ACIT - 9(3)(2), MUMBAI V. FUTURE GENERALI INDIA LIFE INSURANCE LTD., MUMBAI

ITA 2836/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1708 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT PATANKAR
• Keywords: Question of law; Valuation report
• Section: 43B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI M ANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 2836 / MUM/2017 ( ASSESSMENT YEAR : 20 09 10 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 9 (3)(2), MUMBAI . APPELLANT V/S FUTURE GENERALI INDIA LIFE INSURANCE LTD. KNOWLEDGE HOUSE, SHAYAM NAGAR OFF. JOGESHWARI VIKHROLI LINK ROAD JOGESHWARI (E), MUMBAI 400 060 PAN AABCF0190Q . RESPONDENT ITA NO.2837/MUM/2017 ( ASSESSMENT YEAR : 2012 13 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 9(3)(2), MUMBAI . APPELLANT V/S FUTURE GENERALI INDIA LIFE INSURANCE LTD. KNOWLEDGE HOUSE, SHAYAM NAGAR OFF. JOGESHWARI VIKHROLI LINK ROAD JOGESHWARI (E), MUMBAI 400 060 PAN AABCF0190Q . RESPONDENT REVENUE BY : SHRI ABHIJIT PATANKAR ASSESSEE BY : SHRI DINKLE HARIYA DATE OF HEARING 09 .08.2018 DATE OF ORDER 31.08.2018 2 FUTURE GENERALI INDIA LIFE INSURANCE LTD. O R D E R PER SAKTIJIT DEY, J.M. A FORESAID APPEAL S HAVE BEEN FILED BY THE REVENUE CHALLENGING TWO SEPARATE ORDERS , BOTH DATED 20 TH JANUARY 2017, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 16 , MUMBAI, FOR THE ASSESSMENT YEAR S 200 9 10 AND 2012 13. 2 . GROUNDS RAISED BY THE REVENUE ARE COMMON AND IDENTICALLY WORDED IN BOTH THE APPEALS AND READ AS UNDER: I ) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS CORRECT IN CONCLUDING THAT TRANSFER FROM SHARE HOLDER ACCOUNT TO POLICY HOLDERS ACCOUNT AND SHOWN AS PART OF SURPLUS IN THE ACTUARIAL VALUATION WAS ONLY TRANSFER OF CAPITAL ASSE T AND NOT TAXABLE U/S 44 OF THE ACT R/W RULE 2 OF THE FIRST SCHEDULE? II ) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS CORRECT IN ALLOWING THE RELIEF TO THE ASSESSEE BY HOLDING THAT SURPLUS AVAILABLE BOTH IN POLICY HOLDERS ACCOUNT AND SHARE HOLDERS ACCOUNT IS TO BE CONSOLIDATED AND ONLY NET SURPLUS IS TO BE TAXED AS INCOME FROM INSURANCE BUSINESS? III ) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETI NG THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOSS FROM PENSION FUND IGNORING SETTLED POSITION OF LAW THAT INCOME INCLUDES LOSS AND THAT INCOME FROM PENSION FUND DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE CORPORATION U/S 10(23AAB) OF THE ACT? IV ) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS JUSTIFIED IN IGNORING THE FACT THAT THE NON OBSTANTE CLAUSE IN SECTION 44 IN NOT EXTENDED TO SECTION 10(23AAB) OF THE ACT? 3 FUTURE GENERALI INDIA LIFE INSURANCE LTD. 3 . GROUNDS NO.1 AND 2 ARE I N RELATION TO THE TAXABILITY OF PROFITS OF LIFE INSURANCE BUSINESS. 4 . BRIEF FACTS ARE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LIFE INSURANCE. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEARS DECLARING LOSS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE EXAMINING THE COMPUTATION O F PROFIT OF LIFE INSURANCE BUSINESS NOTED THAT IT HAS TO BE ASSESSED AS PER SECTION 44 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). THE ASSESSING OFFICER OBSERVED THAT AS PER THE SAID PROVISION, WHILE COMPUTING THE TAXABLE INCOME OF LIFE INSURANCE CO MPANIES, THE PROVISIONS CONTAINED UNDER SECTION 28 TO 43B OF THE ACT WOULD NOT APPLY. T HEREFORE, HE CALLED UPON THE ASSESSEE TO SUBMIT THE ACTUARIAL VALUATION REPORT OF THE RELEVANT FINANCIAL YEARS. IN RESPONSE, THE ASSESSEE SUBMITTED THE REQUIRED DETAILS AS PER WHICH THE SURPLUS AS ON 31 ST MARCH 2009, WAS ` 2,75,81,110, AND AS ON 31 ST MARCH 2012, WAS ` 11,39,67,000. SINCE , THE ASSESSEE HAD NOT OFFERED THE SURPLUSES IN THE COMPUTATION OF INCOME, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN WHY THEY SHOULD NOT BE ADDED TO THE TOTAL INCOME UNDER SECTION 44 OF THE ACT. THOUGH, THE ASSESSEE OBJECTED TO THE PROPOSED ADDITIONS BY MAKING ELABORATE SUBMISSIONS, HOWEVER, THE ASSESSING OFFICER REJECTING THE SUBMISSIONS OF THE ASSESSEE ADDED BACK THE SURPLUS OF ` 4 FUTURE GENERALI INDIA LIFE INSURANCE LTD. 2,75,81,110 AND ` 11,39,67,000 IN THE ASSESSMENT YEAR 2009 10 AND 2012 13 RESPECTIVELY. THE ASSESSEE CHALLENGED THE AFORESAID ADDITIONS BY FILING APPEAL S BEFORE THE FIRST APPELLATE AUTHORITY. 5 . THE LEARNED COMMISSIONER (APPEALS) FOLLOWING THE DECISION S OF THE TRIBUNAL IN CASE OF ICICI PRUDENTIAL INSURANCE CO. LTD. V/S ACIT, ITA NO.6854/MUM./2010, ETC., AND IN CASE OF SBI LIFE INSURANCE CO. LTD. V/S JCIT, ITA NO.3800/MUM./2009, ETC., DATED 23 RD MAY 2014 AND ALSO TAKING NOTE OF THE FACT THAT IN ASSESSEES OWN CASE IN ASSESSMENT YEAR S 2010 11 AND 2011 12 HE HAS DELETED SUCH ADDITION S, FOLLOWED THE SAME AND DELETED THE AD DITION S IN THE IMPUGNED ASSESSMENT YEARS AS WELL. 6 . THE LEARNED AUTHORISED REPRESENTATIVE , AT THE OUTSET , SUBMITTED THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11 AND 2011 12. IN THIS CONTEXT, THE LEARNED AUTHORISED REPRESENTATIVE FURNISHED COPIES OF THE ORDERS OF THE TRIBUNAL IN THE BENCH. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE , THOUGH , AGREED THAT THE ISSUE IN DISPUTE IS COVERED BY THE DECISION OF THE TRIBUNAL, HOWEVER, HE RE LIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER. 5 FUTURE GENERALI INDIA LIFE INSURANCE LTD. 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. WE FIND THAT IDENTICAL ADDITIONS RELATING TO NET SURPLUS AS PER ACTUARIAL VALUATION WAS MADE BY THE ASSESSING OFFICER IN ASSESSMENT YEAR S 2010 11 AND 2011 12. HOWEVER, THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE DELETED BY THE LEARNED COMMISSIONER (APPE ALS). WHILE DECIDING THE APPEAL PREFERRED BY THE REVENUE ON THE ISSUE IN ASSESSMENT YEAR 2011 12 IN ITA NO.4373/MUM./2013, DATED 30 TH MARCH 2017, THE TRIBUNAL UPHELD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) WITH THE FOLLOWING OBSERVATIONS: 6. WE HAVE HEARD THE RIVAL SUBMISS IONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE BEGIN WITH 1ST, 2ND & 3RD GROUND OF APPEAL AS THEY ADDRESS A COMMON ISSUE. WE FIND THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ICICI PRUDENTIAL INSURANCE CO. LTD. (SUPRA) HAS HELD THAT WHERE ASSES SEE WAS CARRYING ON LIFE INSURANCE BUSINESS AND TRIBUNAL FOLLOWING A DECISION OF SUPREME COURT, WHILE DETERMINING ASSESSEES INCOME UNDER SECTION 44, HAD TAKEN INTO CONSIDERATION TOTAL SURPLUS AS ARRIVED AT BY ACTUARIAL VALUATION AND FURTHER HELD THAT INCO ME FROM SHAREHOLDERS ACCOUNT WAS ALSO TO BE TAXED AS A PART OF LIFE INSURANCE BUSINESS, THERE WAS NO SUBSTANTIAL QUESTION OF LAW ARISING FOR CONSIDERATION. REFERENCE WAS MADE TO THE DECISION IN LIC OF INDIA VS. CIT (1964) 51 ITR 773, WHEREIN THE HON'BLE S UPREME COURT HAS HELD THAT THE ASSESSING OFFICER HAS NO POWER TO MODIFY THE ACCOUNT AFTER ACTUARIAL VALUATION IS DONE. THE ISSUES IN 1ST, 2ND & 3RD GROUND OF APPEAL IN THE INSTANT CASE ARE SQUARELY COVERED BY THE ABOVE JUDGEMENT. RESPECTFULLY FOLLOWING T HE SAME, WE DISMISS 1ST, 2ND & 3RD GROUND OF APPEAL FILED BY THE REVENUE. 9 . T HE SAME VIEW WAS REITERATED BY THE CO ORDINATE BENCH WHILE DECIDING REVENUES APPEAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11 VIDE ITA NO.4038/MUM./2015, DATED 23 RD JUN E 2017. THERE 6 FUTURE GENERALI INDIA LIFE INSURANCE LTD. BEING NO DIFFERENCE IN FACTS BROUGHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE , RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL ON THE DISPUTED ISSUE IN ASSESSEES OWN CASE, WE UPHOLD THE ORDER OF THE LEARNED COMMISS IONER (APPEALS) ON THE ISSUE. GROUNDS RAISED ARE DISMISSED. 10 . GROUND NO.3 AND 4 ARE AGAINST DELETION OF DISALLOWANCE OF LOSS FROM PENSION FUND. 11 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE IN THE COMPUTATION OF INCOME HAS CLAIMED EXEMPTION OF AN AMOUNT OF ` 20,16,38,543 UNDER SECTION 10(23AAB) OF THE ACT ON ACCOUNT OF SURPLUS / DEFICIT PENSION FUND. SIMILARLY, HE FOUND THAT IN ASSESSMENT YEAR 2012 13, THE ASSESSEE HAS CLAIMED EXEMPTION OF AN AMOUNT OF ` 4,63,95,291 UNDER SECTION 10(23AAB) OF THE ACT ON ACCOUNT OF SURPLUS / DEFICIT PENSION FUND. WHEN THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN WHY SUCH EXEMPTION CLAIM ED SHOULD NOT BE DISALLOWED, THE ASSESSEE RELYING UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF LIFE INSURANCE CORPORATION OF INDIA LTD. JUSTIFIED ITS CLAIM. B Y OBSERVING THAT THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF LIFE INSURANCE CORPORATION OF INDIA LTD. WAS CHALLENGED BY TH E DEPARTMENT BEFORE THE HON'BLE SUPREME COURT BY FILING SPECIAL LEAVE 7 FUTURE GENERALI INDIA LIFE INSURANCE LTD. PETITION, THE ASSESSING OFFICER DISALLOWED THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 10(23AAB) OF THE ACT. BEING AGGRIEVED OF SUCH DISALLOWANCE, THE ASSESSEE PREFERRED APPEAL B EFORE THE FIRST APPELLATE AUTHORITY. 12 . THE LEARNED COMMISSIONER (APPEALS) TAKING NOTE OF THE FACT THAT SIMILAR DISALLOWANCE MADE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11 AND 2011 12, WAS DELETED BY HIM , FOLLOWED THE SAME AND DELETED THE DISALLOWAN CE MADE IN THE IMPUGNED ASSESSMENT YEAR. 13 . THE LEARNED DEPARTMENTAL REPRESENTATIVE REITERATED THE OBSERVATIONS OF THE ASSESSING OFFICER. 14 . THE LEARNED AUTHORISED REPRESENTATIVE WHILE SUPPORTING THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) SUBMITTED THA T THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 2010 11 AND 2011 12. 15 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AT THE OUTSET, WE MUST OBSERVE THAT MERELY BECAUSE THE REVENUE HAS FILED S LP AGAINST THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF LIFE INSURANCE CORPORATION LTD. CANNOT BE VALID REASON FOR THE ASSESSING OFFICER IN NOT FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT WHICH IS BINDING ON HIM. BE THAT AS IT 8 FUTURE GENERALI INDIA LIFE INSURANCE LTD. MAY, WE HAVE NOTICED THAT WHILE DECIDING IDENTICAL ISSUE RAISED BY THE REVENUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 12, THE TRIBUNAL IN THE ORDER REFERRED TO ABOVE, HAS HELD AS UNDER: 6.1 NOW WE TURN TO 4TH, 5TH, 6TH AND 7TH GROUND OF APPEAL AS THEY ADDRESS A COMMON ISSUE. IN THE CASE OF LIFE INSURANCE CORPORATION OF INDIA LTD. (SUPRA), THE ASSESSEE WAS ENGAGED IN THE LIFE INSURANCE BUSINESS. IN ITS RETURN OF INCOME FOR THE A.Y. 2002 - 03, IT COMPUTED ACTUARIAL VALUATION SURPLUS BY EXCLUDING THE PROVISION FOR RESERVE ON ACCOUNT OF SOLVENCY MARGIN AMOUNTING TO RS. 3,500 CRORES AND LOSS IN JEEVAN SURAKSHA FUND. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE AND PASSED THE ASSESSMENT ORDER BY ADDING THE AMOUNT ON ACCOUNT OF THE PROVISION FOR SOLVENCY MARGIN AND LOSS FROM JEEVAN SURAKSHA FUND, INTER ALIA , ON THE GROUND THAT THE PROVISION FOR SOLVENCY MARGIN WAS NOT AN ASCERTAINED LIABILITY AND THAT INCOME FROM JEEVAN SURAKSHA FUND BEING EXEMPT U/S 10(23AAB), THE LOSS INCURRED FROM THE SAID FUND COULD NOT BE ADJUSTED AGAINST THE TAXABLE INCOME. ON APPEAL, THE COMMISSIONER (APPEALS) CONFIRMED THE ADDITIONS MADE BY THE AO. ON SECOND APPEAL, THE TRIBUNAL DELETED THE SAID ADDITION. THE REVENUE FILED APPEAL AGAINST THE ORDER OF THE T RIBUNAL BEFORE THE HIGH COURT. THE HON'BLE HIGH COURT HELD THAT (I) AMOUNT SET APART BY INSURANCE COMPANY TOWARDS SOLVENCY MARGIN AS PER THE DIRECTION GIVEN BY IRDA IS TO BE EXCLUDED WHILE COMPUTING ACTUARIAL VALUATION SURPLUS, AND (II) PENSION FUND LIKE J EEVAN SURAKSHA FUND WOULD CONTINUE TO BE GOVERNED BY PROVISIONS OF SECTION 44 IRRESPECTIVE OF THE FACT THAT INCOME FROM SUCH FUND IS EXEMPTED, OR NOT AND, THEREFORE, EVEN AFTER INSERTION OF SECTION 10(23AAB), LOSS INCURRED FROM PENSION FUND LIKE JEEVAN SUR AKSHA FUND HAS TO BE EXCLUDED WHILE DETERMINING ACTUARIAL VALUATION SURPLUS FROM INSURANCE BUSINESS U/S 44 OF THE ACT. WE FIND THAT THE ISSUES IN THE ABOVE GROUNDS OF APPEAL ARE SQUARELY COVERED BY THE ABOVE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT. WE FOLLOW THE JUDGEMENT AND DISMISS 4TH, 5TH, 6TH AND 7TH GROUND OF APPEAL FILED BY THE REVENUE. 16 . THE SAME VIEW WAS REITERATED BY THE CO ORDINATE BENCH WHILE DECIDING THE REVENUES APPEAL FOR ASSESSMENT YEAR 2010 11 (SUPRA). THERE BEING NO DIFFERENCE IN FACT POINTED OUT BY THE LEARNED 9 FUTURE GENERALI INDIA LIFE INSURANCE LTD. DEPARTMENTAL REPRESENTATIVE, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE CO ORDINATE BENCH IN ASSESSEES OWN CASE WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE DISPUTED ISSUE. GRO UNDS RAISED ARE DISMISSED. 17 . IN THE RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.08.2018 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 31.08.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI