DCIT 1(2), MUMBAI V. LIFE INSURANCE CORPORATION OF INDIA, MUMBAI

ITA 4874/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3822 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 23-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GULSHAN RAJ
• Assessee Lawyers: F V IRANI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH , JUDICIAL MEMBER ITA NO. 4874/MUM/2014 : (A.Y : 20 10 - 11 ) DCIT - 3(2) - 1, MUMBAI (APPELLANT) VS. M/S. LIFE INSURANCE CORPORATION OF INDIA CENTRAL OFFICE, YOGKSHEMA, JEEVAN BIMA MARG, P.B. NO. 19953, MUMBAI 400021 PAN : AAACL0528H (RESPONDENT) APPELLANT BY : SHRI GULSHAN RAJ RESPONDENT BY : SHRI F.V. IRANI DATE OF HEARING : 04/02/2016 DATE OF PRONOUNCEMENT : 24 /02/2016 O R D E R PER G.S. PANNU , A M : THE CAPTIONED APPEAL BY THE REVEN U E IS DIRECTED AGAINST THE ORDER OF CIT(A) - 2, MUMBAI DATED 03.03.2014, PERTAINING TO THE ASSESSMENT YEAR 2010 - 11, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 11.02.2013 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN ITS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. 'WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS CORRECT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON 2 M/S. LIFE INSURANCE CORPORATION OF INDIA ITA NO. 4874/MUM/2014 ACCOUNT OF LOSS FROM JEEVAN SURAKSHA FUND IGNORING THE SETTLED POSITION OF LAW THAT INCOME INCLUDES LOSS AND THAT THE LOSS FROM JEEVAN SURAKSHA FUND CAN BE SET OFF AGAINST TAXABLE INCOME OF THE ASSESSEE CORPORATION DESPITE THE FACT THAT JEEVAN SURAKSHA FUND IS COVERED U/S 10(23AAB) OF THE IT ACT WHEREBY THE INCOME INCLUDING THE LOSS IS NOT INCLUDIBLE IN THE TOTAL INCOME.' 1.1. 'WHETHER ON THE FACTS AND IN CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN IGNORING THE FACT THAT THE NON OBSTANTE CLAUSE IN SECTION 44 IS NOT EXTENDED TO SECTION 10(23AAB) OF INCOME TAX ACT.' 1.2. 'WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT NEGATIVE RESERVE HAS AN IMPACT OF REDUCING THE TAXABLE SURPLUS AS PER FORM - I AND THEREFORE, CORRESPONDING ADJUSTMENTS FOR NEGATIVE RESERVE NEED TO BE MADE TO ARRIVE AT TAXABLE SURPLUS?' 1.3. 'WHETHER ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD CIT(A) WAS CORRECT IS LAW IN HOLDING THAT PROVISIONS OF 115O READ WITH SECTION 115 - Q OF THE ACT ARE NOT APPLICABLE IN THE CASE OF ASSESSEE ?' 3. AT THE TIME OF HEARING IT WAS A COMMON POINT BETWEEN THE PA RTIES THAT THE ISSUES RAISED IN ALL THE GROUNDS OF APPEAL ARE COVERED BY THE EARLIER PRECEDENTS IN THE CASE OF ASSESSEE ITSELF, AND THEREFORE, THE APPEAL IS LIABLE TO BE DISPOSED OFF ACCORDINGLY. IN ORDER TO IMPART COMPLETENESS TO THE ORDER WE HEREINAFTER ENUMERATE EACH OF THE GROUNDS IN SERIATIM. 4. THE RESPONDENT - ASSESSEE IS ENGAGED IN THE BUSINESS OF LIFE INSURANCE AND FOR THE A SSESSMENT Y EAR UNDER CONSIDERATION IT FILED ITS RETURN OF INCOME ON 25.9.2010 DECLARING A TOTAL INCOME OF RS.17029,59,48,780/ - . IN THE ASSESSMENT FINALIZED BY THE ASSESSING OFFICER VARIOUS ADDITIONS/DISALLOWANCES WERE MADE WHICH WERE THE SUBJECT MATTER OF APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED PARTIAL RELIEF AND ON SOME OF SUCH ISSUES, THE REVENUE IS IN APPEAL BEFORE US AS PER THE ABOVE STATED GROUNDS OF APPEAL. 3 M/S. LIFE INSURANCE CORPORATION OF INDIA ITA NO. 4874/MUM/2014 5. THE FIRST ISSUE RAISED BY THE REVENUE BY WAY OF GROUND OF APPEAL NOS. 1 AND 1.1 IS IN RESPECT OF D ISALLOWANCE OF RS.7333,53,77,713/ - OF LOSS/DEFICIT FROM JEEVAN SURAKSHA FUND. AS PER THE ASSESSING OFFICER THE ASSESSEE , BEING A LIFE INSURANCE COMPANY, COMPUTED ITS INCOME ON THE BASIS OF ACTUARIAL VALUATION SURPLUS. HOWEVER, THE ASSESSEE HAD SET - OFF TH E DEFICIT ARRIVED AT IN THE JEEVAN SURAKSHA FUND AGAINST THE ACTUARIAL VALUATION SU R PLUS WHILE COMPUTING THE TOTAL INCOME. THE ASSESSING OFFICER DENIED THE CLAIM ON THE GROUND THAT IN TERMS OF SEC. 10(23AAB) OF THE ACT INCOME FROM JEEVAN SURAKSHA FUND WAS EXEMPT, AND THEREFORE, SUCH DEFICIT WAS NOT ELIGIBLE FOR SET - OFF AGAINST OTHER TAXABLE INCOME OF THE ASSESSEE. THE CIT(A) HAS SINCE ALLOWED THE CLAIM OF THE ASSESSEE BY RELYING UPON THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE ASSESSEES OWN CAS E IN RESPECT OF ASSESSMENT YEARS 2002 - 03 TO 2006 - 07. AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 6. IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF THE ASSESSEE FOR A SSESSMENT YEARS 2002 - 03 TO 2006 - 07 , WHICH HAS BEEN RELIED UPON BY THE CIT(A) , CONTINUES TO HOLD THE FIELD, AND THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE IMPUGNED DECISION OF THE CIT(A). AS A CONSEQUENCE, GROUND NOS. 1 & 1.1 OF APPEAL ARE DISMISSE D. 7. BY WAY OF GROUND OF APPEAL NO. 1.2 , THE REVENUE HAS RAISED THE ISSUE OF NEGATIVE RESERVES OF RS.41251,37,55,000/ - SHOWN IN FORM I. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT WHILE COMPUTING THE TAXABLE SURPLUS, THE NEGATIVE RESERVES WERE IGNORED. ON BEING SHOW CAUSED AS TO WHY THE NEGATIVE RESERVES SHOULD NOT BE 4 M/S. LIFE INSURANCE CORPORATION OF INDIA ITA NO. 4874/MUM/2014 TREATED AS INCOME OF THE ASSESSEE , IT WAS POINTED OUT THAT THE COMPUTATION WAS IN TERMS OF THE ACTUARIAL VALUATION CARRIED OUT IN ACCORDANCE WITH SEC. 13, 1 5, 49 & 64V OF THE INSURANCE ACT, 1938 AND IN TERMS OF THE IRDA REGULATIONS. IT WAS ALSO ASSERTED THAT THE PRESCRIBED METHODOLOGY FOR VALUATION OF THE ASSETS AND DETERMINATION OF THE LIABILITIES WAS FOLLOWED, ON THE BASIS OF WHICH, THE ACTUARIAL VALUATION OF SURPLUS WAS ARRIVED AT FOR THE PURPOSE OF TAXATION. THE CONTENTIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND ACCORDINGLY HE DISALLOWED THE ADJUSTMENT OF NEGATIVE RESERVES AMOUNTING TO RS.41251,37,55,000/ - . 8. BEFORE THE CIT(A), THE ASSESSEE POINTED OUT THAT SIMILAR ISSUE WAS DECIDED BY THE MUMBAI BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE ORDER DT. 3.4.2013 IN ITA NOS. 3702, 622 1, 3703/MUM/2012. ON THE BASIS OF THE DECISION OF THE TRIBUNAL IT WAS SOUGHT TO BE CANVASSED THAT THE ADDITION WAS NOT MERITED. THE CIT(A) HAS SINCE DELETED THE ADDITION BY FOLLOWING THE DECISION OF THE TRIBUNAL DT. 3.4.2013 ( SUPRA ) IN THE ASSESSEES OWN CASE. 9. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE DECISION OF THE TRIBUNAL DT. 3.4.2013 ( SUPRA ) PERTAINING TO ASSESSMENT YEAR 2009 - 10 ON AN IDENTICAL ISSUE CONTINUES TO HOLD THE FIELD AS IT HAS NOT BEEN ALTERED BY ANY HIGHER AUTHORITY. AS A CONSEQUENCE, WE FIND NO ERROR ON THE PART OF THE CIT(A) IN DELETING THE IMPUGNED ADDITION. THUS, GROUND OF APPEAL NO. 1.2 RAISED BY THE REVENUE IS ALSO DISMISSED. 10. THE LAST GROUND OF APPEAL IS WITH REGARD TO THE DETERMINATION OF DIVIDEND DISTRIBUTION TAX IN TERMS OF SEC. 115O OF THE ACT. IN THIS CONTEXT, THE RELEVANT FACTS ARE T HAT THE ASSESSING OFFICER NOTED THAT THE 5 M/S. LIFE INSURANCE CORPORATION OF INDIA ITA NO. 4874/MUM/2014 ASSESSEE HAD DISTRIBUTED/PAID RS.1030,92,27,000/ - TO THE GOVERNMENT OF INDIA ON WHICH DIVIDEND DISTRIBUTION TAX IN TERMS OF SEC. 115O OF THE ACT WAS NOT LEVIED. ACCORDINGLY, THE ASSESSING OFFICER INVOKED SEC. 115O OF THE ACT AND DETERMINED DIVIDEND TAX LIABILITY OF RS.154,63,84,050/ - . BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE PROVISIONS OF SEC. 115O OF THE ACT WERE NOT APPLICABLE TO THE ASSESSEE WHEN THE AMOUNT PAID FROM THE PROFITS OF LIFE INSURANCE BUSIN ESS TO THE CENTRAL GOVERNMENT WERE , UNDER A STATUTORY OBLIGATION , BELONGING TO THE CENTRAL GOVERNMENT. THE CIT(A) UPHELD THE PLEA OF THE ASSESSEE FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07 IN ITA NO. 4993 /M/2007 DT. 23.4.2009. AS A CONSEQUENCE, THE STAND OF THE ASSESSEE WAS ALLOWED AND THE ASSESSING OFFICER WAS DIRECTED TO DELETE THE TAX LIABILITY IMPOSED U/S. 115O OF THE ACT. 11. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE DECISION OF THE TRIBUNAL DT. 23.4.2009 ( SUPRA ) IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2006 - 07 SQUARELY COVERS THE CONTROVERSY AND SUCH DECISION OF THE TRIBUNAL CONTINUES TO HOLD THE FIELD. AS A CONSEQUENCE, THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND THE REVENUE FAILS ON THIS ASPECT ALSO. 12. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 T H FEBRUARY, 2016. SD/ - SD/ - ( JOGINDER SINGH ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 2 4 T H FEBRUARY, 2016 6 M/S. LIFE INSURANCE CORPORATION OF INDIA ITA NO. 4874/MUM/2014 COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR *SSL* I.T.A.T, MUMBAI