DCIT 1(3)(1), MUMBAI V. SBI LIFE INSURANCE COMPANY LTD, MUMBAI

ITA 2557/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1754 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA KUMAR LD
• Assessee Lawyers: FARROKH V IRANI LD
• Keywords: Capital asset; Business income
• Section: 143(3); 10

Judgement Text

ITA NO. 2557/MUM/2017 SBI LIFE INSURANCE COMPANY LIMITED ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , BEFORE SHRI JOGINDER SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.2557/MUM/2017 ( ASSESSMENT YEAR: 2011-12) ASSISTANT COMMISSIONER OF INCOME TAX- 1(3)(1) ROOM NO.540, 5 TH FLOOR AAYKAR BHAVAN, M.K.ROAD MUMBAI 400 020 VS. S BI LIFE INSURANCE COMPANY LT D . NATRAJ, M.V.ROAD WESTERN EXPRESS HIGHWAY JUNCTION ANDHERI (E) MUMBAI-400 069 PAN/GIR NO. AAFCS-2530-P ( APPELLANT ) : ( !' RESPONDENT ) ASSESSEE BY : FARROKH V. IRANI, LD. AR REVENUE BY : RAJENDRA KUMAR, LD. DR #$ DATE OF HEARING : 23/08/2018 %&' $ / DATE OF PRONOUNCEMENT : 07/09/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 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/ADDL.CIT-1(3)/14-15 DATED 31/01/2017 BY RAISING THE FOLLOWING GROUNDS OF APP EAL:- 1 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) WAS CORRECT IN CONCLUDING THAT TRANSFER F ROM SHAREHOLDERS ACCOUNT TO POLICY ACCOUNT AND SHOWN AS PART OF SURPLUS IN THE ACTUARIAL VALUATION WAS ONLY TRANSFER OF CAPITAL ASSET AND NOT TAXABLE U/S 44 OF THE ACT READ WITH RULE 2 OF THE FIRST SCHEDULE? ITA NO. 2557/MUM/2017 SBI LIFE INSURANCE COMPANY LIMITED ASSESSMENT YEAR-2011-12 2 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 ASS ESSEE 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 OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT TAKING THE VA LUE OF NEGATIVE RESERVE AT ZERO HAS AN IMPACT OF REDUCING THE TAXABLE SURPLUS AS PER FORM-I AND THEREFORE, CORRESPONDING ADJUSTMENT FOR NEGATIVE RE SERVE 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 THE I.T. A CT 1961 MADE BY THE ASSESSEE, IGNORING THE FACT THAT DIVIDEND INCOME IS CONSIDERED AS PART OF INCOME OF THE LIFE INSURANCE BUSINESS AND IS INCLUD ED AS AN INCOME BY THE ACTUARY. 6. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW. THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MA DE 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 O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN IGNORING THE FACT THAT THE NON OBSTANTE CLAUSE IN SECTION 44 IS NOT EXTENDED TO SECTION 10(23AAB) OF THE ACT 1961. 8. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT SECTION 14 A IS NOT APPLICABLE TO INCOME OF INSURANCE BUSINESS COMPUTED U/S 44 OF THE ACT WHEN THE ITAT ITSELF HAS HELD THAT THE PROVISIONS OF SECTION 10 A RE APPLICABLE TO INCOME OF INSURANCE BUSINESS COMPUTED U/S 44 OF THE ACT. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT 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 ASSESSEE HAS BEEN ASSESSED AT RS.387.08 CRORES AFTER CERTAIN ADJUSTME NTS / DISALLOWANCES AS AGAINST RETURNED INCOME OF RS.150.47 CRORES E-FILED BY THE ASSESSEE ON 17/11/2011. DURING IMPUGNED AY, THE ASSESSEE BEI NG RESIDENT CORPORATE ASSESSEE WAS ENGAGED IN THE BUSINESS OF LIFE INSURANCE . ITA NO. 2557/MUM/2017 SBI LIFE INSURANCE COMPANY LIMITED ASSESSMENT YEAR-2011-12 3 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. POLICY 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 CR ORES IN SHA ACCOUNT WHICH INCLUDED TRANSFER OF SURPLUS FROM PHA FOR RS.335.52 CRORES AND CONTRIBUTION TO PHA FROM SHA AT RS.35.41 CRORES. THUS THE NET INCOME IN THE ACCOUNT WAS RS.70.35 CRORES. THE LD. AO OPIN ED THAT INCOME FROM PHA IS THE INCOME FROM LIC BUSINESS BEING TAXABLE AT SPECIAL RATE OF 12.5% AS PER SECTION 44 OF THE INCOME TAX ACT, 1 961 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 AN D SEPARATELY TAXABLE @30%. ACCORDINGLY, THE NET SURPLUS / INCOME IN SHA ACCOUNT AMOUNTING TO RS.70.35 CRORES WAS ASSESSED AS BUSINESS INCOME BEING TAXABLE AT NORMAL 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 EXEMP TION OF INCOME OF RS.80.50 CRORES, EARNED FROM PENSION SEGMENT AND CL AIMED EXEMPT U/S 10(23AAB) BY THE ASSESSEE, WAS DENIED TO THE ASSESS EE. ITA NO. 2557/MUM/2017 SBI LIFE INSURANCE COMPANY LIMITED ASSESSMENT YEAR-2011-12 4 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 L INE OF BUSINESS. 4. THE LD. SENIOR COUNSEL FOR ASSESSEE [AR], SHRI FARROKH 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 ISSUE 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. 2557/MUM/2017 SBI LIFE INSURANCE COMPANY LIMITED ASSESSMENT YEAR-2011-12 5 6. RESULTANTLY, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH SEPTEMBER, 2018 SD/- SD/- (JOGINDER SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER (# MUMBAI; DATED :07.09.2018 SR.PS:-THIRUMALESH ! COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) / THE CIT(A) 4. ) / CIT CONCERNED 5. * !$+ +' (# / DR, ITAT, MUMBAI 6. GUARD FILE ' / BY ORDER, # '$% (DY./ASSTT.REGISTRAR) (# / ITAT, MUMBAI