Deputy Commissioner of Income Tax Circle-5(1)(2), Bangalore V. M/s PNB Metlife India Insurance Co.Ltd , Bangalore

ITA 1220/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5691 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 30-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1220/B ANG/2017 (ASST. YEAR 2013-14) THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-5(1)(2), BENGALURU. . APPELLANT VS. M/S PNB METLIFE INDIA INSURANCE CO. LTD., NO.5, BRIGADE SESHMAHAL, VANI VILAS ROAD, BASAVANGUDI, BENGALURU. . RESPONDENT PAN - AACCM6448H. APPELLANT BY : SHRI C.H S UNDAR RAO, CIT RESPONDENT BY : SHRI CHAVALI NARAYAN, C.A DATE OF HEARING : 3-1-2018 DATE OF PRONOUNCEMENT : 5-1-2018 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) - 5, BANGALOR E DATED 28/3/2017 FOR ASST. YEAR 2013-14. 2 BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UNDE R:- IT A NO.1220/B/17 2 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF LIFE INSURANCE, FILED ITS RETURN OF INCOME FOR ASST. YEA R 2013-14 ON 26/9/2013 DECLARING NIL INCOME. THE CASE WAS TAKE N UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3 ) OF THE INCOME- TAX 1961 (IN SHORT THE ACT) VIDE ORDER DATED 18/3 /2016, WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.45,59,36,000 /- IN VIEW OF THE ASSESSING OFFICER (AO) DENYING THE ASSESSEE T HE BENEFIT OF AGGREGATION OF SURPLUS/DEFICIT AS PER POLICY HOLDER S ACCOUNT WITH THE SURPLUS/DEFICIT OF SHAREHOLDERS ACCOUNT. 2.2 ON APPEAL, THE ASSESSEE SUBMITTED BEFORE THE LD CIT(A) THAT AS PER THE PROVISIONS OF SEC. 44 OF THE ACT, FOR THE P URPOSE OF COMPUTING INCOME FROM LIFE INSURANCE BUSINESS, THE ASSESSEE I S PERMITTED TO AGGREGATE ITS SURPLUS/DEFICIT FROM POLICY HOLDERS A CCOUNT TO SURPLUS/DEFICIT OF THE SHAREHOLDERS ACCOUNT. IT WAS ALSO SUBMITTED THAT THE SIMILAR ISSUE HAS BEEN CONSIDERED BY THE CO-ORD INATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2011-12 IN ITA NO.1508/BANG/2015 DATED 22/9/2016 WHEREIN THE TRIBU NAL HAS ALLOWED THE BENEFIT OF AGGREGATION OF INCOME FOR TH E PURPOSE OF COMPUTATION OF INCOME FROM LIFE INSURANCE BUSINESS. THE LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND ALSO RELYING ON THE DECISION OF THE CO-ORDINATE BENCH IN THE ASSESS EES OWN CASE FOR ASST. YEAR 2011-12 (SUPRA) ALLOWED THE APPEAL FILED BY THE ASSESSEE VIDE HIS ORDER DATED 28/3/2017. 3.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CI T(A)-5, BANGALORE DATED 28/3/2017 FOR ASST. YEAR 2013-14, H AS PREFERRED THIS APPEAL, RAISING THE FOLLOWING GROUNDS:- IT A NO.1220/B/17 3 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) - 5, BANGALORE, IS OPPOSED TO THE LAW AND NOT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. 'WHETHER THE CIT(A) IS RIGHT, IN LAW IN ALLOWING ASSESSEE APPEAL WITHOUT APPRECIATING THE FACT THAT THE SPECIAL PROVISION U/S.44 OF THE I.T ACT 1961 HA VE BEEN MIXED WITH THE NORMAL PROVISION OF THE ACT BY THE ASSESSEE' 3. THE LEARNED CIT(A) FAILED TO CONSTRUE THE SPECIAL PROVISION U/S.44 OF THE ACT READ WITH FIRST SCHEDULE AND 115B OF THE ACT IN A MEANINGFUL MANNER TO DIFFERENTIATE INCOME FROM LIFE INSURANCE AND OTHER INCOME. 3.2.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE SOLE ISSUE FOR CONSIDERATION AND ADJUDICATION BEFORE US IS THAT AS PER THE PROVI SIONS OF SEC. 44 OF THE ACT, FOR THE PURPOSE OF COMPUTATION OF INCOME F ROM THE BUSINESS OF LIFE INSURANCE, CAN THE ASSESSEE AGGREGATE SURPL US/DEFICIT OF POLICY HOLDERS AND SHARE HOLDERS ACCOUNT. WE FIND THAT A CO-ORDINATE BENCH OF THIS TRIBUNAL HAS CONSIDERED A SIMILAR ISSUE IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2012-13 IN ITA NO.1508/BANG/201 5 DATED 8/9/2017, FOLLOWING THE DECISIONS OF CO-ORDINATE BE NCH IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2011-12 (SUPRA) AND HAS OBSERVED AND HELD THAT SURPLUS/DEFICIT OF THE POLICY HOLDERS SHOULD BE AGGREGATED WITH SURPLUS/DEFICIT OF SHAREHOLDERS ACC OUNT FOR IT A NO.1220/B/17 4 DETERMINING THE PROFIT/LOSS OF THE ASSESSEE U/S 44 OF THE ACT. THE RELEVANT PORTION AT PARAS 4 AND 5 THEREOF IS EXTRAC TED HEREUNDER:- 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE THAT CAME UP FOR OUR CONSIDERATION IS THAT AS PER THE PROVISIONS OF SECTION 44 OF THE ACT, FOR THE PURPOS E OF COMPUTATION OF INCOME FROM BUSINESS OF LIFE INSURANCE, CAN THE ASSESSEE AGGREGATE SURPLUS/DEFIC IT FROM POLICY HOLDERS ACCOUNT TO SURPLUS/DEFICIT OF T HE SHAREHOLDERS ACCOUNT. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL HAS CONSIDERED A SIMILAR ISS UE IN ASSESSEE'S OWN CASE FOR THE AY 2011-12 IN ITA NO.1508/B/2015 WHEREIN IT WAS OBSERVED THAT SURPLUS/DEFICIT FROM SHAREHOLDERS ACCOUNT SHOULD BE AGGREGATED WITH SURPLUS/DEFICIT OF THE POLICY HOLDE RS ACCOUNT FOR DETERMINING THE PROFIT/LOSS OF THE ASSE SSEE U/S. 44 OF THE ACT. THE RELEVANT PORTION OF THE ORD ER OF THE TRIBUNAL IS REPRODUCED HEREUNDER:- '8. AS REGARDS GROUNDS 9 TO 13, WE FIND THAT THEY ARE ALTERNATE GROUNDS. IF THE DEFICITS IN THE POLICY HOLDERS ACCOUNT IS TO BE SET OFF AGAINST THE SURPLUS AS PER SHAREHOLDERS ACCOUNT IN COMPUTING THE TAXABLE INCOME OF THE ASSESSEE U/S. 44 OF THE IT ACT, THE ASSESSEE IT A NO.1220/B/17 5 CONTENDS (I) DEFICIT IN THE POLICY HOLDERS ACCOUNT SHOULD BE SET OFF AGAINST THE SURPLUS AS PER SHAREHOLDERS ACCOUNT U/S 70 OF THE IT ACT AS BOTH CONSTITUTES A SINGLE BUSINESS AND SEC. 70 PERMITS INTER UNIT SET OFF AND (II) THE LOSS OF THE BUSINESS OF ASSESSEE AS DETERMINED AT RS.1745.61 CRORES FOR EARLIER YEARS SHOULD BE CARRIED FORWARD AND SET OFF AGAINST THE BUSINESS INCOME OF THE CURRENT YEAR. AS WE HAVE HELD THAT SURPLUS/DEFICIT AS PER SHAREHOLDERS ACCOUNT SHOULD BE AGGREGATED WITH SURPLUS/DEFICIT IN THE POLICY HOLDERS ACCOUNT FOR DETERMINING THE PROFIT/LOSS OF THE ASSESSEE U/S 44, AND SUCH AGGREGATION WOULD RESULTS IN A LOSS OF RS.34,45,94,000/- AS PER THE IMPUGNED ORDER, THE VIEW OF SETTING OFF OF LOSSES AGAINST INCOME U/S. 70,72 WOULD BE ACADEMIC AND HENCE NOT DECIDED.' 5. IN THIS VIEW OF THE MATTER AND ALSO RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF T HIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2011-12, WE ARE OF THE VIEW THAT SURPLUS/DEFICIT AS PER SHAREHOLDERS ACCOUNT MAY BE AGGREGATED WITH SURPLUS/DEFICIT OF THE POLICY HOLDERS ACCOUNT FOR DETERMINING THE INCOME OF THE ASSESSEE U/S. 44 OF T HE IT A NO.1220/B/17 6 ACT. THE CIT(APPEALS) AFTER CONSIDERING THE RELEVAN T PROVISIONS OF THE ACT HAS RIGHTLY DELETED THE ADDIT ION MADE BY THE AO. WE DO NOT FIND ANY ERROR OR INFIRMI TY IN THE ORDERS OF CIT(APPEALS). HENCE, WE ARE INCLIN ED TO UPHOLD THE CIT(APPEALS) ORDER AND DISMISS THE APPEAL FILED BY THE REVENUE. 3.2.2 FOLLOWING THE AFORESAID ORDERS OF THE CO-ORDI NATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASST. YEAR S 2011-12 AND 2012-13 (SUPRA) WE ARE OF THE VIEW AND HOLD THAT SU RPLUS/DEFICIT OF POLICY HOLDERS ACCOUNT MAY BE AGGREGATED WITH THE S URPLUS/DEFICIT OF THE SHAREHOLDERS ACCOUNT FOR DETERMINING THE INCOME OF THE ASSESSEE U/S 44 OF THE ACT. IN THIS VIEW OF THE MATTER, WE FIND NO REASON TO INTERFERE WITH THE FINDING/ORDER OF THE LD CIT(A) O N THIS ISSUE AND CONSEQUENTLY DISMISS THE APPEAL FILED BY REVENUE. 4. IN THE RESULT, REVENUES APPEAL FOR ASST. YEAR 2 013-14 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5TH JANUARY, 2018 . SD/- SD/- (SUNIL KUMAR YADAV) (JASON P B OAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE DATED : 5/1/2018 VMS IT A NO.1220/B/17 7 COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGAL ORE.