Appeal details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 8079 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 7 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-03-2017
Appeal Filed By
Assessee
Bench Allotted
A
Next Hearing Date
28-09-2016
Assessment Year
2010-2011
Appeal Filed On
07-08-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.5118/MUM./2014 ( ASSESSMENT YEAR :2010 - 11 ) LIC OF INDIA, 3 RD FLOOR, YOGAKSHEMA, JEEVAN BIMA MARG, MUMBAI 400 021 PAN AAACL0582H . APPELLANT V/S ACIT 1(2), AAYAKAR BHAVAN MUMBAI. . RESPONDENT ASSESSEE BY : SHRI. FARROKH IRANI REVENUE BY : SHRI. R.P MEENA DATE OF HEARING 06.03.2017 DATE OF ORDER 07.03.2017 O R D E R PER: SHAMIM YAHYA THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LD. CIT - A DATED. 03.03.2014 AND PERTAINS TO ASSESSMENT YEAR 2010 - 11. 2. THE GROUNDS OF APPEAL READ AS UNDER: I) THE CIT - A ERRED IN CONFIRMING THE ACTION OF THE AO OF ADDING THE INCOME FROM SHAREHOLDERS FUNDS CREDITED DIRECTLY TO THE SHAREHOLDERS ACCOUNT. LIC OF INDIA ITA NO.5118/MUM./2014 2 II) THE CIT - A ERRED IN HIS INTERPRETATION OF ACT, THE INSURANCE ACT 1938, THE IRDA ACT AND THE IRDA (PREPARATION OF FINANCIAL STA TEMENTS AND AUDITORS REPORT OF INSURANCE COMPANIES) REGULATIONS 2002, THE IRDA (ASSETS, LIABILITIES AND SOLVENCY MARGIN OF INSURERS) REGULATIONS 2000. III) T HE CIT - A ERRED IN NOT DELETING THE INTEREST CHARGED BY THE AO U/S. 234D OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND AND /OR ALTER ALL OR ANY OF THE ABOVE GROUND OF APPEAL. 3. AT THE OUTSET IN THIS CASE LD. COUNSEL OF THE ASSESSEE F AIRLY CONCEDED THAT GROUND NO. (I) AND (II) ARE ALREADY DECIDED AGAINST THE ASSESSEE BY THE DECI SION OF THIS TRIBUNAL IN ASSESSMENT YEAR 2009 - 10 BY ORDER DATED 03.04.2013 IN ITA NO. 6221 & OTHERS IN ASSESSEES OWN CASE. 4. AS REGARDS GROUND NO. (III) LD. COUNSEL OF THE SUBMITTED THAT HE SHALL NOT BE PRESSING FOR THIS GROUND. 5. UPON HERE IN BOTH THE COUNSEL OF PERUSING THE RECORD WE FIND THAT GROUND NO. (I) AND (II) ARE DECIDED BY THE TRIBUNAL IN ASSESSEE OWN CASE IN THE ORDER C ITED ABOVE VIDE PARA 5 THEREOF. W E MAY GAI NFULLY REFERRED TO THE CONCLUDING PORTION OF THE ITAT ORDER AS UNDER: 1) WE HAVE R IVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BASIC QUESTION TO BE DECIDED BY US IS WHETHER THE INCOME RESPECT OF SHAREHOLDERS ACCOUNT SHOULD BE TAXED IN THE HANDS OF THE ASSESSEE LIC OF INDIA ITA NO.5118/MUM./2014 3 OR NOT? THE UNDI SPUTED FACTS RELEVANT FOR DECIDING THE ISSUE CAN B E SUMMARISED AS UNDER: I) LIC WAS ESTABLISHED BY THE LIC ACT,1956 , II) IN THAT YEAR GOVERNMENT OF INDIA HAD CONTRIBUTED RS . 5 CRORES TOWARDS CAPITAL OF THE CORPORATION. III) NO SHARES WERE ISSUED BY THE LIC TO GOVERNMENT OF INDIA. IV) ASSESSEE CORP ORATION HAD PREPARED ITS ACCOUNTS AS PER THE GUIDELINES ISSUED BY COMPETENT AUTHORITIES. V) AO DID NOT TAX THE SUM APPEARING IN THE POLICY - HOLDERS A/C., WHEREAS AMOUNT APPEARING IN THE SHAREHOLDERS A/C. WAS TREATED AS INCOME OF THE ASSESSEE BY HIM AND TAXED ACCORDINGLY. 2) WE FIND THAT THE BASIS FOR ALLOCATION FOR PROFIT BETWEEN THE SHAREHOLDER AND THE GOVERNMENT OF INDIA IS THE PROVISIONS OF SECTION 28 OF THE LIC ACT. FROM PAGE NO. 313 AND 114 OF THE PAPER BOOK IT BECOMES CLEARLY TH AT P ROFIT WAS ALLOCATED BY THE ASSESSEE ON THE BASIS OF A PARTICULAR FORMULA. THERE IS NO DOUBT THAT INCOME HAD ACCRUED TO THE ASSESSEE AND SAME WAS TRANSFERRED TO THE SHARE HOLDERS ACCOUNT. IN OUR OPINION ONCE INCOME IS EARNED BY THE ASSESSEE AND LAT ER ON IT IS APPLIED FOR SOME SPECIFIC PURPOSE IT CANNOT BE TREATED AS CHARGE ON PROFIT. WE ARE OF THE OPINION THAT IT IS APPLICATION OF INCOME. PREPARATION OF BOOKS OF ACCOUNTS AS PER THE INSURANCE ACCOUNT IS DIFFERENT FROM DETERMINING THE TAX LIABIL ITY UNDER INCOME TAX. INCOME TRANSFERRED TO POLICY HOLDERS A/C. WAS NOT LIC OF INDIA ITA NO.5118/MUM./2014 4 APPLICATION OF INCOME - IT WAS CHARGE ON INCOME AND THEREFORE AO HAD RIGHTLY EXCLUDED IT FROM TAXATION. 3) SECONDLY, INCOME EARNED BY THE ASSESSEE - CORPORATION ON DIVIDEND AND INTEREST, IN A STRICT SENSE, CANNOT BE HELD TO BE EARNED FROM THE INSURANCE BUSINESS. AS PER THE PROVISIONS OF THE ACT INCOME FROM INSURANCE BUSINESS IS EXEMPT FROM TAXATION AND NOT EVERY TYPE OF INCOME. WE AGREE THAT INITIAL CAPITAL CONTRIBUTION WAS MADE BY T HE GOVERNMENT OF INDIA IN 1955 FOR CARRYING OUT INSURANCE BUSINESS, BUT INCOME EARNED BY THE ASSESSEE AS DIVIDEND AND INTEREST IN THE YEAR UNDER CONSIDERATION CANNOT BE TERMED AS INCOME OF THE SOVEREIGN. IT IS NOT PART OF ANY TAX, DUTY, CES S OR ANY OTHER SIMILAR LEVY BY THE STATE, WHICH COULD BE TERMED ASINCOME OF GOVERNMENT OF INDIA. LIC CANNOT CLAIM THAT IT REPRESENTS GOVERNMENT OF INDIA IT IS ONE OF MANY A CORPORATIONS ESTABLISHED BY GOVERNMENT OF INDIA FOR SPECIFIC PURPOSES. INCOME EARNED BY IT FOR CARRYING OF BUSINESS OF LIFE INSURANCE IS EXEMPT AS PER THE PROVISIONS OF SECTION 44 OF THE ACT AND NOT BECAUSE THAT INCOME OF LIC IS INCOME OF GOVERNMENT OF INDIA. 4) WE HAVE PERUSED THE ORDER OF THE TRIBUNAL DATED 18.12.2006 (ITA 2 025/MUM/ 2000 - AY. 1998 - 99. THE BASIC QUESTION TO BE DECIDED IN THAT APPEAL WAS WHETHER THE ASSESSEE COULD BE SAID TO BE IN DEFAULT U/S.115 - Q OF THE ACT ON ACCOUNT OF NON - PAYMENT OF TAX ON DISTRIBUTED PROFITS U/S.115 - O OF THE ACT IN RESPE CT OF PAYMENT MADE TO CENTRAL GOVERNM ENT OUT OF THE SURPLUS PROFIT. AFTER DISCUSSING LIC OF INDIA ITA NO.5118/MUM./2014 5 FACTS OF THE CASE AND THE PROVISIONS OF THE SECTIONS 115 - O AND 115 - Q OF THE ACT, TRIBUNAL HELD THAT PAYMENT MADE BY THE ASSESSEE TO THE CENTRAL GOVERNMENT COULD NOT BE TR EATED AS DIVIDEND WITHIN THE AMBIT OF DEFINITION CLAUSE 2(22) OF THE ACT, THAT PROVISIONS OF SECTION 115 - O OF THE ACT WERE NOT APPLICABLE, THAT ASSESSEE COULD NOT BE DECLARED AS ASSESSEE IN DEFAULT U/S.115 Q OF THE ACT. IN OUR OPINION, IN T HE CASE RELIED UPON BY THE AR OF THE ASSESSEE, QUESTION OF TAXABILITY OF PARTICULAR ITEMS OF INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES WAS NOT BEFORE THE TRIBUNAL. THEREFORE, UPHOLDING THE ORDER OF THE FAA WE DECIDE GROUND OF APPEAL NO.3 AGAINST T HE ASSESSEE. 6. SINCE FACTS ARE IDENTICAL FOLLOWING THE ABOVE PRECEDENT WE UPHOLD THE ORDER OF LD. CIT - A. HENCE THE GROUND RAISED IN THIS REGARD STAND DISMISSED. 7. GROUND NO. 3 IS DISMISSED AS NOT PRESSED. LIC OF INDIA ITA NO.5118/MUM./2014 6 IN THE RESULT THIS APPEAL FILE BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.03.2017 SD/ - SD/ - RAVISH SOOD SHAMIM YAHIYA JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 07.03.2017 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 NISHANT VERMA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI LIC OF INDIA ITA NO.5118/MUM./2014 7
