JCIT, SPECIAL RANGE- 1, NEW DELHI V. AGRICULTURE INSURANCE COMPANY OF INDIA LTD., NEW DELHI

ITA 1622/DEL/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0721 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 08-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Keywords: Diversion of income; Capital Gains
• Section: 43B; 14A; 13; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 1622/DEL/2018 : ASSTT. YEAR : 2013-14 JCIT, SPECIAL RANGE-1, NEW DELHI VS AGRICULTURE INSURANCE COMPANY OF INDIA LTD., 13 TH FLOOR, AMBARDEEP, 14, K.G. MARG, CONNAUGHT PLACE, NEW DELHI-110001 (APPELLANT) (RESPONDENT) PAN NO. A A ECA2874P ASSESSEE BY : NONE REVENUE BY : SH. SATPAL GULATI, CIT DR DATE OF HEAR ING: 12.07 .20 2 1 DATE OF PRONOUNCEMENT: 12 .07 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF LD. CIT(A)-32, NEW DELHI DATED 26.10.2 017. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED I N DELETING THE ADDITION OF RS.14,60,88,000/- ON ACCOU NT OF CORPUS FUND WITHOUT ROUTING THE INCOME THROUGH T HE PROFIT AND LOSS ACCOUNT. THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT TREATING THE SAME AS DIVERSION OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.2,41,82,570/- MADE BY THE AO ON ACCOUNT OF ITA NO. 1622/DEL/2018 AGRICULTURE INSURANCE COMPANY OFF INDIA LTD. 2 DISALLOWANCES U/S 14A R.W.R. 8D OF THE INCOME TAX RULES. 3. GROUND NO. 1 RELATES TO CORPUS FUND RAISED BY TH E REVENUE STANDS COVERED BY THE DECISION OF THE TRIBUNAL IN A SSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 IN ITA NO.366/DEL/ 2018 VIDE ORDER DATED 17.03.2021. 4. WE HAVE PERUSED THE MATERIAL AVAILABLE ON THE RE CORD. IN THE PRESENT CASE, IT IS NOTICED THAT AN IDENTICAL I SSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEE S APPEAL IN ITA NO.366/DEL/2018, THE RELEVANT FINDINGS HAVE BEE N GIVEN IN PARA 5 & 6 WHICH READ AS UNDER: 5. WE FIND THAT THIS TRIBUNAL IN ASSESSEES OWN CA SE HAVE NOTED THE FOLLOWING FACTS AND HAVE DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING MANNER:- 10. AFTER DISCUSSING CERTAIN OTHER JUDICIAL DECISIO NS, THE LD. CIT(A) OBSERVED THAT THE INCOME RECEIVED FROM INVESTMENTS AND CREDITED TO THE CORPUS FUND HAS BEE N CREDITED AS PER THE DIRECTIONS OF THE GOVERNMENT OF INDIA AND SUCH INCOME WAS EARNED OUT OF THE AMOUNT RECEIV ED FROM THE CENTRAL GOVERNMENT AND STATE GOVERNMENT IN THE CORPUS FUND FOR SPECIFIED PURPOSES BY THE GOVERNMEN T OF INDIA. ACCORDINGLY, HE DELETED THE ADDITION OF RS. 8,62,47,181/-. 11. BEFORE US, THE LD. DR VEHEMENTLY STATED THAT TH E APPELLANTS ACTIVITIES IN RESPECT OF INVESTMENTS OU T OF CORPUS FUND VIS A VIS OTHER INVESTMENTS ARE SAME FO R WHICH COMMON EXPENSES HAVE BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. FURTHER, THE ASSESSEE HAS UTILIZED THE COR PUS FUNDS, OWNERSHIP/ RIGHT TO USE, VESTS WITH THE ASSE SSEE. THE LD. DR FURTHER STATED THAT THE LD. CIT(A) HAS S IMPLY REFERRED TO THE SUBMISSIONS OF THE ASSESSEE AND HAS DELETED THE ADDITIONS WITHOUT ANY SPEAKING ORDER. THEREFORE, THE MATTER SHOULD BE RESTORED TO THE FIL E OF THE LD. CIT(A) FOR FRESH ADJUDICATION. 12. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE RE ITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IN ITA NO. 1622/DEL/2018 AGRICULTURE INSURANCE COMPANY OFF INDIA LTD. 3 SUPPORT, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THE LETTER FROM GOVERNMENT OF INDIA, MINISTRY OF AGRICU LTURE, DEPARTMENT AGRICULTURE AND CO-OPERATION, WHICH READ S AS UNDER: I AM DIRECTED TO SAY THAT THE FUNDS UNDER THE CORP US FUND ARE PROVIDED BY THE CENTRAL AND STATE GOVERNME NTS ON 50:50 BASIS. AS THE CORPUS FUND BELONGS TO THE C ENTRAL AND STATE GOVERNMENT, THE INTEREST ACCRUED THEREON ALSO BELONG TO THE GOVERNMENT. THEREFORE, INTEREST ACCRU ED ON THE CORPUS FUND IS REQUIRED TO BE ADDED IN THE CORP US FUND. 13. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW AND HAVE CAREFULLY CONSIDE RED THE LETTER OF THE GOVERNMENT OF INDIA REFERRED TO HEREI NABOVE. THE FACTS OF THE CASE, READ WITH THE AFORESAID LETT ER OF THE GOVERNMENT, CLEARLY DEMONSTRATES THAT THIS IS A CAS E OF DIVERSION OF INCOME BY OVERRIDING TITLES. CONSIDERI NG THE FATS OF THE CASE IN THE LIGHT OF THE LETTER OF GOVE RNMENT OF INDIA, WE FIND THAT THE RELIANCE BY THE LD. CIT(A) ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ASSOCIATED POWER [SUPRA] IS WELL TAKEN. THE RATI O LAID DOWN BY THE HON'BLE SUPREME COURT HAS BEEN FOLLOWED IN VARIOUS JUDGMENTS, TO NAME A FEW, CIT VS. NEW HORIZ ON SUGAR MILL PVT LTD 244 ITR 738, BIJLI COTTON MILLS [P] LTD 116 ITR 60, DALMIA CEMENT LTD 237 ITR 617, ETC. ALL THESE JUDICIAL DECISIONS HAVE BEEN DISCUSSED ELABORATELY BY THE LD. CIT(A) IN HIS ORDER. WE, THEREFORE, DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, GROUND NO. 1 OF THE REVENUE IS DISMISS ED. 5. HENCE, IN THE ABSENCE OF ANY MATERIAL CHANGE ON THE FACTS OF THE ISSUE, THE ADDITION IS HEREBY DELETED. 6. GROUND NO. 2 RELATES TO DISALLOWANCE U/S 14A RAI SED BY THE REVENUE STANDS COVERED BY THE DECISION OF THE TRIBU NAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2014-15 IN ITA NO.367/DEL/2018 VIDE ORDER DATED 17.03.2021. 7. WE HAVE PERUSED THE MATERIAL AVAILABLE ON THE RE CORD. IN THE PRESENT CASE, IT IS NOTICED THAT AN IDENTICAL I SSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEE S APPEAL IN ITA NO. 1622/DEL/2018 AGRICULTURE INSURANCE COMPANY OFF INDIA LTD. 4 ITA NO.367/DEL/2018, THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 10 & 11 WHICH READ AS UNDER: 10. WE FIND THAT THIS TRIBUNAL AFTER NOTING THE EA RLIER ORDERS OF THE TRIBUNAL WHEREIN IT WAS HELD THAT ONC E THE ASSESSEES INCOME IS TO BE COMPUTED U/S.44 WHIC H RELATES TO ALL INSURANCE BUSINESS WHICH IS A NON OBSTANTE CLAUSE, THEREFORE DISALLOWANCE OF SECTION 14A CANNOT BE MADE. THE RELEVANT OBSERVATION OF THE TRIBUNAL READS AS UNDER: WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE COORDINATE BENCH IN ITA NO. 5779/DEL/2015 ORDER DATED 09TH NOVEMBER 2017. WE FIND THAT THE COORDINATE BENCH HAS FOLLOWED THE EARLIER ORDER OF THE COORDINATE BENCH IN ITA NO. 3115/DEL/2013. THE RELEVANT FINDINGS OF THE COORDINATE BENCH READ AS UNDER: WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORDS. THE PROVISIONS OF SECTION 44 READ AS UNDER. 'INSURANCE BUSINESS, - 44 : NOTWITHSTANDING ANYTHIN G TO THE CONTRARY CONTAINED IN THE PROVISIONS OF THIS ACT RELATING TO THE COMPUTATION OF INCOME CHARGEABL E UNDER THE HEAD 'INTEREST ON SECURITIES', 'INCOME FR OM HOUSE PROPERTY', 'CAPITAL GAINS' OR 'INCOME FROM OT HER SOURCES' OR PROFITS AND GAINS OF ANY BUSINESS OF INSURANCE, INCLUDING ANY SUCH BUSINESS CARRIED ON B Y A MUTUAL INSURANCE COMPANY OR BY A COOPERATIVE SOCIETY, SHALL BE COMPUTED IN ACCORDANCE WITH THE RULES CONTAINED IN THE FIRST SCHEDULE. 23. THE ABOVE PROVISION MAKES IT VERY CLEAR THAT SECTION 44 APPLIES NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED WITHIN THE 'PROVISIONS OF THE INCOME-TAX ACT RELATING TO COMPUTATION OF INCOME CHARGEABLE UNDER DIFFERENT HEADS. WE AGREE WITH THE LEARNED COUNSEL THAT THERE IS NO REQUIREMENT OF HEAD-WISE BIFURCATION CALLED FOR WHILE COMPUTING TH E INCOME U/S 44 OF THE ACT IN THE CASE OF A INSURANCE COMPANY: ITA NO. 1622/DEL/2018 AGRICULTURE INSURANCE COMPANY OFF INDIA LTD. 5 'THE INCOME OF THE BUSINESS OF INSURANCE IS ESSENTIALLY TO BE AT THE AMOUNT OF THE BALANCE OF PROFITS DISCLOSED BY THE ANNUAL ACCOUNTS AS FURNISH ED TO THE CONTROLLER OF INSURANCE. THE ACTUAL COMPUTATION OF PROFITS AND GAINS OF INSURANCE BUSINESS WILL HAVE TO BE COMPUTED IN ACCORDANCE WITH RULE 5 OF THE FIRST SCHEDULE. IN THE LIGHT OF THESE SPECIAL PROVISIONS COUPLED WITH NON OBSTANTE CLAUSE THE AO IS NOT PERMITTED TO TRAVEL BEYOND THESE PROVISIONS. 24. SECTION 14A CONTEMPLATES AN EXCEPTION FOR DEDUCTIONS AS ALLOWABLE UNDER THE ACT ARE THOSE CONTAINED U/S 28 TO 43B OF THE ACT. SECTION 44 CREATES SPECIAL APPLICATION OF THESE PROVISIONS IN THE CASES OF INSURANCE COMPANIES. WE, THEREFORE, AGREE WITH THE ASSESSEE AND DELETE THE DISALLOWANCE MADE BY THE AO WHICH IS BASED ON THE APPLICATION OF SEC. 14A OF THE ACT AS ACCORDING TO US, IT IS NOT PERMISSIBLE TO THE AO TO TRAVEL BEYOND SECTION 44 AND FIRST SCHEDULE OF THE INCOME-TAX ACT. RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT IN THE CASE OF ORIENTAL INSURANCE CO. LTD. (SUPRA), THE ADDITIONAL GROUND RAISED BY ASSESSEE IS ALLOWED. ACCORDINGLY, IT IS HELD THAT THE PROVISIONS OF SECT ION 14A ARE NOT APPLICABLE IN THE CASE OF ASSESSEE. THEREFORE, THE ADDITION OF RS. 23,31,454/- STANDS DELETED. 4. RESPECTFULLY FOLLOWING THE ORDER IN ITA 3115/DEL/2013, WE ALLOW THE APPEAL OF THE ASSESSEE. 11. THUS, FOLLOWING THE AFORESAID DECISION AND THE PRINCIPLE UPHELD BY THE TRIBUNAL, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SA ME IS CONFIRMED. ACCORDINGLY GROUND NO.2 IS DISMISSED. 8. HENCE, IN THE ABSENCE OF ANY MATERIAL CHANGE ON THE FACTS OF THE ISSUE, THE ADDITION IS HEREBY DELETED. ITA NO. 1622/DEL/2018 AGRICULTURE INSURANCE COMPANY OFF INDIA LTD. 6 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/07/2021. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 12/07/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR