DCIT 9(3)(2), MUMBAI V. FUTURE GENERALI INDIA LIFE INSURANCE CO LTD, MUMBAI

ITA 4038/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0109 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 26-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Keywords: Capital asset; Question of law
• Section: 14A; 10

Judgement Text

, J , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM & SHRI RAVISH SOOD, JM ITA NO.4038/MUM/2015 : ASST.YEAR 2010-2011 DY.COMMISSIONER OF INCOME - TAX CIRCLE 9(3)(2) MUMBAI. / VS. M/S.FUTURE GENERALI INDIA LIFE INSURANCE CO. LIMITED 12 TH & 15 TH FLOOR, TOWRE-1, INDIA BULLS FINANCE, 6 TH FLOOR, TOWER-3, SENAPATI BAPAT MARG, ELPHINESTONE ROAD MUMBAI 400 013. PAN : AAGCF0190Q. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : MS.ARJU GARODIA /RESPONDENT BY : SHRI DINKLE HARIYA / DATE OF HEARING : 20.06.2017 / DATE OF PRONOUNCEMENT : 23.06.2017 / O R D E R PER SHAMIM YAHYA, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER OF LEARNED CIT(A) DATED 20.03.2015 AND PERTAINS TO ASSESSMENT YEAR 2010-2011. 2. THE GROUNDS OF APPEAL READ AS UNDER:- I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE TRIBUNAL WAS CORRECT IN CONCLUDING THAT TRANSFER FROM SHARE HOLDERS ACCOUNT TO POLICY HOLDER'S 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. II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE TRIBUNAL WAS CORRECT IN ALLOWING THE RELIEF ITA NO.4038/MUM/2015. M/S.FUTURE GENERALI INDIA LIFE INSURANCE CO.LTD. 2 TO THE ASSESSEE 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. III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE I TAT IS JUSTIFIED IN RESTORING TO ASSESSING OFFICER THE ISSUE OF TAXING INCOME OF ASSESSEE ARISING FROM ACTIVITY UNCONNECTED WITH INSURANCE BUSINESS, (CONSEQUENT SET OFF LOSS), WITHOUT ASSIGNING ANY REASONS WHATSOEVER. IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IT AT OUGHT TO HAVE HOLD THE INCOME OF ASSESSEE ARISING FROM ACTIVITY UNCONNECTED WITH INSURANCE BUSINESS IS TAXABLE UNDER NORMAL PROVISION OF THE ACT TO THE EXCLUSION OF SECTION 44 OF THE INCOME TAX ACT READ WITH SCHEDULE THERETO? V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, SECTION 10 OF I. T. ACT IS APPLICABLE TO INSURANCE BUSINESS WHEN TOTAL INCOME OF INSURANCE ACTIVITY IS GOVERNED AND COMPUTED UNDER SCHEDULE 1 OF THE J. T. ACT INDEPENDENT OF VARIOUS COMPUTATIONAL PROVISIONS AS PRESCRIBED U/S 44 OF THE ACT? VI) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, INCOME SPECIFIED TO BE EXEMPT U/S 10 CAN BE REDUCED FROM INCOME OF INSURANCE BUSINESS CHARGEABLE TO TAX U/S 44 OF THE ACT READ WITH SCHEDULE 1 PARTICULARLY WHEN THE SECTION OF THE ACT HAVE TO BE GIVEN EFFECT TO IN SERETUM, UNLESS SPECIFIED OTHERWISE , AND CONSEQUENTLY HAVING ONCE COMPUTED INCOME U/S 44 PROCEDURALLY, ONE HAS TO MOVE AHEAD TO COMPUTE TOTAL INCOME AND NOT GO BACK TO SECTION 10 OF THE ACT. VII) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IT AT IS JUSTIFIED IN NOT CONFIRMING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF NEGATIVE RESERVE IGNORED IN CALCULATION OF LIABILITY TO ARRIVE AT ACTUARIAL SURPLUS?' ITA NO.4038/MUM/2015. M/S.FUTURE GENERALI INDIA LIFE INSURANCE CO.LTD. 3 VIII) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IT AT IS JUSTIFIED IN HOLDING THAT SECTION 14A IS NOT APPLICABLE TO INCOME OF INSURANCE BUSINESS COMPUTED U/S 44 OF THE ACT WHEN THE ITAT ITSELF HAD HELD THAT PROVISIONS OF SECTION 10 ARE APPLICABLE TO INCOME OF INSURANCE BUSINESS COMPUTED U/S 44 OF THE ACT THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ADDL. CIT 8(1) BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. AT THE OUTSET, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT GROUND NO. (VIII) IS NOT ARISING OUT OF THE ORDER OF LEARNED CIT(A). ACCORDINGLY, WE DISMISS THIS GROUND RAISED BY THE REVENUE. 4. FURTHERMORE, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT GROUND NOS. (I) TO (VII), IN THE APPEAL ARE ARISING OUT OF LEARNED CIT(A)S ORDER AND IT HAS BEEN WRONGLY MENTIONED AS ITAT. 5. THE LEARNED COUNSEL OF THE ASSESSEE AT THE THRESHOLD SUBMITTED THAT THE ISSUE RAISED IN GROUND (I) TO (VII) ABOVE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-2012 IN ITA NO.4373/MUM/2015 VIDE ORDER DATED 30.03.2017. 6. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT DISPUTE THIS PROPOSITION. ITA NO.4038/MUM/2015. M/S.FUTURE GENERALI INDIA LIFE INSURANCE CO.LTD. 4 7. UPON CAREFUL CONSIDERATION, WE NOTE THAT IDENTICAL ISSUES RAISED IN GROUND NO.(I) TO (VII) ABOVE HAVE BEEN DEALT WITH BY THIS TRIBUNAL IN THE AFORESAID ORDER AS UNDER:- 6. WE HAVE HEARD THE RIVAL SUBMISSIONS 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 ASSESSEE WAS CARRYING ON LIFE INSURANCE BUSINESS AND TRIBUNAL FOLLOWING A DECISION OF SUPREME COURT, WHILE DETERMINING ASSESSEE'S INCOME UNDER SECTION 44, HAD TAKEN INTO CONSIDERATION TOTAL SURPLUS AS ARRIVED AT BY ACTUARIAL VALUATION AND FURTHER HELD THAT INCOME 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 SUPREME 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 JUDGMENT. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS 1ST, 2ND & 3RD GROUND OF APPEAL FILED BY THE REVENUE. 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 LEEVAN SURAKSHA FUND. THE AO 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 BEING EXEMPT U/S 10(23AAB), THE LOSS INCURRED FROM THE ITA NO.4038/MUM/2015. M/S.FUTURE GENERALI INDIA LIFE INSURANCE CO.LTD. 5 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 TRIBUNAL 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 JEEVAN 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 SURAKSHA 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. 8. SINCE FACTS ARE IDENTICAL AND THERE IS NO CHANGE IN THE FACTS OR LAW, RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT, WE DECIDE GROUND NOS.(I) TO (VII) RAISED IN THIS APPEAL IN FAVOUR OF THE ASSESSEE. 9. ACCORDINGLY THE ORDER OF THE LEARNED CIT(A) IS UPHELD. 10. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 23 RD DAY OF JUNE, 2017. SD/- SD/- ( RAVISH SOOD ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 23 RD JUNE, 2017. DEVDAS* ITA NO.4038/MUM/2015. M/S.FUTURE GENERALI INDIA LIFE INSURANCE CO.LTD. 6 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.