ASST CIT CIR 6(1)(2), MUMBAI V. BIRLA SUN LIFE INSURANCE CO. LTD, MUMBAI

ITA 3911/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6499 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 29-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Set aside
• Section: 143(3); 14A; 250

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO. 3911/MUM/2017 FOR (ASSESSMENT YEAR 2009-10) ACIT, CIR-6(1)(2), R.NO. 563, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI-400020. VS. M/S BIRLA SUN LIFE INSURANCE CO. LTD., ONE INDIABULLS CENTRE, TOWER-1, 15 TH & 16 TH FLOORS, JUPITER MILL COMPOUND, 841, SENAPATI MARG, ELPHINSTON ROAD, MUMBAI-400013. PAN: AABCB4623J APPELLANT RESPONDENT APPELLANT BY : DR. NARENDER KUMAR (DR) RESPONDENT BY : SHRI YOGESH THAR WITH SHRI ADITYA GOSALIA (AR) DATE OF HEARING : 19.02.2019 DATE OF PRONOUNCEMEN T : 19.02.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-12, MUMBAI [FOR SHORT THE LD. CIT(A)] DATED 22.03.2017, WHICH IN TURN ARISES FROM THE ASSESSMEN T ORDER PASSED UNDER SECTION 143(3) ON 30.03.2016 FOR ASSESSMENT YEAR 20 13-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT AO CANNOT MAKE A D ISALLOWANCE U/S 14A OF THE ACT IN RESPECT OF INCOME FROM DIVIDEND.' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON A CCOUNT OF NEGATIVE RESERVES OF RS.3634,99,75,000/- BY NOT APPRECIATING THE FACT THAT THE NEGATIVE RESERVE CANNOT BE TAKEN AS ZERO AS THE SAME IS NOT IN ACCORDANCE WITH THE INSURANCE ACT 1938 AND IRDA REGULATIONS.' ITA NO. 3911 MUM 2017-M/S BIRLA SUN LIFE INSURANCE CO. LTD. 2 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPE ALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERED IN FAVOUR OF ASSESSEE EITHER IN ASSESSEES OWN CASE OR BY THE DECISION OF HONBLE HIGH COURTS. GROUND NO.1 RELATES TO DISALLO WANCE UNDER SECTION 14A. THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS G ROUND OF APPEAL IS COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES O WN CASE FOR ASSESSMENT YEAR 2012-13 AND 2014-15, WHEREIN THE TRIBUNAL WHIL E FOLLOWING THE ORDER OF ASSESSMENT YEAR 2004-05 GRANTED THE RELIEF TO TH E ASSESSEE. THE LD. AR OF THE ASSESSEE FURNISHED THE COPY OF DECISION OF T RIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 681/MUM/2017 DATED 31.10.2018 AND I TA NO. 6390/MUM/2017 FOR ASSESSMENT YEAR 2012-13 AND 2014- 15 RESPECTIVELY. THE LD. AR OF THE ASSESSEE ALSO FURNISHED THE DECIS ION OF TRIBUNAL FOR ASSESSMENT YEAR 2004-05 IN ITA NO. 602/MUM/2009 DAT ED 09.09.2010. 3. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF TRIBUNAL IN ASSESSEES OWN CA SE FOR ASSESSMENT YEAR 2004-05, WHICH WAS FOLLOWED IN APPEAL FOR ASSESSMEN T YEAR 2012-13 AND 2014-15. THE CO-ORDINATE BENCH OF THE TRIBUNAL HELD THAT IT IS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO GO BEYOND THE SCOPE OF SECTION 44, SCHEDULE-1 OF THE ACT AND MAKE THE DISALLOWANCE BY APPLYING SECTION 14A. ITA NO. 3911 MUM 2017-M/S BIRLA SUN LIFE INSURANCE CO. LTD. 3 WE HAVE NOTED THAT THE CO-ORDINATE BENCH OF TRIBUNA L IN APPEAL FOR ASSESSMENT YEAR 2012-13 AND 2014-15, THE CO-ORDINAT E BENCH OF TRIBUNAL BY FOLLOWING THE DECISION OF ASSESSMENT YEAR 2004-0 5 PASSED THE FOLLOWING ORDER: 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER AFTER EXAMI NING THE RELEVANT DETAILS AS DISCUSSED IN PARA 5.16 AND 5.17 OF THE ASSESSMENT O RDER HAS DISALLOWED THE EXPENSES OF RS.30,18,496/- FOR EARNING DIVIDEND INC OME, THEREFORE, THE PLEA TAKEN BY THE LD. DR THAT THE ISSUE MAY BE SET ASIDE TO TH E FILE OF THE ASSESSING OFFICER IS DEVOID OF ANY MERIT. THIS BEING SO, AND KEEPING IN VIEW THAT THE TRIBUNAL IN ORIENTAL INSURANCE CO. LTD. VS. ACIT (2009) TIOL -1 72-ITAT-DEL AFTER DISCUSSING THE IDENTICAL ISSUE AT LENGTH HAS HELD T HAT SEC.44 PROVIDES FOR APPLICATION OF SPECIAL PROVISIONS FOR COMPUTATION O F PROFITS AND GAINS OF INSURANCE BUSINESS IN ACCORDANCE WITH RULE 5 OF SCH EDULE I AND, THEREFORE, IT IS NOT PERMISSIBLE TO THE ASSESSING OFFICER TO TRAVEL BEYOND SEC.44 AND SCHEDULE-I AND MAKE DISALLOWANCE BY APPLYING SEC.14 A OF THE ACT . THE ABOVE ORDER HAS CONSISTENTLY BEEN FOLLOWED BY THE TRIBUNAL IN THE A BOVE THREE CASES RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE LD. DR WE RESPECTFULLY, FO LLOWING THE CONSISTENT VIEW OF THE TRIBUNAL HOLD THAT IT IS NOT PERMISSIBLE TO THE ASSESSING OFFICER TO TRAVEL BEYOND SEC.44 AND SCHEDULE-I AND MAKE A.Y:04-05 DIS ALLOWANCE BY APPLYING SEC.14 A OF THE ACT AND ACCORDINGLY THE DISALLOWANCE OF RS.30,18,496/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT( A) IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE, ALLOWED. 10. GROUND NO.2 AND 3 ARE AGAINST THE SUSTENANCE OF DISALLOWANCE OF EXPENSES OF RS.11.00 LACS FOR INCREASE OF SHARE CAPITAL AND RS. 2,65,112/- ON ACCOUNT OF SOFT WARE EXPENSES. 11. THE BRIEF FACTS OF THE ABOVE ISSUES ARE THAT DU RING THE COURSE OF ASSESSMENT PROCEEDING ON EXAMINATION OF BALANCE SHEET IT WAS F OUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS INCREASED ITS AUTHORI SED CAPITAL. THE ASSESSEE WAS ASKED TO SUBMIT THE EXPENSES RELATED TO INCREASE OF SHARE CAPITAL AND WAS ALSO ASKED TO EXPLAIN AS TO WHY THESE EXPENSES SHOULD NO T BE DISALLOWED BEING CAPITAL EXPENSES. THE ASSESSING OFFICER AFTER CONSIDERING T HE MATERIAL AVAILABLE ON RECORD AND IN RELYING ON DECISIONS IN BROOKE BOND I NDIA LTD. 225 ITR 798( SC), PSIDCL VS. CIT 225 ITR 792( SC) AND CIT VS. HINDUSTAN INSECTICIDES LTD . 250 ITR 338(DEL.) DISALLOWED THE EXPENSES OF RS.11.00 L ACS ON ACCOUNT OF INCREASE IN AUTHORISED CAPITAL AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE . ON APPEAL, THE ITA NO. 3911 MUM 2017-M/S BIRLA SUN LIFE INSURANCE CO. LTD. 4 LD. CIT(A) WHILE REJECTING THE CLAIM OF THE ASSESSE E THAT THE ASSESSEE'S CASE IS COVERED U/S.44 OF THE ACT UPHELD THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER. 5. CONSIDERING THE DECISION OF TRIBUNAL WHEREIN IT WAS HELD THAT WHILE MAKING ASSESSMENT FOR INSURANCE COMPANIES, IT IS NOT PERMI SSIBLE FOR ASSESSING OFFICER TO TRAVEL BEYOND SECTION 44 AND FIRST SCHED ULE AND MADE THE DISALLOWANCE BY APPLYING SECTION 14A. WE HAVE FURTH ER NOTED THAT LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 AND 2004-05 THAT IT IS NOT PERMISSIBLE FOR ASSESSING OFFICER TO TRAVEL BEY OND SECTION 44 AND FIRST SCHEDULE OF THE ACT AND CANNOT MADE A DISALLOWANCE UNDER SECTION 14A. NO CONTRARY LAW IS BROUGHT TO OUR NOTICE, THEREFORE, R ESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH AND CONSISTENCY, GROU ND NO.1 OF THE APPEAL IS DISMISSED. 6. GROUND NO.2 RELATES TO ADDITION ON ACCOUNT OF NEGAT IVE RESERVE. THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS ALSO COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY VARIOUS DECI SIONS OF HONBLE BOMBAY HIGH COURT AS WELL AS THE CO-ORDINATE BENCH OF TRIB UNAL. THE LD. AR OF THE ASSESSEE FURNISHED THE COPY OF FOLLOWING DECISIONS: 1. CIT V. HDFC STANDARD LIFE INSURANCE COMPANY (ITA NO . 548 OF 2014) (BOM). 2. CIT V LIFE INSURANCE CORPORATION OF INDIA (ITA N 17 59 OF 2013)(BOM). 3. LIFE INSURANCE CORPORATION OF INDIA V. CIT 951 ITR 773) (SC). 4. CIT V. ICICI PRUDENTIAL INSURANCE CO. LTD. (ITA NO. 711 READ WITH ITA NO. 688) (BOM). 5. ICICI PRUDENTIAL INSURANCE CO. LTD. VS. ACIT (ITA N O. 6854/MUM/2010) (MUM). ITA NO. 3911 MUM 2017-M/S BIRLA SUN LIFE INSURANCE CO. LTD. 5 6. ACIT V. SBI LIFE INSURANCE COMPANY LTD. (ITA NO. 25 57/MUM/2017). 7. LIFE INSURANCE CORPORATION V. ADIT (ITA NO. 6221/MU M/2012) (MUM). 8. HDFC STANDARD LIFE INSURANCE COMPANY LTD. V. DCIT ( ITA NO. 2203/MUM/2012) (MUM). 7. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RELIE D UPON THE ORDER OF ASSESSING OFFICER. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER IN PARA- 5.14 OF THE ORDER RECORDED THAT THE ISSUE OF NEGATIVE RESERVE IS COVE RED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF LIFE INSURANCE CORPORATION OF INDIA (LIC) FOR ASSESSMENT YEAR 2007-08, 2008-09 & 2009-1 0 AND IN CASE OF ICICI PRUDENTIAL INSURANCE CO. LTD. FOR ASSESSMENT YEAR 2005-06, 2007-08 & 2008-09. THE ASSESSING OFFICER RECORDED THAT THE REVENUE HAS NOT ACCEPTED THE DECISION OF HONBLE HIGH COURT AND MAD E A PROPOSAL FOR FILE SPECIAL LEAVE PETITION BEFORE THE HONBLE SUPREME C OURT. THE ASSESSING OFFICER CONCLUDED THAT THE CONTENTION OF ASSESSEE I N TAKING THE NEGATIVE RESERVE IS ZERO IS NOT TENABLE AS THE SAME IS NOT I N ACCORDANCE WITH INSURANCE ACT, 1938 AND IRDA REGULATION. THE NEGATIVE RESERVE REPORTED BY THE ACTUARY WAS ADDED TO THE SURPLUS OF ACTUARIAL VALUA TION OF LIFE INSURANCE BUSINESS OF THE ASSESSEE AND MADE AN ADDITION OF RS . 3634,99,75,000/- ON ACCOUNT OF NEGATIVE RESERVE. ITA NO. 3911 MUM 2017-M/S BIRLA SUN LIFE INSURANCE CO. LTD. 6 9. WE HAVE NOTED THAT LD. CIT(A) WHILE FOLLOWING THE D ECISION OF HONBLE BOMBAY HIGH COURT IN ICICI PRUDENTIAL INSURANCE CO. LTD. IN ITA NO. 711, 688 OF 2013 GRANTED RELIEF TO THE ASSESSEE. 10. WE HAVE FURTHER NOTED THAT HONBLE BOMBAY HIGH COUR T IN CASE OF CIT V. HDFC STANDARD LIFE INSURANCE IN ITA NO. 548 OF 2014 DATED 10.10.2016 WHILE CONSIDERING THE SIMILAR QUESTION OF LAW FOLLO WED ITS EARLIER DECISION IN ICICI PRUDENTIAL INSURANCE CO. LTD. (SUPRA). CONSID ERING THE CONSISTENT DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE D O NOT FIND ANY MERIT IN THE GROUND OF APPEAL RAISED BY REVENUE. NO CONTRARY DECISION IS BROUGHT TO OUR NOTICE TO TAKE OTHER VIEW. IN THE RESULT, GROUN D NO.2 OF THE APPEAL IS ALSO DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/02/2019. SD/- SD/- MANOJ KUMAR AGGARWAL PAWAN SINGH ACCOUNTANT MEMBER JUDIC IAL MEMBER MUMBAI, DATE: 19.02.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR B BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI