIT- DR FAIRLY ADMITTED THE AFORESAID SUBMISSIONS BUT CONTENDED THAT THE IS SUE HAS NOT ATTAINED FINALITY YET. 5. UPON PERUSAL OF THE ORDERS OF LOWER AUTHORITIES AND THE COMMON ORDER OF THIS TRIBUNAL FOR AYS. 2002-03, 2007-08 TO 2010-11, ITA NOS. 4066/MUM/2011 & OTHERS DATED 23/12/2016 IN ASSESSEE S OWN CASE; WE CONCUR WITH THE SUBMISSIONS OF LD. SR. COUNSEL AND FIND THAT ALL THE ISSUES HAVE ALREADY BEEN DELVED UPON BY THIS TRIBUN AL IN THOSE YEARS WHEREIN THE MATTER HAS BEEN ADJUDICATED IN ASSESSEE S FAVOR. THE RELEVANT EXTRACT OF THE SAME HAS ALREADY BEEN REPRO DUCED IN THE IMPUGNED ORDER. NO CONTRARY JUDGMENT HAS BEEN PLACE D ON RECORD BY THE REVENUE. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE REVENUES APPEAL. ITA NO. 1025 & 1068 MUM 2018-M/S SBI LIFE IN SURANCE COMPANY LTD. 7 5. CONSIDERING THE DECISION CONSISTENT ORDERS OF COORD INATE BENCH TRIBUNAL ON IDENTICAL GROUNDS OF APPEAL IN EARLIER YEAR AND NO VARIATIONS IN THE FACTS FOR THE YEAR UNDER CONSIDERATION IS BROUGHT T O OUR NOTICE, THEREFORE RESPECTFULLY FOLLOWING THE ORDER OF EARLIER YEARS A RE REFERRED ABOVE, THE APPEAL FOR BOTH THE YEARS ARE DISMISSED. 6. IN THE RESULT, THE APPEAL FOR AY 2013-13 & 2014-15 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/03/2019 WHILE HARING THE APPEALS. SD/- SD /- N.K. PRADHAN, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 14.03.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI