BAJAJ ALLIANZ GENERAL INSURANCE CO.LTD., Pune V. ADDL C.I.T., Pune

ITA 1508/PUN/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5293 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 09-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Assessee Lawyers: PRAMOD ACHUTAN
• Keywords: Gift; Business income; Opportunity of being heard; Rule of consistency; Retrospective amendment; Question of law; Revised return
• Section: 43B; 14A; 54; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1508/PN/2012 (ASSTT.YEAR : 2005-06) BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD., IST FLOOR,GE PLAZA, AIRPORT ROAD, PUNE 411006 PAN NO.AABCB5730G .. APPELLANT VS. ADDL.CIT, RANGE-1, PUNE .. RESPONDENT ITA NO. 1406/PN/2012 (ASSTT.YEAR : 2005-06) DCIT, RANGE-1, PUNE .. CROSS OBJECTOR VS. BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD., IST FLOOR,GE PLAZA, AIRPORT ROAD, PUNE 411006 PAN NO.AABCB5730G .. APPELLANT IN THE APPEAL CO NO. 42/PN/2013 (ARISING OUT OF ITA NO.1406/PN/2012) (ASSTT.YEAR : 2005-06) BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD., IST FLOOR,GE PLAZA, AIRPORT ROAD, YERAWADA, PUNE 411006 PAN NO.AABCB5730G .. APPELLANT VS. DCIT, RANGE-1, PUNE .. RESPONDENT APPELLANT BY : SHRI PRAMOD ACHUTAN REVENUE BY : SMT. M.S. VERMA DATE OF HEARING : 17-10-2013 DATE OF PRONOUNCEMENT : 23-10-2013 2 ORDER PER R.K. PANDA, AM : ITA NO.1508/PN/2012 AND ITA NO.1406/PN/2012 ARE CRO SS APPEALS. THE FIRST ONE IS FILED BY THE ASSESSEE AN D THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AGAINST THE ORDER DATE D 15-12-2011 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2005-06. THE ASSESSEE HAS ALSO FILED A CROSS OBJECTION AGAINST THE APPEAL FIL ED BY THE REVENUE. FOR THE SAKE OF CONVENIENCE, BOTH THE APPEALS AND THE C ROSS OBJECTION WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. ITA NO.1508/PN/2012 (BY ASSESSEE) : 2. THE ASSESSEE IN ITS ONLY EFFECTIVE GROUND HAS CH ALLENGED THE ORDER OF THE CIT(A) IN UPHOLDING THE ACTION OF THE ASSESS ING OFFICER IN DISALLOWING THE LIABILITY TOWARDS ENVIRONMENTAL REL IEF FUND AMOUNTING TO RS.69,76,873/- U/S.43B OF THE INCOME TAX ACT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A JOINT VENTURE BETWEEN BAJAJ AUTO LIMITED AND ALLIANZ AG OF GERMAN Y AND IS ENGAGED IN THE GENERAL INSURANCE BUSINESS IN INDIA. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE IN ITS SUBMISSI ON ON 14-11-2008 REQUESTED ASSESSING OFFICER TO ALLOW THE DISALLOWAN CE U/S.43B OF THE I.T. ACT. PERTAINING TO ENVIRONMENT FUND LIABILITY OF RS .69,76,873/-. IN THAT SUBMISSION, THE ASSESSEE ALSO SUBMITTED THE COPY OF PUBLIC LIABILITY INSURANCE ACT. THE ASSESSING OFFICER NOTED THAT TH E ASSESSEE HIMSELF HAD ADDED BACK THE ABOVE AMOUNT IN THE STATEMENT OF INCOME U/S.43B AS THE SUM DURING THE PREVIOUS YEAR BUT NOT PAID ON OR BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME. THE ASSESSEE HAD ALSO QUOTED THE 3 DECISION IN THE CASE OF SIDDHESWAR SSK LTD. VS. CIT REPORTED IN 139 TAXMANN 434 (SC). HOWEVER, THE ASSESSING OFFICER R EJECTED THE CONTENTION OF THE ASSESSEE. DISTINGUISHING THE DEC ISION RELIED ON BY THE ASSESSEE BEFORE HIM AND FOLLOWING THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF GOETZ (INDIA) LTD. VS. CIT REP ORTED IN 284 ITR 323 ACCORDING TO WHICH CLAIM OF DEDUCTION BY WAY OF APP LICATION CANNOT BE ENTERTAINED BY THE ASSESSING OFFICER, THE ASSESSING OFFICER REJECTED THE CLAIM OF DEDUCTION UNDER ENVIRONMENT FUND LIABILITY . IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICE R. 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IDEN TICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE DURIN G A.Y. 2006-07. WE FIND THE TRIBUNAL VIDE ITA NO.119/PN/2011 ORDER DAT ED 06-05-2013 HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW BY OBSERVING AS UNDER: 4.8 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE DRP AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE HAS ORIGINALLY ADDED THE AMOUNT OF RS.70,31,561/- COLLEC TED TOWARDS ENVIRONMENT RELIEF FUND AS DISALLOWABLE U/S.43B. SAME WAS ON THE BASIS OF THE REPORT OF THE AUDITORS IN FORM NO.3CD. THE A SSESSEE SUBSEQUENTLY FILED A REVISED COMPUTATION STATEMENT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS WHEREIN IT CLAIMED THAT THE ABOVE AMOUNT IS NOT A DISALLOWABLE AMOUNT. WE FIND THE ASSESSING OFFICER AND THE DRP REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT SINCE THE ASSESSEE HAS NOT FILED A REVISED RETURN, THEREFORE, THE ASSESSEE IS NOT EN TITLED TO MAKE THE ABOVE CLAIM. FURTHER, SINCE THE ASSESSEE HAS NOT PAID THE AMOUNT BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME, THE REFORE, THE PROVISIONS OF SECTION 43B OF THE ACT ARE APPLICABLE. FOR THIS P URPOSE THE DRP AND THE 4 ASSESSING OFFICER RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LTD. VS. CIT REPORTED IN 284 ITR 323 ACCORDING TO WHICH CLAIM FOR DEDUCTION CAN BE MADE ONLY BY FILIN G A REVISED RETURN. WE FIND THE HONBLE SUPREME COURT IN THE CASE OF NT PC LTD. (SUPRA) HAS HELD THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LTD. IS LIMITED TO THE POWER OF THE ASSESSING AUTH ORITY AND DOES NOT IMPINGE ON THE POWER OF THE ITAT U/S.254 OF THE I.T. ACT. FOLLOWING THE ABOVE DECISION THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD. HAS HELD THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE AO, IT CAN BE MADE BEFORE THE APPEL LATE AUTHORITIES AND THE JURISDICTION OF THE APPELLATE AUTHORITIES TO ENTE RTAIN SUCH A CLAIM HAS NOT BEEN NEGATED BY THE HONBLE SUPREME COURT. SIN CE THE ASSESSEE IN THE REVISED RETURN HAS MADE A CLAIM THAT THE AMOUNT O F RS.70,31,561/- COLLECTED TOWARDS ENVIRONMENTAL RELIEF FUND DOES NOT FALL UNDER THE PURVIEW OF SECTION 43B AND SINCE THE ASSESSING OFFICER H AS NOT ENTERTAINED THE CLAIM FOR NOT BEING CLAIMED THROUGH A REVISED RETURN, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS CITED (SUPRA) WE HOLD THAT THE ASSESSEE CAN MAKE THE CLAIM BEFORE THE APPELLATE AU THORITIES AND THE APPELLATE AUTHORITIES CAN ENTERTAIN SUCH A CLAIM. WE , THEREFORE ADMIT THIS GROUND AND RESTORE THE MATTER TO THE FILE OF THE ASSESSI NG OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE ASSESSEE IS ACC ORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 4.1 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 ON IDENTICAL ISSUE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE TH E ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GRO UND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSE. ITA NO.1406/PN/2012 ( BY REVENUE) : 5. GROUNDS OF APPEAL NO.1 AND 2 BY THE REVENUE READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A)-I, PUNE HAS ERRED IN DELETING THE ADDITION OF RS.11,23,922/- MADE ON ACCOUNT OF DISALLOWANCES OF CLAIM EXEMPTION O F PROFIT ON SALE/REDEMPTION OF INVESTMENTS? 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD.CIT(A)-I, PUNE HAS ERRED IN NOT CONSIDERING THE A. OS CONTENTION THAT THERE WAS NO SPECIFIC PROVISION IN RULE 5 OF THE FIRST SCHEDULE ALLOWING FOR SUCH EXEMPTION AND IN THE ABSENCE OF A SPECIFIC PROVISI ON UNDER THE ACT TO EXEMPT SUCH INCOME, NO EXEMPTION WOULD BE AVAILAB LE? 5 5.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER WHILE COMPLETING THE ASSESSMENT MADE ADDITION OF RS.11,23 ,922/- EARNED BY THE ASSESSEE ON SALE/REDEMPTION OF INVESTMENT (NET OF AMORTIZATION OF SECURITIES) WHICH WAS CLAIMED BY THE ASSESSEE AS EX EMPT. ACCORDING TO THE ASSESSING OFFICER, AS PER RBI GUIDELINES, INCOM E FROM NON-BANKING ACTIVITY OF FINANCIAL INSTITUTION HAS TO BE RECOGNI SED AS INCOME. AS SUCH THE PROFIT REALISED BY THE ASSESSEE ON SALE OF INVE STMENTS SHOULD BE CONSIDERED AS BUSINESS INCOME OF THE PUBLIC FINANCI AL INSTITUTION AND NOT THAT OF THE INSURANCE BUSINESS TO WARRANT EXEMPTION ON THE GROUND THAT RULE 5(B) OF THE FIRST SCHEDULE HAS BEEN DELETED BY THE STATUTE W.E.F. 01- 04-1988. REJECTING THE EXPLANATION GIVEN BY THE AS SESSEE AND FOLLOWING THE ORDERS FOR A.Y. 2003-04 AND 2004-05 THE ASSESSI NG OFFICER HELD THAT THE PROFIT ON SALE/REDEMPTION OF INVESTMENTS (NET O F AMORTIZATION OF SECURITIES) WHICH HAS BEEN CLAIMED AS EXEMPT BY THE ASSESSEE SHOULD BE CONSIDERED IN COMPUTING THE TAXABLE INCOME OF THE A SSESSEE. HE ACCORDINGLY MADE ADDITION OF RS.11,23,922/-. IN AP PEAL THE LD.CIT(A) FOLLOWING THE ORDER OF HIS PREDECESSOR IN A.Y. 2003 -04 WHICH WAS UPHELD BY THE TRIBUNAL DELETED THE ADDITION. 5.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 6. AFTER HEARING BOTH THE SIDES WE FIND IDENTICAL I SSUED HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07. WE FIND THE TRIBUNAL VIDE ITA NO.119/PN/2011 ORDER DATED 06 -05-2013 FOR A.Y. 2006-07 HAS DISCUSSED THE ISSUE AND FOLLOWING THE O RDER OF THE TRIBUNAL FOR A.Y. 2003-04 HAS ALLOWED THE CLAIM OF THE ASSES SEE REGARDING NON- 6 TAXABILITY OF PROFITS OF SALE/REDEMPTION OF INVESTM ENTS BY HOLDING AS UNDER : 2.5 AFTER HEARING BOTH THE SIDES WE FIND THE TRIBUNA L IN ASSESSEES OWN CASE FOR A.Y. 2003-04 HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE BY HOLDING AS UNDER : 8. A CONCLUSION CAN BE DRAWN ON THE BASIS OF THE A BOVE ELABORATE DISCUSSION THAT THE DELETION OF SUB RULE (B) FROM R ULE 5 OF THE FIRST SCHEDULE WAS WITH A SPECIFIC PURPOSE. THIS SCHEDULE NOT ONLY PRESCRIBE THE METHOD OF COMPUTATION OF INCOME OF INSURANCE BUSINE SS IN PART (A) BUT ALSO PRESCRIBE THE METHOD OF COMPUTATION OF OTHER I NSURANCE BUSINESS IN PART (B). RULE 5 IS WITHIN PART(B) AND EARLIER IT HAS PRESCRIBED THE METHOD OF TAXATION OF PROFIT ON SALE OF INVESTMENTS WHICH WAS LATER ON SCRAPED. EVEN BY APPLYING A REVERSE LOGIC WE MUST A RRIVE AT THE SAME CONCLUSION THAT HAD THE IMPUGNED INCOME WAS EARLIER TAXABLE UNDER ONE SPECIFIC CLAUSE BUT EVEN ON ITS DELETION NO CLAUSE WAS INTRODUCED OR REPLACED TO PRESCRIBE THE METHOD OF TAXATION OF SUC H INCOME; THEREFORE THE REVENUE DEPARTMENT HAS NO RIGHT TO TAX SUCH AN INCOME IN THE ABSENCE OF ANY ENABLING PROVISION. NATURALLY, SUCH A DELETION CANNOT BE TREATED A SUPERFLUOUS ACTION BUT THIS CHANGE HAD TO GIVE A DEFINITE JUDICIAL MEANING. WE HAVE TO ASCRIBE A LOGICAL CONC LUSION TO THE SAID DELETION OF SUB RULE (B) FROM RULE 5 AND THE NATURA L MEANING IS THAT AFTER THE DELETION THE INCOME DESCRIBED THEREIN IS OUT OF THE PURVIEW OF COMPUTATION OF INSURANCE BUSINESS FROM THE FIRST SC HEDULE THEREFORE CONSEQUENTLY CANNOT BE TAXED U/S 44 OF I.T. ACT. AFT ER EXPRESSING THIS VIEW WE HEREBY DISMISS THE CROSS OBJECTION OF THE REVENU E. 2.6 SINCE THE ORDER OF THE TRIBUNAL HAS NOT BEEN REV ERSED, THEREFORE, MERELY BECAUSE THE REVENUE HAS FILED AN APPEAL BEFORE THE HIGH COURT A VIEW CONTRARY TO THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE CANNOT BE TAKEN. THEREFORE, FOLLOWING THE RULE OF CONSISTENCY IN ASSESSEES OWN CASE FOR PRECEEDING ASSESSMENT YEARS BY THE ORD ER OF THE TRIBUNAL WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 6.1 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BR OUGHT TO OUR NOTICE THE ABOVE TWO GROUNDS BY THE REVENUE ARE DISMISSED. 7. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UN DER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A)-I, PUNE HAS ERRED IN CONCLUDING THAT THE P ROVISIONS OF SECTION 14A OF THE INCOME TAX ACT ARE NOT APPLICABLE IN THE CASE OF THE PRESENT ASSESSEE FOR THE REASON THAT THE SUB-RULE(B) OF RULE 5 O F THE FIRST SCHEDULE IS DELETED AND IGNORING THAT THE RULE ONLY PRESCRIBED A METHOD OF COMPUTATION OF INCOME AND THE TAXABILITY OF A PA RTICULAR INCOME HAS TO BE DECIDED BY APPLYING THE PROVISIONS CONTAINED UNDER THE RESPECTIVE HEADS OF INCOME WHICH ARE TO BE FOUND UNDER CHAPTER IV OF THE INCOME TAX ACT, 1961. 7 7.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE U/S.14A OF THE I.T. ACT SHOULD NOT BE MADE IN VIEW OF THE FINDINGS GIVEN BY THE CIT(A) IN ASSESSEES OWN CASE FOR A.Y. 2004-05. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE THE ASSESSING OFFICER MADE ADDITION OF RS.18,14,03,633/- U/S.14A . 8. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE PUNE BENCH OF THE TRIBUNAL FOLLOWING THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. ORIENTAL GENERAL INSURANCE COMPANY LTD. REPORTED IN 92 TTJ 300 HAS HELD THAT SECTION 54 OF THE ACT CREA TES A SPECIAL PROVISION IN THE CASE OF THE ASSESSMENT OF INSURANCE COMPANIE S AND THEREFORE SECTION 14A DOES NOT APPLY TO PROFITS ON SALE/REDEM PTION OF INVESTMENTS. IT WAS FURTHER SUBMITTED THAT THE TRIBUNAL IN ASSES SEES OWN CASE FOR A.YRS. 2002-03, 2003-04 AND 2004-05 HAS GRANTED REL IEF TO THE ASSESSEE. 8.1 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING AS UND ER : 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE LAW. THE APPELLANT HAS RAISED NUMEROUS ISSUES RELATING TO DISALLOWA NCE MADE U/S.14A THROUGH GROUNDS NO.2 AND 3 AS CAN BE SEEN FROM THE GROUNDS QUOTED IN PARA 2 ABOVE. HOWEVER, DURING THE COURSE OF APPEAL IT WAS POINTED OUT THAT THE HONBLE ITAT HAS HELD THAT SEC. 14A WILL NOT APPLY IN THE CASE OF ASSESSMENTS OF THE INSURANCE COMPANIES MADE U /S.44 OF THE I.T. ACT AND THEREFORE, MANY ISSUES RELATING TO THE Q UANTUM ETC. HAS BECOME IRRELEVANT. THE APPELLANT HAS CLAIMED THAT T HE DECISION OF THE ITAT IS BINDING ON THE SUBORDINATE JUDICIAL AUTHORITI ES AND THEREFORE, THE SAME SHOULD BE FOLLOWED. CONSIDERING THE SAME AND FOLL OWING THE JUDICIAL DISCIPLINE LAID BY THE HIGH COURTS AND SUPRE ME COURTS TO FOLLOW THE JUDICIAL PRECEDENTS WITHIN THE JURISDICTION OF A JUDICIAL COURT, I AM ALLOWING GROUNDS NO.2 AND 3 OF THE APPELLANT AS DECID ED BY THE HONBLE ITAT IN A.Y. 2003-04 AND OTHER YEARS QUOTED SUPRA. 8 8.2 AGGRIEVED WITH SUCH ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 9. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04. WE FIND THE TRIBUNAL VIDE ITA NO.1447/PN/2007 ORDER DATED 3 1-08-2009 FROM PARA 13 ONWARDS OF THE ORDER HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : 13. WE HAVE HEARD BOTH THE SIDES AT LENGTH AND AL SO CAREFULLY PERUSED THE MATERIAL PLACED BEFORE US. THE LD. CIT(A) HAS B IFURCATED CERTAIN EXPENDITURE AND ADJUSTED THE SAME AGAINST THE NON T AXABLE INCOME EARNED ON REALIZATION OF INVESTMENT. SINCE THE AMOUNT OF E XPENDITURE WAS MORE THAN THE AMOUNT OF INCOME THEREFORE THE RESULTANT F IGURE WAS A NEGATIVE AMOUNT AND THE LOSS WAS NOT ALLOWED TO BE ADJUSTED AGAINST THE INSURANCE BUSINESS INCOME. AT THE OUTSET IT IS WORTH TO MENTI ON, AS POINTED OUT DURING THE COURSE OF HEARING, THAT THE LD. CIT(A) HAS TAKE N A WRONG FIGURE OF INTEREST AND BANK CHARGES AS NOTED IN SCHEDULE IV OF OPERATING EXPENSES RELATED TO INSURANCE BUSINESS FOR THE YEAR ENDED 31 ST MARCH 2003. IT WAS POINTED OUT THAT THE TOTAL AMOUNT OF INTEREST AND B ANK CHARGES WERE RS.22,41,119/- HOWEVER, LD. CIT(A) HAS WRONGLY TAKE N THE FIGURE OF SERVICE CHARGES WHICH WAS RS.23,81,85,483/-. IT WAS STATED THAT THIS FIGURE IS SUBSTITUTED THEN THE ENTIRE APPROACH OF THE AMOUNT OF DISALLOWANCE SHOULD GET ALTERED. WE FIND FORCE IN THIS ARGUMENT. SINCE THE GRIEVANCE RELATED TO THE ASCERTAINMENT OF CERTAIN FIGURES OF EXPENSES; A S APPEARED IN THE BOOKS OF ACCOUNTS, THEREFORE WE CAN TAKE THE RECOURSE OF DIRECTING THE LD. CIT(A) TO VERIFY THE SAME AND IF FOUND CORRECT MUST RECTIFY T HIS MISTAKE, HOWEVER IT IS ALSO PERTINENT TO OBSERVE AT THIS JUNCTURE THAT THI S DIRECTION OF OURS SHALL NOT PREJUDICE IN ANY MANNER THE MAIN GRIEVANCE OF THE ASSESSEE ABOUT THE APPLICABILITY OF THE PROVISIONS OF SEC. 14A OF I.T. ACT IN THE PRESENT SITUATION. 14. REVERTING BACK TO THE GRIEVANCE, THE ISSUE OF T HE APPLICABILITY OF SEC. 44 HAS ALREADY BEEN SETTLED BY THE HONBLE APEX COUR T IN THE CASE OF GENERAL INSURANCE CORPORATION OF INDIA VS. CIT 240 ITR 139 WHICH SAYS IN CLEAR TERMS THAT SEC. 44 IS A SPECIAL PROVISION GOVERNING COMPUTATION OF TAXABLE INCOME EARNED FROM BUSINESS OF INSURANCE. FOR READY REFERENCE RELEVANT HELD PORTION IS REPRODUCED BELOW:- SECTION 44 OF THE INCOME-TAX ACT, 1961, IS A SPECIA L PROVISION GOVERNING COMPUTATION OF TAXABLE INCOME EARNED FROM BUSINESS OF INSURANCE. IT OPENS WITH A NON-OBSTANTE CLAUSE AND THUS HAS AN OVERRIDING EFFECT OVER OTHER PROVISIONS CONTAINED I N THE ACT. IT MANDATES THE ASSESSING AUTHORITIES TO COMPUTE THE T AXABLE INCOME FOR BUSINESS OF INSURANCE IN ACCORDANCE WITH THE PR OVISIONS OF THE FIRST SCHEDULE. A PLAIN READING OF RULE 5(1) OF THE FIRST SCHEDULE. THERE IS ANOTHER APPROACH TO THE SAME ISSUE. SECTIO N 44 OF THE INCOME-TAX ACT READ WITH THE RULES CONTAINED IN THE FIRST SCHEDULE TO THE ACT LAYS DOWN AN ARTIFICIAL MODE OF COMPUTIN G THE PROFITS AND GAINS OF INSURANCE BUSINESS. FOR THE PURPOSE OF INC OME-TAX, THE 9 FIGURES IN THE ACCOUNTS OF THE ASSESSEE DRAWN UP IN ACCORDANCE WITH THE PROVISIONS OF THE FIRST SCHEDULE TO THE INCOME- TAX ACT AND SATISFYING THE REQUIREMENTS OF THE INSURANCE ACT AR E BINDING ON THE ASSESSING OFFICER UNDER THE INCOME-TAX ACT AND HE HA S NO GENERAL POWER TO CORRECT THE ERRORS IN THE ACCOUNTS OF AN I NSURANCE BUSINESS AND UNDO THE ENTRIES MADE THEREIN. THE AMOUNT SET APART BY THE GENERAL INSURANCE CORPO RATION FOR REDEMPTION OF PREFERENCE SHARES AND TREATED AS EXPE NDITURE UNDER RULE 2(2)(A) OF THE GENERAL INSURANCE BUSINESS (NAT IONALISATION) RULES IS SO TREATED FOR THE PURPOSE OF THE INSURANC E ACT, 1938. THE RESERVE IS NOT AN EXPENDITURE IN THE ORDINARY COMME RCIAL SENSE OF THE TERM. IT CANNOT BE ADDED BACK FOR COMPUTING THE PROFITS AND GAINS OF BUSINESS BY INCLUDING IT IN EXPENDITURE N OT ADMISSIBLE UNDER THE PROVISIONS OF SECTIONS 30 TO 43A OF THE I NCOME-TAX ACT BY REFERENCE TO RULE 5(A) OF THE FIRST SCHEDULE TO THE INCOME-TAX ACT. 15. ON READING THE AFOREMENTIONED JUDGMENT THERE SH OULD NOT BE ANY DOUBT AND THEREUPON UP TO THIS EXTENT WE ENDORSE TH E ARGUMENT OF LD. AR THAT THE PROVISIONS OF SEC. 44 BEING STARTED WITH A NON-OBSTANTE CLAUSE THEREFORE THE METHOD PRESCRIBED THERE IN ARE SPECIA L PROVISIONS FOR THE PURPOSE OF GOVERNING THE COMPUTATION OF TAXABLE INC OME OF INSURANCE BUSINESS. STILL THE QUESTION IS VERY MUCH ALIVE TH AT WHETHER A PART OF INSURANCE BUSINESS WHICH IS OTHERWISE NOT TAXABLE B EING AN INCOME NOT FORMING PART OF THE TOTAL INCOME SO THE EXPENDITURE RELATED TO SUCH AN EXEMPTED INCOME BE DISALLOWED BY INVOKING THE PROVIS IONS OF SEC. 14A OF I.T. ACT. 16. ON PLAIN READING OF SEC. 14A IT IS EXPLICIT THA T AN EXPENDITURE CLAIMED BY THE ASSESSEE AS DEDUCTION AGAINST INCOME WHICH IS NOT CHARGEABLE TO TAX THEN THE EXPENDITURE CLAIMED HAS T O BE DISALLOWED TO THAT EXTENT. AN INTERESTING ARGUMENT WAS RAISED THAT PROV ISIONS OF SEC. 14A APPLY ONLY TO INCOME WHICH ARE NOT INCLUDIBLE IN TO TAL INCOME IN TERMS OF CHAPTER III OF I.T. ACT. IT IS MORE INTERESTING THA T FOR THIS PROPOSITION LD. AR HAS PLACED RELIANCE ON WALLFORT SHARES & STOCK BROK ERS LTD. 96 TTJ 673. STRANGE ENOUGH, THE VERDICT OF THE RESPECTED SPECIA L BENCH WAS NOT CORRECTLY INTERPRETED BECAUSE IN PARA 108, AS QUOTE D TO US, THE RESPECTED BENCH HAS CLEARLY EXPRESSED ITS DISAGREEMENT WITH T HE ARGUMENT OF THE ASSESSEE THAT PROVISIONS OF SEC. 14A APPLIES TO THE INCOME CONTAINED IN CHAPTER III OF I.T. ACT. THE CONFUSION HAD CROPPED UP ONLY BECAUSE OF THE WAY A QUOTATION WAS MADE WITHIN INVERTED COMAS BUT IN THE VERY NEXT LINES THAT WAS NOT CONFIRMED. THE FACTUAL POSITION IS TH AT WHILE DEALING WITH THIS ISSUE THE RESPECTED CO ORDINATE BENCH HAS STATED TH AT THEY HAD NOT ACCEPTED THE ARGUMENT OF APPLICABILITY OF CHAPTER III OF THE ACT. RATHER THE RESPECTED BENCH HAS SAID THAT THERE WAS NO CONFLICT BETWEEN C HAPTER III AND SEC. 14A. IT WAS FURTHER CLARIFIED THAT THE PROVISIONS OF SEC . 14A CANNOT BE CONSIDERED DEFUNCT OR REDUNDANT FOR THE REASON ONLY THAT THESE PROVISIONS SHOULD HAVE BEEN INSERTED IN CHAPTER III AND NOT IN CHAPTER IV , AFTER ALL BOTH CHAPTER III AND CHAPTER IV ARE INTEGRAL PART OF THE SAME ENACTM ENT. FOR READY REFERENCE PARA 108 IS REPRODUCED VERBATIM BELOW:- 108. THE MAIN PROVISION OF S. 14A INSERTED BY THE FINANCE ACT, 2001, WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 1962 READS AS UNDER: 14A FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESP ECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT: 10 ON A PLAIN READING OF THE ABOVE QUOTED PROVISIONS, WE FIND THAT IF ANY PART OF THE EXPENDITURE CLAIMED BY THE ASSESSE E AS DEDUCTION AGAINST HIS INCOME CHARGEABLE TO TAX IS FOUND OR DET ERMINED TO HAVE BEEN INCURRED BY THE ASSESSEE IN RELATION TO INCOME RECEIVED BY THE ASSESSEE FROM THE MUTUAL FUNDS, THE EXPENDITURE CLA IMED BY THE ASSESSEE AS DEDUCTION AGAINST HIS INCOME CHARGEABLE TO TAX HAS TO BE DISALLOWED TO THAT EXTENT. WE DO NOT SEE MUCH FORCE IN THE CONTENTION OF THE ASSESSEE THAT WHILE THE PROVISION S OF S. 10(33) EXEMPTING THE ASSESSEES INCOME ON UNITS OF MUTUAL F UNDS FALL UNDER CHAPTER III, THE PROVISIONS OF S. 14A HAVE BEEN INS ERTED IN CHAPTER IV ONLY. THE IMPORT OF THE WORDS INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME UNDER THIS ACT UNMISTAKABLY TAKES US TO CHAPTER III TITLED AS INCOMES WHICH DO NOT FORM PART OF TO TAL INCOME. ONE MAY AS WELL READ THE PROVISIONS OF S. 14A IN THE FO LLOWING MANNER: FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME UNDE R THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDI TURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME EXCLUDED FROM TOT AL INCOME UNDER THE PROVISIONS OF CHAPTER III OF THE ACT. IT DOES NOT APPEAR CORRECT TO SAY THAT PROVISIONS O F S. 14A IMPINGE ON THE PROVISIONS OF S. 10(33) . THESE PROVISIONS O PERATE IN RELATION TO THE EXPENDITURE AN ASSESSE CLAIM IN THE COMPUTAT ION OF HIS INCOME CHARGEABLE TO TAX. SUCH EXPENDITURE IF FOUND TO HAVE BEEN INCURRED IN RELATION TO INCOME EXEMPT UNDER CHAPTER III SHALL BE DISALLOWED BY VIRTUE OF THE PROVISIONS OF S. 14A. I N THE INSTANT CASE, THE ASSESSEE HAS CLAIMED EXPENDITURE ON PURCHASE OF THE UNITS OF CHOLA MUTUAL FUND AND SUN F & C FUND AGAINST SUBSEQ UENT SALE OF THOSE UNITS. THOSE SALE PROCEEDS ARE INCOME CHARGEA BLE TO TAX UNDER CHAPTER IV AND ARE NOT EXEMPT UNDER ANY PROVISION OF CHAPTER III. PURCHASE PRICE OF UNITS IS AN EXPENDITURE TO WHICH DISALLOWANCE PROVISION OF CHAPTER IV WOULD SQUARELY APPLY. REFER ENCE IN THIS RESPECT MAY BE MADE TO THE JUDGMENT OF HONBLE SUPR EME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH, ETC. VS. ITO (1991) 97 CTR (SC) 251 : (1991) 191 ITR 667 (SC). WE, THEREFORE, DO NOT ACCEPT THE ARGUMENTS BASED ON CHAPTER III. WE DO NOT SEE ANY C ONFLICT BETWEEN CHAPTER III AND S. 14A AND EVEN IF THERE IS ONE, TH E MEANING OF THE PROVISIONS OF S. 14A BEING UNMISTAKABLY CLEAR, THE PROVISIONS HAVE TO BE GIVEN EFFECT TO BY WAY OF HARMONIOUS CONSTRUCTIO N. PROVISIONS OF S. 14A CANNOT BE CONSIDERED DEFUNCT OR REDUNDANT FOR T HE REASON ONLY THAT THESE PROVISIONS SHOULD HAVE BEEN INSERTED IN CHAPTER III AND NOT CHAPTER IV. AFTER ALL BOTH CHAPTER III AND CHAP TER IV ARE INTEGRAL PART OF THE SAME ENACTMENT. WE ALSO DO NOT AGREE WITH THE ARGUMENTS OF THE ASSESSEE THAT IT AMOUNTS TO ARTIFI CIAL ENHANCEMENT OF SALE PRICE BY THE AMOUNT OF DIVIDEND. THE CASE O F REVENUE IS BASED ON DISALLOWANCE OF EXPENDITURE (PURCHASE PRICE), NO T ENHANCEMENT OF SALE PROCEEDS. WE ALSO DO NOT SEE PROVISO TO S. 14A HAVING ANY APPLICATION. IT IS NOT THE CASE OF REOPENING ANY CL OSED MATTER. IT IS, THEREFORE, OPEN TO US TO TAKE NOTE OF THE RETROSPEC T PROVISIONS OF S. 14A. RESPECTFULLY FOLLOWING THE VERDICT OF THE RESPECTED FIVE MEMBER SPECIAL BENCH WE HEREBY DISAPPROVE THE ARGUMENT OF LD. AR T HAT THE PROVISIONS OF SEC. 14A ARE APPLICABLE ONLY IN RESPECT OF INCOME F ALL WITHIN THE PURVIEW OF CHAPTER III OF I. T. ACT. 11 17. FINALLY THE QUESTION TO BE ANSWERED IS ABOUT TH E APPLICABILITY OF SEC. 14A IN RESPECT OF SALE OF INVESTMENT WHICH IS NOT T AXED UNDER THE SPECIAL CIRCUMSTANCES OF DELETION OF A SUB RULE FROM THE ST ATUTE. IT IS NOT QUESTIONED THAT THE IMPUGNED PROFIT WAS NON-TAXABLE PER-SE, RA THER THE ACCEPTED LEGAL POSITION IS THAT THE IMPUGNED PROFIT WAS VERY MUCH TAXABLE IN THE PAST. NOW IT HAS BEEN INFORMED THAT THIS CONTROVERSY IN RESPE CT OF INSURANCE COMPANY SET AT REST BY A DECISION OF ITAT DELHI BENCH VERDI CT IN THE CASE OF ORIENTAL INSURANCE COMPANY LIMITED (ITA NO. 5462 & 5463/DEL/ 03) A.Y. 2000-01 AND 2001-02 ORDER DATED 27 TH FEBRUARY 2009.THEREFORE CONSIDERING THE VEHEMENT RELIANCE OF LD. AR IT IS WORTH TO MENTION AT THE OUTSET ITSELF THAT THE ISSUE NOW STOOD RESOLVED BY THIS LATEST DECISIO N OF DELHI TRIBUNAL IN THE CASE OF M/S. ORIENTAL INSURANCE CO LTD. (SUPRA), TH E RELEVANT PORTION REPRODUCED BELOW:- 17. WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IDEN TICAL ISSUE AROSE IN ASSESSEES OWN CASE FOR A.Y 1985-86. THE TRIBUNA L ACCEPTED THE PICA OF THE ASSESSEE AND IN FACT THE ISSUE WENT UP TO THE HONBLE DELHI HIGH COURT IN AY 1986-87 TO 1988-89, WHICH IS REPORTED AS 125 TAXMAN 1094 (DEL.), DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT SECTION 44 OF THE ACT IS A SPECIAL PROVISION DEALING WITH THE COMPUTATION OF PROFITS AND GIFTS OF BUSINE SS OF INSURANCE. IT BEING A NON OBSTINATE PROVISION, HAS TO PREVAIL OVE R OTHER PROVISIONS IN THE ACT. IT CLEARLY PROVIDES THAT INCOME FROM IN SURANCE BUSINESS HAS TO BE COMPUTED IN ACCORDANCE WITH THE RULE CONT AINED IN THE FIRST SCHEDULE. IT IS NOT THE CASE OF THE REVENUE T HAT THE ASSESSEE HAS NOT COMPUTED THE PROFITS AND GAINS OF ITS INSURANCE BUSINESS IN ACCORDANCE WITH THE SAID RULES. RELIANCE WAS PLACED ON THE SCOPE OF SECTION 144, AS HELD IN THE CASE OF GENERAL INSURAN CE CORPN. OF INDIA VS. CIT (1999) 240 ITR 139 (SC), WHEREIN THEIR LORD SHIPS OF THE APEX COURT HAVE CATEGORICALLY HELD THAT THE PROVISIO NS OF SECTION 44 BEING A SPECIAL PROVISION GOVERN COMPUTATION OF TAXA BLE INCOME EARNED FROM BUSINESS OF INSURANCE. IT MANDATES THE TAX AUTHORITIES TO COMPUTE THE TAXABLE INCOME IN RESPECT OF INSURANC E BUSINESS IN ACCORDANCE WITH THE PROVISIONS OF THE FIRST SCHEDUL E TO THE ACT. IN THE LIGHT OF THESE, THEIR LORDSHIPS OF DELHI HIGH C OURT HAVE HELD THAT NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTIO N OF LAW SURVIVES FOR THEIR CONSIDERATION. IN OTHER WORDS, ORDER OF T HE TRIBUNAL HAS BEEN AFFIRMED. FOLLOWING THE SAME REASONING, ADDITI ON MADE BY THE AO IS DELETED. 18. THE NEXT COMMON DISPUTE RELATES TO THE ORDER OF THE CIT(A) IN SUSTAINING THE ACTION OF AO IN ALLOWING ONLY 50% OF THE MANAGEMENT EXPENSES BY INVOKING THE PROVISIONS OF S EC. 14A OF THE ACT. THE ADDITION IS MADE BY THE AO ON THE PLEA THA T THE PROVISIONS OF SECTION 14A WAS INSERTED BY FINANCE ACT 2001 WIT H EFFECT FROM 1- 4-1962. IT IS STATED THAT THE INVESTMENTS MADE BY T HE ASSESSEE ARE BOTH TAXABLE AS WELL AS TAX FREE. AN ESTIMATED DISAL LOWANCE OF 50% OUT OF THE MANAGEMENT EXPENSES INCURRED AND AS CLAI MED IN THE P & L A/C IS TREATED AS EXPENSES INCURRED IN CONNECTION WITH THE LOOKING AFTER TAX FREE INVESTMENT. 19. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE INCOME OF THE ASSESSEE IS TO BE COMPUTED U/S 44 READ WITH RULE 5 OF SCHEDULE 1 OF THE IT. ACT SECTION 44 IS A NON-OB STANTE CLAUSE AND APPLIES NOTWITHSTANDING ANYTHING TO THE CONTRARY CO NTAINED WITHIN THE PROVISIONS OF THE INCOME-TAX ACT RELATING TO COM PUTATION OF INCOME CHARGEABLE UNDER DIFFERENT HEADS, OTHER THAN THE INCOME TO BE COMPUTED UNDER THE HEAD PROFIT AND GAINS OF BUS INESS OR PROFESSION. FOR COMPUTATION OF PROFITS AND GAINS O F BUSINESS OR 12 PROFESSION THE MANDATE TO THE AO IS TO COMPUTE THE SAID INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 28 TO 43B OF THE ACT. IN THE CASE OF THE COMPUTATION OF PROFITS AND GAIN OF ANY BUSINESS OF INSURANCE, THE SAME SHALL BE DONE IN ACCORDANCE WIT H THE RULES PRESCRIBED IN FIRST SCHEDULE OF THE ACT, MEANING TH EREBY SECTION 28 TO 43B SHALL NOT APPLY. NO OTHER PROVISION PERTAINI NG TO COMPUTATION OF INCOME WILL BECOME RELEVANT. ACCORDI NG TO THE LEARNED COUNSEL, TWO PRESUMPTIONS THAT FOLLOW ON A COMBINED READING OF SECTION 14, 14A, 44 AND RULE 5 OF THE FI RST SCHEDULE ARE: (A) THAT NO HEAD-WISE BIFURCATION IS CALLED FOR. TH E INCOME, INTER ALIA, OF THE BUSINESS OF INSURANCE IS ESSENTIALLY T O BE AT THE AMOUNT OF THE BALANCE OF PROFITS DISCLOSED BY THE ANNUAL ACCO UNTS AS FURNISHED TO THE CONTROLLER OF INSURANCE UNDER THE INSURANCE ACT, 1938. THE SAID BALANCE OF PROFITS IS SUBJECT ONLY TO ADJUSTME NTS THEREUNDER. THE ADJUSTMENTS DO NOT REFER TO DISALLOWANCE UNDER SECTION 14A. OF THE ACT. (B) PROFITS AND GAINS OF BUSINESS AS REFERRED TO IN (A) ABOVE HAVE ONLY TO BE COMPUTED IN ACCORDANCE WITH RULE 5 OF TH E FIRST SCHEDULE. 22. SECTION 44 CREATES A SPECIFIC EXCEPTION TO THE A PPLICABILITY OF SECTIONS 28 TO 43B. THEREFORE, THE PURPOSE, OBJECT AND PURVIEW OF SECTION 14A HAS NO APPLICABILITY TO THE PROFITS AND GAINS OF AN INSURANCE BUSINESS. 21. THE LEARNED DR STRONGLY JUSTIFIED THE ACTION OF THE AO AND THAT OF THE CIT(A) IN THE LIGHT OF THE CLEAR PROVIS IONS OF SECTION 14A OF THE ACT. 22. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GO NE THROUGH THE RECORDS. THE PROVISIONS OF SECTION 44 READ AS U NDER: INSURANCE BUSINESS. 44, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAI NED IN THE PROVISIONS OF THIS ACT RELATING TO THE COMPUTAT ION OF INCOME CHARGEABLE UNDER THE HEAD INTEREST ON SECUR ITIES. INCOME FROM HOUSE PROPERTY, CAPITAL GAINS OR I NCOME FROM OTHER SOURCES, OR IN SECTION 199 OR IN SECTIO NS 28 TO 43B, THE PROFITS AND GAINS OF ANY BUSINESS OF INSUR ANCE, INCLUDING ANY SUCH BUSINESS CARRIED ON BY A MUTUAL INSURANCE COMPANY OR BY A CO-OPERATIVE SOCIETY, SHA LL BE COMPUTED IN ACCORDANCE WITH THE RULES CONTAINED IN THE FIRST SCHEDULE. 23. THE ABOVE PROVISION MAKES IT VERY CLEAR THAT SE CTION 44 APPLIES NOTWITHSTANDING ANYTHING TO THE CONTRARY CO NTAINED WITHIN THE PROVISIONS OF THE INCOME-TAX ACT RELATING TO COM PUTATION OF INCOME CHARGEABLE UNDER DIFFERENT HEADS. WE AGREE W ITH THE LEARNED COUNSEL THAT THERE IS NO REQUIREMENT OF HEA D-WISE BIFURCATION CALLED FOR WHILE COMPUTING THE INCOME U /S 44 OF THE ACT IN THE CASE OF A INSURANCE COMPANY. THE INCOME OF T HE BUSINESS OF INSURANCE IS ESSENTIALLY TO BE AT THE AMOUNT OF THE BALANCE OF PROFITS DISCLOSED BY THE ANNUAL ACCOUNTS AS FURNISHED IN TH E CONTROLLER OF INSURANCE, THE ACTUAL COMPUTATION OF PROFITS AND GA INS OF INSURANCE BUSINESS WILL HAVE TO BE COMPUTED IN ACCORDANCE WIT H RULE 5 OF THE FIRST SCHEDULE. IN THE LIGHT OF THESE SPECIAL PROVI SIONS COUPLED WITH NOT OBSTANTE CLAUSE THE AO IS NOT PERMITTED TO TRAV EL BEYOND THESE PROVISIONS. 13 24. SECTION 14A CONTEMPLATES AN EXCEPTION FOR DEDUC TIONS AS ALLOWABLE UNDER THE ACT ARE THOSE CONTAINED U/S 28 TO 43B OF THE ACT. SECTION 44 CREATES SPECIAL APPLICATION OF THES E PROVISIONS IN THE CASES OF INSURANCE COMPANIES. WE THEREFORE, AGREE W ITH THE ASSESSEE AND DELETE THE ACT AS ACCORDING TO US, IT IS NOT PE RMISSIBLE TO THE AO TO TRAVEL BEYOND SECTION 44 AND FIRST SCHEDULE OF T HE INCOME-TAX ACT. 18. IT MAY NOT BE OUT OF PLACE TO MENTION THAT THE RESPECTED CO ORDINATE BENCH HAS DULY TAKEN THE NOTE OF AN EARLIER DECISIO N OF THAT VERY BENCH DECIDED IN THE CASE OF THAT VERY ASSESSEE VIDE ORDE R DATED 29 TH SEPTEMBER 2004 BEARING ITA NOS. 7815/DEL/1989; 3607 TO 3609/D EL/1990; 5035/DEL/1998 & 3910/DEL/2000 NAMED AS DCIT VS. ORI ENTAL GENERAL INSURANCE CO. LTD. REPORTED IN 92 TTJ 300 (DEL). AS SEEN FROM THE PARAS REPRODUCED ABOVE ON DUE CONSIDERATION OF THE RELEVA NT PROVISIONS AS APPLICABLE TO RESOLVE THIS ISSUE A CONCLUSION WAS D RAWN THAT SINCE THE COURTS HAVE HELD, SEC. 44 CREATES A SPECIAL PROVISI ON IN THE CASES OF ASSESSMENT OF INSURANCE COMPANIES THEREFORE IT WAS NOT PERMISSIBLE TO THE A.O TO TRAVEL BEYOND SEC. 44 OF FIRST SCHEDULE OF I . T. ACT. SINCE THE VIEW HAS ALREADY BEEN EXPRESSED BY RESPECTED CO ORDINATE BEN CH THEREFORE WE HAVE NO REASON TO TAKE ANY OTHER VIEW EXCEPT TO FOLLOW TH E SAME. WITH THE RESULT WE HEREBY ACCEPT THE ARGUMENT OF LD. AR TO THE EXTEN T THAT IN THE PRESENT SITUATION THE PROVISIONS OF SEC. 14A NEED NOT TO AP PLY WHILE GRANTING EXEMPTION TO AN INCOME EARNED ON SALE OF INVESTMENT PRIMARILY BECAUSE OF THE REASON OF THE WITHDRAWAL OR DELETION OF SUB RUL E 5(B) TO SCHEDULE FIRST OF SEC. 44 OF I.T. ACT. ONCE WE HAVE TAKEN THIS VIE W THEREFORE THE ENHANCEMENT AS PROPOSED BY LD. CIT(A) IS REVERSED AND THE DIRECTIONS IN THIS REGARD ARE SET ASIDE. RESULTANTLY GROUND NO. 1 IS ALLOWED CONSEQUENT THEREUPON GROUND NO. 2 AUTOMATICALLY GOES IN FAVOU R OF THE ASSESSEE. 3.4 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUN AL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROU GHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THE GROUN D RAISED BY THE ASSESSEE IS ALLOWED. 9.1 WE FIND THE ABOVE VIEW HAS AGAIN BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 VIDE ITA NO .119/PN/2011 ORDER DATED 06-05-2013. 9.2 RESPECTFULLY FOLLOWING THE DECISIONS OF THE TRI BUNAL IN ASSESSEES OWN CASE IN THE PRECEDING AND SUCCEEDING ASSESSMENT YEAR AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOT ICE AGAINST THE ORDER OF THE TRIBUNAL THIS GROUND BY THE REVENUE IS DISMI SSED. 14 10. GROUNDS OF APPEAL NO. 4 & 5 BEING GENERAL IN NA TURE ARE DISMISSED. CO NO.42/PN/2013 (BY ASSESSEE) : 11. THE ASSESSEE IN THE GROUND OF CROSS OBJECTION H AS CHALLENGED THE COMPUTATION OF DISALLOWANCE U/S.14A AT RS.18,14,03, 633/- AGAINST PROFIT FROM SALE/REDEMPTION OF INVESTMENT OF RS.11,23,922/ - CLAIMED AS NON TAXABLE. 11.2 AFTER HEARING BOTH THE SIDES WE FIND THE CIT(A ) HAS HELD THAT THE PROVISIONS OF SECTION 14A OF THE I.T. ACT ARE NOT A PPLICABLE IN THE CASE OF THE PRESENT ASSESSEE. THE SAID VIEW OF THE CIT(A) HAS BEEN UPHELD BY US IN THE PRECEDING PARAGRAPHS. THEREFORE, THE GROUND OF CROSS OBJECTION BY THE ASSESSEE BECOMES INFRUCTUOUS AND ACCORDINGLY THE SAME IS DISMISSED. 12. IN THE RESULT, ITA NO.1508/PN/2012 BY THE ASSES SEE IS ALLOWED. ITA NO.1406/PN/2012 FILED BY THE REVENUE AND CO NO. 42/PN/2013 FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF OCTOBER, 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PA NDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 23 RD OCTOBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I PUNE 4. THE CIT-I, PUNE 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE