ACIT, New Delhi V. M/s Sahara India Life Insurance Company Ltd., Lucknow

ITA 1162/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8152 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ADITY VOHRA ADV SH ARPIT GOYAL
• Section: 43B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT & SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1162/DEL/2016 ASSESSMENT YEAR: 2012-13 ACIT CENT. CIRCLE-1 NEW DELHI. VS SAHARA INDIA LIFE INSURANCE CO. LTD. R/O 1 KAPOORTHALA COMPLEX, ALIGANJ, LUCKNOW. PAN NO. AAHCS1334B APPELLANT RESPONDENT REVENUE BY SH. J.K. MISHRA, CIT DR ASSESSEE BY ADITY VOHRA, ADV. SH. ARPIT GOYAL, CA ORDER PER SHRI BHAVNESH SAINI, J.M. THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST TH E ORDER OF LD. CIT(APPEALS)-23, NEW DELHI DATED 21.12.2012 FOR AY 2012- 13 ON THE FOLLOWING GROUNDS: 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. DATE OF HEARING 12.04.2019 DATE OF PRONOUNCEMENT 16.04.2019 2 ITA NO . 1162/DEL/2016 1,60,24,438/- MADE BY THE AO ON ACCOUNT OF AMORTIZ ATION OF INVESTMENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 12,00,000/- MADE BY THE AO ON ACCOUNT OF PAYMENT O F PENALTY TO IRDA. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 3. THE ASSESSEE HAS OBJECTED TO THE DISALLOWANCE OF WRITE OFF OF RS. 1,60,24,438/- REPRESENTING THE AMORTIZED PORTIO N OF THE INVESTMENTS. THE SUBMISSIONS OF THE ASSESSEE ARE N OTED IN THE IMPUGNED ORDER. THE ASSESSEE ALSO PLEADED THAT THE CIT(A) HAS DELETED THE SIMILAR DISALLOWANCES MADE IN EARLIER Y EARS FOR AY 2011-12 VIDE ORDER DATED 11.4.2013 AND SIMILAR ADDI TION MADE IN EARLIER YEARS FROM AYS 2006-07 TO 2010-11 HAVE ALSO BEEN DELETED BY THE LD. CIT(A). THE ASSESSEE ALSO OBJECTED TO T HE DISALLOWANCE OF RS. 12 LAKHS ON ACCOUNT OF PENALTY LEVIED BY IRD A. IT WAS SUBMITTED BEFORE LD. CIT(A) THAT AO HAS FAILED TO A PPRECIATE THAT THE PROVISIONS OF SECTION 28 TO 43B ARE NOT APPLICA BLE IN THE CASE OF INSURANCE COMPANY, THEREFORE, ADDITION SHALL HAV E TO BE DELETED. 4. THE LD. CIT(A) ON BOTH THE ISSUES FOLLOWING HIS APPELLATE ORDERS FOR EARLIER YEARS DELETED THE SIMILAR ADDITI ONS. HIS FINDINGS IN PARA 4.2 TO 4.2.4 OF THE IMPUGNED ORDER ARE REPR ODUCED AS UNDER: 4.2 THE 2 ND , 3 RD & 4 TH GROUNDS RELATE TO ADDITION OF RS. 1,60,24,438.70 ON ACCOUNT OF AMORTIZED PORTION OF 3 ITA NO . 1162/DEL/2016 INVESTMENT WRITTEN OFF IN ACCORDANCE WITH THE INSUR ANCE ACT AND IRDA GUIDELINES IN TERMS OF THE PROVISIONS OF SECTION 44 OF THE ACT READ WITH FIRST SCHEDULE, AND THE GROUNDS 5(A) AND 5(B) RELATE TO ADDITION OF RS. 12 LAKH BY WAY OF DISALLOWANCE OF PENALTY PAID TO IRDA THOUGH THE ASSESSMENT OF AN INSURANCE COMPANY HAS TO BE MADE I N ACCORDANCE WITH THE PROVISIONS OF SECTION 44 OF THE INCOME TAX ACT, 1961 AND THE PROVISIONS OF SECTION 28 TO 4 3B OF THE ACT ARE NOT APPLICABLE IN THE CASE OF LIFE INSU RANCE BUSINESS. SINCE THESE GROUNDS RELATE TO ASSESSMENT OF LIFE INSURANCE BUSINESS THESE ARE TAKEN TOGETHER. 4.2.2 THE APPELLANT COMPANY IS CARRYING ON BUSINES S OF LIFE INSURANCE AND IS DULY REGISTERED AND APPROV ED BY IRDA. THE APPELLANT COMPANY IS GOVERNED BY THE INSURANCE ACT, 1938 AND THE INCOME OF COMPANY HAS T O BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 44 READ WITH FIRST SCHEDULE OF INCOME TAX ACT, 1961 AN D THE PROVISIONS OF SECTIONS 28 TO 43B OF THE ACT DO NOT APPLY TO THIS BUSINESS. ACCORDINGLY, THE INVESTMENTS OF THE APPELLANT COMPANY ARE TO BE MADE AS PRESCRIBED UNDE R THE INSURANCE ACT, 1938 ONE OF THE MODE OF INVESTME NTS BEING SECURITIES. THE ACCOUNTS OF THE APPELLANT CO MPANY HAS TO BE PREPARED AS PER IRDA GUIDELINES (PREPARAT ION OF FINANCIAL STATEMENTS AND AUDITORS REPORT OF INSURA NCE COMPANIES REGULATIONS 2002) AND AT THE TIME OF PURC HASE OF THE SECURITY THE EXCESS AMOUNT PAID OVER AND ABO VE THE FACE VALUE IS AMORTIZED AND THE SAME IS WRITTEN OFF OVER THE PERIODICITY OF THE SECURITY AND THE SAID SECURI TY IS CONSIDERED AS HELD TO MATURITY. THE ACCOUNTS OF THE APPELLANT COMPANY HAVE BEEN PREPARED IN ACCORDANCE WITH THE INSURANCE ACT, 1938 AND THE PROFITS OF RS. 13,89,36,728.19 AS PER PROFIT AND LOSS ACCOUNT (SHAREHOLDERS ACCOUNTS) AND RS. 22,05,74,467.37 SUR PLUS APPEARING IN THE POLICYHOLDERS ACCOUNT IN ACCORDANC E WITH ACTUARIAL VALUATION WORKED OUT, AND DURING THE YEAR THE APPELLANT HAS WRITTEN OFF A SUM OF RS. 1,60,24,438/ - AS AMORTIZED CHARGE AGAINST THE EARNINGS FROM SECURITI ES. 4 ITA NO . 1162/DEL/2016 4.2.3 THE AO HOLDING THAT THE INVESTMENT ACTIVITY OF THE APPELLANT IS SEPARATE AND DISTINGUISHED FROM LI FE INSURANCE BUSINESS CARRIED ON BY THE APPELLANT COMP ANY REJECTED THE CLAIM OF THE APPELLANT. THE APPELLANT HAS DISTINGUISHED THE JUDGMENT IN VIJAYA BANK LTD. VS. CIT REPORTED IN 187 ITR 541 SINCE THE JUDGMENT OF THE H ONBLE SUPREME COURT IN CASE OF VIJAYA BANK LTD. WAS WITH REFERENCE TO TREATMENT OF INTEREST RECEIVABLE ON TH E SECURITY VIS--VIS ITS BREAK-UP INTO PRE-ACQUISITIO N PERIOD AND POST-ACQUISITION PERIOD AND THE ISSUE REGARDING AMORTIZED PORTION OF INVESTMENT HELD TO MATURITY WAS NEVER AN ISSUE BEFORE THE HONBLE SUPREME COURT IN THE CASE. THE APPELLANT HAS RELIED ON THE JUDGMENTS IN NEW INDIA ASSURANCE COMPANY LTD. VS. ADDL. CIT 12 TAXMAN.COM 465 (MUM.), CIT VS. ORIENTAL INSURANCE COMPANY LIMITED 260 ITR 91 (DEL), BAJAJ ALLIANZ GEN ERAL INSURANCE CO. LTD. VS. ADDL. CIT 130 TTJ 398 (PUNE) AND THAT OF THE HONBLE PUNE TRIBUNAL IN THE CASE OF OR IENTAL INSURANCE CO. LTD. VS. ACIT 130 TTJ 338 (DEL.). 4.2.4 ON SIMILAR FACTS MY LD. PREDECESSOR IN THE CASE OF THE APPELLANT IN AYS 2006-07 TO 2011-12 IN APPEAL NOS. 136 AND 664/09-10, 236/10-11, 398/11-12 , 157 AND 751/13-14 HAS DECIDED THE ISSUE IN FAVOUR O F THE APPELLANT IN VIEW OF THE FACT THAT THE PROVISIONS O F SECTIONS 28 TO 43 OF THE ACT ARE NOT APPLICABLE TO THE CASE OF THE APPELLANT WHERE THE ACCOUNTS ARE TO BE PREPARED IN ACCORDANCE WITH PROVISIONS OF SECTION 44 READ WITH FIRST SCHEDULE OF INCOME TAX ACT, 1961 AND IRDA GUIDELINE S (PREPARATION OF FINANCIAL STATEMENTS AND AUDITORS REPORT OF INSURANCE COMPANIES REGULATIONS 2002). FOLLOWIN G THESE DECISIONS BOTH THE ADDITIONS MADE ARE ACCORDI NGLY DELETED. 5. LD. COUNSEL FOR ASSESSEE AT THE OUTSET, SUBMITTE D THAT SIMILAR ISSUES HAVE BEEN CONSIDERED BY ITAT DELHI A BENCH IN THE CASE OF THE SAME ASSESSEE FOR AY 2004-05 TO AY 2010-11 VIDE ORDER DATED 31.10.2018 IN WHICH IT WAS HELD THAT THERE IS NO R EASON TO 5 ITA NO . 1162/DEL/2016 INTERFERE WITH THE DIRECTIONS OF THE LD. CIT(A) IN ALL THE CAPTIONED YEARS AND WE UPHOLD HIS DIRECTIONS THAT THE INCOME OF THE ASSESSEE SHOULD BE COMPUTED IN ACCORDANCE WITH THE PROVISION S OF SECTION 44 OF THE ACT. ACCORDINGLY, WE DISMISS THE GROUNDS RAISED BY THE DEPARTMENT IN ALL THE SIX APPEALS. HE HAS FURTHER SUBMITTED THAT THE SAME ORDER DATED 31.10.2018 IN THE CASE OF THE ASSESSEE HAS BEEN FOLLOWED BY THE TRIBUNAL IN THE CASE OF THE AS SESSEE FOR AY 2005-06 VIDE ORDER DATED 27.02.2019 AND DEPARTMENTA L APPEAL HAS BEEN DISMISSED. HE HAS, THEREFORE, SUBMITTED T HAT BOTH THE ISSUES ARE COVERED BY EARLIER ORDERS OF THE TRIBUNA L ABOVE. COPIES OF THE SAME ORDERS ARE FILED IN THE PAPER BOOK. 6. LD. DR ALSO STATED THAT BOTH THE ISSUES ARE COVE RED IN FAVOUR OF THE ASSESSEE BY ABOVE ORDERS OF THE TRIBUNAL. 7. CONSIDERING THE FACTS OF THE CASE, IN THE LIGHT OF THE SUBMISSIONS OF THE PARTIES AND EARLIER ORDERS OF TH E TRIBUNAL, WE ARE OF THE VIEW THAT BOTH THE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY ABOVE ORDERS OF THE TRIBUNAL IN WHICH I T WAS HELD THAT INCOME OF THE ASSESSEE SHOULD BE COMPUTED IN ACCORD ANCE WITH SECTION 44 OF THE ACT. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE SAME IS ACCORDINGLY DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (G.D. AGRAWAL) (BHAV NESH SAINI) VICE PRESIDENT JU DICIAL MEMBER DATED: 12/04/2019 6 ITA NO . 1162/DEL/2016 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 12/04/2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16/04/19 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 12/4 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 16/4 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 16/4 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 16/4 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 7 ITA NO . 1162/DEL/2016