ACIT RG 10(1), MUMBAI V. ICICI LOMBARD GENERAL INSURANCE CO. LTD, MUMBAI

ITA 4373/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8605 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 20-09-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 20-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency
• Section: 43B; 115JB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI RAJENDRA SINGH, AM & SHRI VIJAY PAL RA O, JM ITA NO. 4286/MUM/2009 (ASST YEA 2002-03) & ITA NO. 4373/MUM/2009 (ASST YEA 2002-03) ICICI LOMBARD GENERAL INSURANCE CO LTD ZENITH HOUSE 2 ND FLOOR KESHAVRAO KHADE MARG OPP RACE COURSE, MAHALAXMI MUMBAI 34 VS THE ASSTT COMMR OF INCOME TAX RANGE 10(1), MUMBAI (APPELLANT/RESPONDENT ) (RESPONDENT/APPELLANT ) PAN NO. AAACI7904G ASSESSEE BY MS ARATI VISSANJI REVENUE BY SH PRITAM SINGH DT.OF HEARING 27 TH SEPT 2012 DT OF PRONOUNCEMENT 10 TH ,OCT 2012 PER VIJAY PAL RAO, JM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 14.5.2009 OF THE COMMISSIONER OF INCOME TAX(APPEALS) FOR THE ASSESSM ENT YEAR 2002-03. 2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND TH E LAW, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE IN RESPECT OF T HE REDUCTION/EXEMPTION FOR GAINS ON SALE OF INVESTMENT AMOUNTING TO RS.6,94 ,628 ON THE GROUND THAT PROFITS FROM INSURANCE BUSINESS ARE TO BE TAKEN TO BE BALANCE OF THE PROFITS AS DISCLOSED BY ANNUAL ACCOUNTS, SUBJECT TO THE ADJUST MENTS PROVIDED IN CLAUSE 5 (A) TO (C) AND IT IS NOT OPEN TO THE APPELLANT TO REDUCE THESE PROFITS FROM ITS COMPUTATION OF INCOME IN VIEW OF THE NON-OBSTINATE CLAUSE B OF RULE 5 OF THE FIRST SCHEDULE TO THE ACT. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND TH E LAW, THE CIT(A) ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF PREMIU M DEFICIENCY OF RS 5,15,00,000/- FOR COMPUTING BOOK PROFIT U/S 115JB ON THE GROUND THAT THE SAME 4286 & 4373/M/2009 ICICI LOMBARD GENERAL INSURANCE CO LTD 2 IS AN UNASCERTAINED PROVISION NOT ALLOWABLE UNDER CL AUSE (C), TO EXPLANATION 1, TO SECTION 11 5JB(2). 3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND TH E LAW, THE CIT(A) ERRED IN DIRECTING THE A.O. TO COMPUTE THE BOOK PROFI TS OF THE APPELLANT FOR THE PURPOSES OF MAT UNDER SECTION 1 15JB, BY ALLOWING THE URR TO THE EXTENT ALLOWABLE UNDER RULE 6E OF THE L.T. RULES EVEN AFTER GIVING A CLEAR FINDING THAT THE URR IS NOT HIT BY THE PROVISIONS OF CLAUSE (B), TO EXPLANATION 1, TO SECTION 115JB(2) FOR COMPUTING BOOK PROFIT THEREUNDER AS THIS IS NOT IN THE NATURE OF A RESERVE BUT RATHER AN ALLOWABLE DEDUCTION FOR COMPUTING REAL INCOME OF AN INSURANCE COMPANY. 3 GROUND NO.1 IS REGARDING EXEMPTION OF GAIN ON SAL E OF INVESTMENT. 4 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AN IDENTICAL ISSU E HAS BEEN CONSIDERED AND DECIDED BY US IN ASSESSEES OWN CASE FOR THE AY 200 3-04 VIDE EVEN DATED 10 TH OCT 2012 ORDER IN ITA NO. 2398/MUM/2009 AS UNDER: 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS A SPECIAL PROVISION FOR COMPUTATION OF INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAIN INTER-A LIA IN THE BUSINESS OF INSURANCE UNDER SECTION 44 OF THE I T ACT AND THE SA ME SHALL BE COMPUTED IN ACCORDANCE WITH THE RULE CONTAINING IN FIRST SCHEDUL E OF THE ACT. THE PROFITS AND GAINS OF BUSINESS OF INSURANCE OTHER THAN THE LI FE INSURANCE SHALL BE COMPUTED AS PER RULE 5 OF FIRST SCHEDULE AS UNDER: 5. THE PROFITS AND GAINS OF ANY BUSINESS OF INSURAN CE OTHER THAN LIFE INSURANCE SHALL BE TAKEN TO BE THE PROFIT BEFORE TAX AND APPROPRIATIONS AS DISCLOSED IN THE PROFIT AND LOSS AC COUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THE INSURANCE ACT, 1 938 (4 OF 1938) OR THE RULES MADE THEREUNDER OR THE PROVISIONS OF THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT, 1999 (4 O F 1999) OR THE REGULATIONS MADE THEREUNDER, SUBJECT TO THE FOLLOWI NG ADJUSTMENTS; A. SUBJECT TO THE OTHER PROVISIONS OF THIS RULE, ANY EX PENDITURE OR ALLOWANCE INCLUDING ANY AMOUNT DEBITED TO THE PROFI T AND LOSS ACCOUNT EITHER BY WAY OF A PROVISION FOR ANY TAX, DIVI DEND, RESERVE OR ANY OTHER PROVISION AS MAY BE PRESCRIBED WHICH IS NOT ADMISSIBLE UNDER THE PROVISIONS OF SECTIONS 30 TO 43B IN COMPUT ING THE PROFITS AND GAINS OF A BUSINESS SHALL BE ADDED BACK; B. (I) ANY GAIN OR LOSS ON REALISATION OF INVESTMENTS SHALL BE ADDED OR DEDUCTED, AS THE CASE MAY BE, IF SUCH GAIN OR LOSS IS NOT CREDITED OR DEBITED TO THE PROFIT AND LOSS ACCOUNT; (II) ANY PROVISION FOR DIMINUTION IN THE VALUE OF I NVESTMENT DEBITED TO THE PROFIT AND LOSS ACCOUNT, SHALL BE ADDED BACK; 4286 & 4373/M/2009 ICICI LOMBARD GENERAL INSURANCE CO LTD 3 C. SUCH AMOUNT CARRIED OVER TO A RESERVE FOR UNEXPIRED RI SKS AS MAY BE PRESCRIBED IN THIS BEHALF SHALL BE ALLOWED AS A DEDUCTION. 5.1 THE BARE READING OF THE AMENDED PROVISIONS OF RULE 5 OF FIRST SCHEDULE MAKES IT CLEAR THAT THE PROFITS AND GAIN S SHALL BE TAKEN TO BE THE PROFIT BEFORE THE TAX AND APPROPRIATELY DISCLOSED IN THE P&L ACCOUNT PREPARED IN ACCORDANCE WITH THE INSURANCE ACT, 1938 O R THE RULE MADE THEREUNDER OR THE PROVISIONS OF IRDA ACT. THERE IS NO DISPUTE THAT THE ASSESSEE BEFORE US HAS INCLUDED THE PROFIT ON SALE OF INVEST MENTS IN THE PROFIT AND GAIN AS DECLARED IN THE ACCOUNTS PREPARED IN ACCORDANCE WI TH THE PROVISIONS OF INSURANCE ACT 1938. IT IS ALSO NOT THE CASE OF THE ASSESSEE THAT THE PROFITS/GAINS ON SALE OF INVESTMENTS IS NOT REQUIRED TO BE INCLUDED IN THE P&L ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF INSURANCE ACT. THEREFORE, ONCE THE PROFIT ON SALE OF INVESTMENT IS RE QUIRED TO BE INCLUDED IN THE P& L ACCOUNT IN ACCORDANCE WITH THE PROVISIONS O F INSURANCE ACT, THEN AS PER THE RULE 5 OF FIRST SCHEDULE OF THE I T ACT, NO ADJUSTMENT IS REQUIRED TO BE MADE ON ACCOUNT OF THE AMOUNT OF PROFITS ON SALE OF INVESTMENT ALREADY INCLUDED IN THE P&L ACCOUNT. THUS, WE FIND FORCE A ND SUBSTANCE IN THE CONTENTION OF THE LD DR THAT ONCE THE ASSESSEE HAS INCLUDED THE GAIN ON SALE OF INVESTMENTS IN THE P&L ACCOUNT PREPARED AS PER TH E PROVISIONS OF THE INSURANCE ACT, 1938, THEN THE SAID AMOUNT CANNOT BE REDUCED WHILE COMPUTING THE INCOME AS PER PROVISIONS OF SEC. 44 R. W FIRST SCHEDULE OF THE I T ACT. 5.2 HOWEVER, IN THE SERIES OF DECISIONS OF THE TRI BUNAL A VIEW HAS BEEN TAKEN THAT THE AMENDMENT VIDE FINANCE ACT 1988 W.E. F 1.4.89, THE SUB RULE (B) OF RULE 5 OF FIRST SCHEDULE WAS OMITTED WITH TH E PURPOSE TO GRAND EXEMPTION TO THE INSURANCE COMPANIES WITH REGARD TO THE PROFIT ON SALE OF INVESTMENTS. THE TRIBUNAL HAS TAKEN NOTE OF THE FAC T THAT IN THE COROLLARY, IT HAS BEEN PROVIDED IN THE CIRCULAR NO.528 DATED 16.12. 1988 THAT THE LOSS INCURRED BY THE GENERAL INSURANCE COMPANIES ON REALIZ ATION OF INVESTMENT SHALL NOT BE ALLOWED AS DEDUCTION IN COMPUTING THE PROFIT CHARGEABLE TO TAX. 5.3 IN THE LATEST DECISION DATED 22.10.2010, THIS T RIBUNAL IN THE CASE OF TATA AIG GENERAL INSURANCE CO LTD VS ACIT IN ITA NO.2597/ MUM/2009 AFTER CONSIDERING THE EARLIER DECISIONS OF THE TRIBUNAL HA S HELD IN PARAS 18 TO 20 AS UNDER: 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. THERE IS NO DISPUTE THAT UNDER THE GUIDELINES ISSUED BY THE IRDA (AUDITORS REPORT) REGULATIONS OF 2002, FOR PREPARATION OF FINANCIAL ST ATEMENTS, THE PROFIT ON SALE OF INVESTMENTS IS TO BE CREDITED TO THE PROFI T AND LOSS ACCOUNT OF THE INSURANCE COMPANY. THERE IS ALSO NO DISPUTE TH AT THE ASSESSEE HAS CREDITED THE PROFIT AND LOSS ACCOUNT WITH SUCH PRO FIT THE QUESTION IS WHETHER SUCH PROFIT CAN BE EXCLUDED AND EXEMPTION CA N BE CLAIMED. RULE 5(B), AS IT STOOD BEFORE BEING OMITTED FROM 01 .04.1989, WAS AS FOLLOWS: - ANY AMOUNT EITHER WRITTEN OFF OR RESERVED IN THE ACC OUNTS TO MEET DEPREDATION OF OR LOSS ON THE REALIZATION OF INVE STMENTS 4286 & 4373/M/2009 ICICI LOMBARD GENERAL INSURANCE CO LTD 4 SHALL BE ALLOWED AS A DEDUCTION, AND ANY SUMS TAKEN CREDIT FOR IN THE ACCOUNTS ON ACCOUNT OF APPRECIATION OF OR GAI NS ON THE REALIZATION OF INVESTMENTS SHALL BE TREATED AS PART OF THE PROFITS AND GAINS; PROVIDED THAT THE ASSESSING OFFICER IS SATISFIED ABO UT THE REASONABLENESS OF THE AMOUNT WRITTEN OFF OR RESERVED IN THE ACCOUNTS, AS THE CASE MAY BE, TO MEET DEPREDATION OF OR LOSS ON THE REALIZATION OF INVESTMENT. THE ARGUMENT ON BEHALF OF THE ASSESSEE PRIMARILY IS THAT WHEN THE RULES FOR PREPARATION OF THE FINAL ACCOUNTS PROVIDE THAT THE PROFIT ON SALE OF INVESTMENTS, SHOULD BE SHOWN IN THE CREDIT SIDE OF T HE PROFIT AND LOSS ACCOUNT, THEN THERE WAS NO QUESTION OF RULE 5(B) BEI NG APPLICABLE AND THAT WAS THE REASON WHY THE SAID RULE WAS OMITTED WI TH EFFECT FROM 01.04.1989 AND THE EFFECT OF THE OMISSION IS THAT W HERE THE PROFIT AND LOSS ACCOUNT ALREADY INCLUDES THE PROFIT ON SALE OF INVESTMENTS, THE SAME SHALL STAND EXCLUDED. THE EFFECT OF THE OMISSI ON OF THE RULE WAS CONSIDERED BY THE PUNS BENCH OF THE TRIBUNAL IN ITS ORDER DATED 31 AUGUST 2009, IN THE CASE OF BAJAJ ALLIANZ GENERAL I NSURANCE COMPANY, IN ITA NO: 1447/PN12007 AND CO NO:521PN12007 (ASSES SMENT YEAR 2003-04). A COPY OF THE SAID ORDER HAS BEEN FILED B EFORE US. THE TRIBUNAL HAS ALSO CONSIDERED THE CIRCULAR NO.528 DATE D 16.12.1988. AFTER ANALYZING THE IMPACT OF THE OMISSION OF RULE 5 (B) AND THE CIRCULAR, THE TRIBUNAL HELD AS UNDER. - 8. A CONCLUSION CAN BE DRAWN ON THE BASIS OF THE A BOVE ELABORATE DISCUSSION THAT THE DELETION OF SUB RULE (B ) FROM RULE 5OF THE FIRST SCHEDULE WAS WITH A SPECIFIC PURPOSE. THIS SCHEDULE NOT ONLY PRESCRIBES THE METHOD OF COMPUTATION OF INCO ME OF INSURANCE BUSINESS IN PART (A) BUT ALSO PRESCRIBE THE METHOD OF COMPUTATION OF OTHER INSURANCE BUSINESS IN PART (B). RULE 5 IS WITHIN PART (B) AND EARLIER IT HAS PRESCRIBED THE METH OD OF TAXATION OF PROFIT ON SALE OF INVESTMENTS WHICH WAS LATER ON SCRAPED. EVEN BY APPLYING A REVERSE LOGIC WE MUST A RRIVE AT THE SAME CONCLUSION THAT HAD THE IMPUGNED INCOME WAS E ARLIER TAXABLE UNDER ONE SPECIFIC CLAUSE BUT EVEN ON ITS D ELETION NO CLAUSE WAS INTRODUCED OR REPLACED TO PRESCRIBE THE ME THOD OF TAXATION OF SUCH INCOME;. THEREFORE THE REVENUE DEPA RTMENT HAS NO RIGHT TO TAX SUCH AN INCOME IN THE ABSENCE OF ANY ENABLING PROVISION. NATURALLY, SUCH A DELETION CANNOT BE TREATED A SUPERFLUOUS ACTION BUT THIS CHANGE HAD TO GIVE A D EFINITE JUDICIAL MEANING. WE HAVE TO ASCRIBE A LOGICAL CONCL USION TO THE SAID DELETION OF SUB RULE (B) FROM RULE 5 AND T HE NATURAL MEANING IS THAT AFTER THE DELETION THE INCOME DESCRIB ED THEREIN IS OUT OF THE PURVIEW OF COMPUTATION OF INSURANCE BU SINESS FROM THE FIRST SCHEDULE THEREFORE CONSEQUENTLY CANNOT BE TAXED U/S 44 OF I T ACT. AFTER EXPRESSING THIS VIEW WE HEREB Y DISMISS THE CROSS OBJECTION V F THE REVENUE. 19: THE AFORESAID ORDER OF THE PUNE BENCH, WHICH WAS IN THE CASE OF A COMPANY CARRYING ON GENERAL INSURANCE BUSINESS, WAS FOLLOWED BY THE 4286 & 4373/M/2009 ICICI LOMBARD GENERAL INSURANCE CO LTD 5 MUMBAI BENCH OF THE TRIBUNAL IN ITS ORDER DATED 17.09. 2010, IN THE CASE :OF HDFC ERGO GENERAL INSURANCE COMPANY LTD., IN ITA NO: 338/MUM12009 (ASSESSMENT YEAR 2004- 05) AS ALSO IN ITS ORDER DATED 30.04.2010, IN THE CASE OF RELIANCE GENERAL INSURANC E CO. LTD., IN :ITA NO. 781/MUM12007 (AND OTHER APPEALS). COPIES OF THES E ORDERS HAVE ALSO BEEN FILED BEFORE US. IN THESE ORDERS IT HAS BE EN HELD THAT THE PROFIT ON SALE OF INVESTMENT IN THE CASE OF AN ASSESSEE CA RRYING ON GENERAL INSURANCE BUSINESS CANNOT BE BROUGHT TO TAX AFTER THE OMISSION OF RULE 5(B) AND AS PER THE CIRCULAR CITED ABOVE. SINCE THE CONTROVERSY BEFORE US IS IDENTICAL, RESPECTFULLY FOLLOWING THE ORDERS O F THE PUNS AND MUMBAL BENCHES OF THE TRIBUNAL CITED ABOVE, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE PROFIT OF Z47,45,699/- ON THE SALE OF INVESTMENTS FROM THE ASSESSMENT V 20. THE LEARNED CIT DR, HOWEVER, ARGUED THAT THE EFFE CT OF THE OMISSION OF RULE 5(B) IS JUST THE OPPOSITE OF WHAT THE ASSES SEE HAS CONTENDED. ACCORDING TO HIM, AFTER 01.04.1989 THE EXEMPTION WAS TAKEN AWAY. HE SUBMITTED FURTHER THAT THE PROFIT ON SALE OF THE INVES TMENT HAS ALREADY BEEN INCLUDED IN THE PROFIT AND LOSS ACCOUNT AND TH ERE IS NO AUTHORITY TO TAKE IT OUT EVEN UNDER RULE 5(B) AS IT EXISTED BE FORE 01.04.1989. ACCORDING TO HIM, THERE WAS NO SCOPE FOR APPLYING TH E RULES OF INTERPRETATION WHEN THE STATUTORY PROVISIONS ARE CLEA R. SINCE THE MATTER IS CONCLUDED BY THE ORDERS OF THE TRIBUNAL CITED SUPR A, WHERE ALL THESE ASPECTS HAVE BEEN CONSIDERED, WE ARE UNABLE TO TAKE A DIFFERENT VIEW OF THE MATTER. THUS GROUND NO.4 IS ALLOWED. 5.4 SINCE THE TRIBUNAL HAS BEEN TAKING A CONSISTENT VIEW ON THIS ISSUE IN A SERIES OF DECISIONS AS RELIED UPON BY THE LD AR OF T HE ASSESSEE; THEREFORE, TO MAINTAIN THE RULE OF CONSISTENCY AND UNIFORMITY ON THIS ASPECT, WE DEICIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVE NUE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5 THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND VIDE LETTER DATED 25.09.2012 AS UNDER: [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER HAS ERRED IN COMPUTING INCOME OF THE APPELLA NT UNDER SECTION 115JB OF THE ACT. [2] THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THAT PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE TO THE APPELLANT AS THE APPELLANT PREPARES ITS ACCOUNTS AS PER THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA) (PREPARATION OF FINANCIAL STATEMENT S AND AUDITORS REPORT OF INSURANCE COMPANIES) REGULATION, 2002 AND NOT AS PER PROVISIONS OF PART II AND ILL OF SCHEDULE VI OF THE COMPANIES ACT, 1956. 6 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AN IDENTICAL ISSU E HAS BEEN CONSIDERED AND 4286 & 4373/M/2009 ICICI LOMBARD GENERAL INSURANCE CO LTD 6 DECIDED BY US IN ASSESSEES OWN CASE FOR THE AY 200 3-04 IN ITA NO. 2398/MUM/2009 AS UNDER: 9 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO QUARREL ON THE POINT THAT THE ASSESSEE, BEING AN INSURANCE COMPANY IS NOT REQUIRED TO PREPARE ITS AC COUNTS AS PER PART II & III OF SCHEDULE VI OF THE COMPANIES ACT 1956. SUB . SECTION (2) OF SEC 211 ARE REQUIRED EVERY P&L ACCOUNTS OF THE COMPANIES SHALL BE PREPARED AS PER THE REQUIREMENT OF PART II OF SCHEDULE VI. HOWEVER, THE P ROVISO TO SUB. SEC (2) OF SEC. 211 OF THE COMPANIES ACT CREATES AN EXEMPTION OF APPLICABILITY OF SUB. SEC. (2) INTER-ALIA IN RESPECT OF INSURANCE COMPA NIES OR BANKING COMPANIES OR ANY OTHER COMPANIES ENGAGED IN GENERATION AND SUPP LY OF ELECTRICITY FOR WHICH A FORM OF PROFIT AND LOSS ACCOUNT HAS BEEN SPEC IFIED IN OR UNDER THE ACT GOVERNING SUCH CLASS OF COMPANY. EVEN IF AN IN SURANCE COMPANY DOES NOT DISCLOSE ANY MATTER IN THE BALANCE SHEET AND P&L ACCOUNT BECAUSE THE SAME IS NOT REQUIRED TO BE DISCLOSED BY THE INSURANCE ACT SHALL NOT BE TREATED UN-DISCLOSER OF A TRUE AND FAIR VIEW OF THE STATE OF A FFAIRS OF THE COMPANY AS THE SAID CONDITION HAS BEEN RELAXED BY SUB.,SEC 5 O F SEC 211 OF THE COMPANIES ACT . 9.1 IT IS TO BE NOTED THAT IN ORDER TO ALIGN THE PROVI SIONS OF THE I T ACT WITH THE COMPANIES ACT , AN AMENDMENT HAS BEEN BROUGHT IN TO THE STATUTE BY THE FINANCE ACT 2012 WHEREBY SEC 115JB HAS BEEN A MENDED W.E.F 2013 AND THEREFORE, PRIOR TO 1.4.2013, THE PROVISIONS OF SE C. 115JB CANNOT BE APPLIED IN CASE OF INSURANCE, BANKING, ELECTRICITY, GENERATION AND DISTRIBUTION COMPANIES AND OTHER CLASS OF COMPANIES, WHICH ARE NO T REQUIRED TO PREPARE THEIR ACCOUNTS AND PARTICULARLY BALANCE SHEET AND P&L ACCOUNT AS PER PART II & III OF SCHEDULE VI OF THE COMPANIES ACT. 9.2 THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASED OF STATE BANK OF HYDERABAD (SUPRA) HAS CONSIDERED AND DECIDED A SIMIL AR ISSUE; THOUGH IN THE CASE OF BANK IN PARAS 13 & 14 AS UNDER: 13. THE PROVISIONS OF SEC.1153B WILL BE APPLICABLE TO ALL COMPANIES. HOWEVER, IT IS CONTENDED THAT SEC.115JB WILL BE APP LICABLE ONLY WHERE THE ASSESSEE IS REQUIRED TO SHOW PROFIT & LOSS ACCOU NT IN ACCORDANCE WITH SCHEDULE VI OF COMPANIES ACT. AS THE BANKS ARE REQUIRED TO PREPARE BALANCE SHEET AND PROFIT & LOSS ACCOUNT IN A CCORDANCE WITH THE BANKING REGULATION ACT, PROVISION OF 115JB CANN OT BE APPLIED TO THE BANKS. IN THE CASE OF MAHARASHTRA STATE ELECTRICIT Y BOARD VS. )CIT (82 LTD 422) IT WAS HELD THAT PROVISIONS OF BOOK PROF IT CANNOT BE APPLIED TO ELECTRICITY COMPANIES. BANKING COMPANIES AND COM PANIES ENGAGED IN GENERATION AND SUPPLY OF ELECTRICITY DO NO T HAVE TO PREPARE THEIR ACCOUNTS IN ACCORDANCE WITH PARTS II AN D III OF SCH. VI OF THE COMPANIES ACT BY THE VIRTUE OF PROVISO TO SEC 21 1(2) OF THE COMPANIES ACT. WE FIND THAT BY THE FINANCE ACT 2012 , WITH EFFECT FROM 1.4.2013, EVEN COMPANIES TO WHICH PROVISO TO SEC 211 (2) APPLIES (THE BANKING COMPANIES AND COMPANIES ENGAGED IN GENERATI NG AND DISTRIBUTION OF ELECTRICITY), SHOULD PREPARE THEIR P&L AND BALANCE SHEET IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNI NG SUCH 4286 & 4373/M/2009 ICICI LOMBARD GENERAL INSURANCE CO LTD 7 COMPANIES. THIS WOULD MEAN THAT PRIOR TO AY 2013-14, PROVISIONS OF SEC 115)B WILL NOT APPLY TO COMPANIES TO WHICH PROVISO TO SEC 211(2) OF THE COMPANIES ACT, 1956 APPLIES. TH ASSESSEE BEING A CO MPANY TO WHICH PROVISO TO SEC 211(2) OF THE COMPANIES ACT 1956 APP LIES, WILL NOT BE LIABLE TO BE TAXED UNDER SEC 115JB. 14. THE MUMBAI TRIBUNAL IN THE CASE OF KRUNG THAI BA NK VS. JCIT (133 TTJ 435), TO WHICH ONE OF US IS A PARTY HAS HELD THAT P ROVISIONS OF SEC 115JB CANNOT BE APPLIED TO THE BANKING COMPANY. 9.3 SIMILARLY, IN THE CASE OF RELIANCE ENERGY (SUPRA) , THE COORDINATE BENCH OF THIS TRIBUNAL HAS HELD IN PARAS 28 & 29 AS UNDER : 28 AS DISCUSSED ABOVE WHEN IT IS NOT POSSIBLE TO P REPARE THE ACCOUNTS UNDER THE COMPANIES ACT FOR THE PURPOSE OF COMPUTATION U/S 115JB, THEREFORE, THE ASSESSEE CANNOT BE FORCED TO PREPARE THE ACCOUNTS WHEN IT IS NOT POSSIBLE. THEREFORE, WE ARE IN AGREEMENT WITH THE CONTENTIONS OF THE ASSESSEE IN AS MUCH AS THE A CCOUNTING POLICIES FOLLOWED IN THE ELECTRICITY ACCOUNTS IF FOLLOWED FO R THE PREPARATION OF COMPANIES ACT ACCOUNT WILL NOT DISCLOSE TRUE AND FA IR VIEW AND WILL NOT BE IN ACCORDANCE WITH PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT. THE RATIO OF THE DECISIONS OF THE HONBLE SUP REME COURT AND THE RATIO OF THE DECISION OF THE TRIBUNAL DISCUSSED ABOV E ARE IN SUPPORT OF THE CONTENTIONS OF THE ASSESSEE. WE FURTHER FOUND THAT THE ISSUE OF APPLICABILITY OF SEC. 115J CAME BEFORE THE TRIBUNAL FOR AY 88-89. TAKING INTO CONSIDERATION THE PREPARATION OF ACCOUNTS UNDER THE ELECTRICITY ACT AND OTHER CONTENTIONS THE ASSESSEE INCLUDING THE DECISIONS OF THE SUPREME COURT IN THE CASE OF B.C.SRINIVASA SETTY (SU PRA), THE TRIBUNAL HAS HELD THAT THE PROVISIONS OF SEC. 115J ARE NOT AT TRACTED ON THE FACTS OF THE PRESENT CASE. 29 AS DISCUSSED ABOVE, THE ASSESSEE IS FOLLOWING TH E ACCOUNTING POLICIES UNDER THE ELECTRICITY SUPPLY ACT AND PREPARED ITS ACCOUNTS IN VIEW OF THOSE VERY POLICIES. FOLLOWING THOSE VERY P OLICIES, THE ACCOUNTS IN ACCORDANCE WITH PART II & III OF SCHEDULE VI OF TH E COMPANIES ACT ARE NOT APPLICABLE AT ALL. ONCE THERE IS NO POSSIB ILITY FOR PREPARING THE ACCOUNTS IN ACCORDANCE WITH THE PART II & II OF SCHE DULE VI OF COMPANIES ACT THEN THE PROVISIONS OF SEC. 115JB CANN OT BE FORCED. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCE S AND RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF THE HO NBLE SUPREME COURT AND THE DECISION OF THE TRIBUNAL FOR AY 88-89, W E HOLD THAT PROVISIONS OF SEC. 115JB ARE NOT APPLICABLE ON THE F ACTS OF THE PRESENT CASE. 10 FOLLOWING THE DECISIONS OF THE COORDINATE BENCHES OF THIS TRIBUNAL, WE HOLD THAT WHEN THE INSURANCE COMPANIES, BANKING COMP ANIES AND ELECTRICITY GENERATION AND DISTRIBUTIONS COMPANIES ARE TREATED IN THE SAME CLASS AS PER THE PROVISIONS OF SEC. 211 OF THE COMPANIES ACT IN P REPARING THEIR FINAL ACCOUNTS, THEN THESE COMPANIES CANNOT BE TREATED DI FFERENTLY FOR THE PURPOSE OF SEC. 115JB AND ACCORDINGLY, THE PROVISIONS OF SEC. 115JB ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. 4286 & 4373/M/2009 ICICI LOMBARD GENERAL INSURANCE CO LTD 8 ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 7 THE REVENUE HAS RAISED THE ONLY GROUND IN ITS APP EAL AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD CIT(A) HAS ERRED IN DIRECTING TO COMPUTE THE BOOK PROF ITS OF THE COMPANY, FOR THE PURPOSE OF MAT U/S 115JB BY ALLOWING THE URR RESE RVE TO THE EXTENT ALLOWABLE U/R 6E OF THE I T RULES, WITHOUT APPRECIAT ING THAT CLAUSE (B) OF EXPLANATION TO SECTION 115JB PROVIDES TO INCREASE TH E BOOK PROFIT BY THE AMOUNT CARRIED TO ANY RESERVES, BY WHATEVER NAME CALL ED, OTHER THAN A RESERVE SPECIFIED U/S 33AC AND NO SUCH ALLOWANCE OF RE SERVE U.R 6E IS ALLOWABLE THEREIN . 8 THE OTHER GROUNDS RAISED BY THE ASSESSEE AS WELL AS THE ONLY GROUND RAISED BY THE REVENUE IS WITH REGARD TO ADJUSTMENTS MADE WHIL E COMPUTATION OF BOOK PROFIT FOR THE PURPOSE OF MAT U/S115JB. 9 SINCE WE HAVE DECIDED THE ISSUE OF APPLICABILITY OF PROVISIONS OF SEC. 115JB WHILE DECIDING THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IN FAVOUR OF THE ASSESSEE; THEREFORE, THE OTHER GROUND RAISED IN ASS ESSES APPEAL AS WELL AS REVENUES APPEAL HAVE BECOME INFRUCTUOUS AND ACCORDINGLY, THE SAME ARE DISMISSED. 10 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED; WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH , DAY OF OCT 2012. SD/ - SD/- ( RAJENDRA SINGH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 10 TH OCT 2012 RAJ* 4286 & 4373/M/2009 ICICI LOMBARD GENERAL INSURANCE CO LTD 9 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI