ADDL CIT RG 1(2), MUMBAI V. LIFE INSURANCE COPORATION OF INDIA, MUMBAI

ITA 6689/MUM/2012

• Counselvise Citation: 668919914 RSA 2012
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY SINGH
• Assessee Lawyers: FAROOKH V IRANI
• Keywords: Valuation report
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.6689/MUM./2012 (ASSESSMENT YEAR : 200910 ) ASSTT. COMMISSIONER OF INCOME TAX RANGE1(2), R.NO.535, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 .. APPELLANT V/S LIFE INSURANCE CORPORATION OF INDIA CENTRAL OFFICE,, YOGAKSHEMA JEEVAN BHIMA MARG B.P. 19953, MUMBAI 400 021 .... RESPONDENT REVENUE BY : SHRI SANJAY SINGH, D.R. ASSESSEE BY : SHRI FAROOKH V. IRANI, A.R. DATE OF HEARING 23.07.2015 DATE OF ORDER 19-8-2 015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER THE PRESENT APPEAL PREFERRED BY THE REVENUE IS DIRE CTED AGAINST THE IMPUGNED ORDER DATED 16 TH AUGUST 2012, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)2, [HEREINAFTER REFERRED TO AS THE CIT(A) ] MUMBAI, FOR THE ASSESSMENT YEAR 200910. THE GROUNDS RAISED BY THE ASSESSEE AR E AS FOLLOWS: '1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD CIT(A) IS CORRECT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOSS FROM JEEVAN SURAKSHA FUND IGNORING THE SETTLED POSITION OF LAW LIFE INSURANCE CORPORATION OF INDIA 2 THAT INCOME INCLUDES LOSS AND THAT THE INCOME FROM JEEVAN SURAKSHJ FUND DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE C ORPORATION U/S 10(23AAB) OF THE INCOME TAX ACT, 1961? 1.1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT (A) WAS JUSTIFIED IN IGNORING THE FACT THAT THE NON OBSTANTE CLAUSE IN SECTION 44 IS NOT EXTENDED TO SECTION 10(23AAB) OF THE INCO ME-TAX ACT 1961?' 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS CORRECT IN LAW IN HOLDING THAT PROVISIO NS OF 115-O RED WITH SECTION 115-Q OF THE ACT ARE NOT APPLICABLE IN THE CASE OF ASSESSEE? THE APPELLANT CRAVES LEAVE TO MAKE ADDITIONS, ALTER ATION, AMENDMENTS, CORRECTION, MODIFICATIONS TO OR OMISSIONS, DELETION OF THE AFORESAID GROUNDS OF APPEAL. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CALCULA TED ITS INCOME ON THE BASIS OF ACTUARIAL VALUATION SURPLUS WHICH WAS ARRIVED AF TER SETTING OFF THE LOSS INCURRED OF RS. 8460,99,92,471/- FROM JEEVAN SURAKSHA FUND W HICH IS PART OF THE INSURANCE BUSINESS OF THE ASSESSEE. 3. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO A S THE AO) DISALLOWED THE SETTING OFF OF SAID LOSS FROM THE INCOME OF THE AS SESSEE ON THE GROUND THAT INCOME AS REFERRED TO IN SECTION 10(23AAB) DOES NOT FORM P ART OF THE TOTAL INCOME. ON THE SAME ANALOGY THE NEGATIVE INCOME UNDER SECTION 10(A AB) I.E. LOSS WAS ALSO NOT LIABLE TO BE SET OFF AGAINST THE TOTAL INCOME. 4. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSE E IN VIEW OF THE ISSUE BEING DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE JU RISDICTIONAL HIGH COURT. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS AND RECOR DS BEFORE US. THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE IN ITA NO.3693 , 3623, 3691 AND 5001 ALL OF 2010 BY THE HONBLE JURISDICT IONAL HIGH COURT VIDE ORDER DATED 2 ND AUGUST, 2011. THE RELEVANT PART OF THE ORDER OF TH E HONBLE BOMBAY HIGH COURT (SUPRA) IS REPRODUCED AS UNDER: LIFE INSURANCE CORPORATION OF INDIA 3 17. IT IS NOT IN DISPUTE THAT THE JEEVAN SURAKSHA F UND IS A PENSION FUND APPROVED BY THE CONTROLLER OF INSURANCE APPOINTED B Y THE CENTRAL GOVERNMENT TO PERFORM THE DUTIES OF THE CONTROLLER OF INSURANCE UNDER THE INSURANCE ACT, 1938. THE LOSS INCURRED IN THE JEEVA N SURAKSHA FUND HAS BEEN CONSIDERED BY THE ACTUARY AS A BUSINESS LOSS, AS PER THE VALUATION REPORT AS ON THE LAST DAY OF THE FINANCIAL YEAR, AL LOWABLE UNDER SECTION 44 READ WITH THE FIRST SCHEDULE TO THE INCOME TAX ACT, 1961. THE FACT THAT THE INCOME FROM SUCH FUND HAS BEEN EXEMPTED UNDER SECTI ON 10(23AAB) WITH EFFECT FROM 1' APRIL 1997, DOES NOT MEAN THAT THE P ENSION FUND CEASES TO BE INSURANCE BUSINESS, SO AS TO FALL OUTSIDE THE PURVI EW OF THE INSURANCE BUSINESS COVERED UNDER SECTION 44 OF THE INCOME TAX ACT, 1961. IN OTHER WORDS, THE PENSION FUND LIKE JEEVAN SURAKSHA FUND W OULD CONTINUE TO BE GOVERNED BY THE PROVISIONS OF SECTION 44 OF THE INC OME TAX ACT, 1961 IRRESPECTIVE OF THE FACT THAT THE INCOME FROM SUCH FUND ARE EXEMPTED, OR NOT. THEREFORE, WHILE DETERMINING THE SURPLUS FROM THE I NSURANCE BUSINESS, THE ACTUARY WAS JUSTIFIED IN TAKING INTO CONSIDERATION THE LOSS INCURRED UNDER JEEVAN SURAKSHA FUND. 18. THE OBJECT OF INSERTING SECTION 10(23AAB) AS P ER THE BOARD CIRCULAR NO.762 DATED 18 1H FEBRUARY 1998 WAS TO ENABLE THE ASSESSEE TO OFFER ATTRACTIVE TERMS TO THE CONTRIBUTORS. THUS, T HE OBJECT OF INSERTING SECTION 10(23AAB) WAS NOT WITH A VIEW TO TREAT THE PENSION FUND LIKE JEEVAN SURAKSHA FUND OUTSIDE THE PURVIEW OF INSURAN CE BUSINESS BUT TO PROMOTE INSURANCE BUSINESS BY EXEMPTING THE INCOME FROM SUCH FUND. THEREFORE, IN THE FACTS OF THE PRESENT CASE, THE DE CISION OF THE INCOME TAX APPELLATE TRIBUNAL IN HOLDING THAT EVEN AFTER INSER TION OF SECTION 10(23AAB), THE LOSS INCURRED FROM THE PENSION FUND LIKE JEEVAN SURAKSHA FUND HAD TO BE EXCLUDED WHILE DETERMINING THE ACTUA RIAL VALUATION SURPLUS FROM THE INSURANCE BUSINESS UNDER SECTION 44 OF THE INCOME TAX ACT, 1961 CANNOT BE FAULTED. ACCORDINGLY, QUESTIONS CC) AND ( D) ARE ANSWERED IN THE AFFIRMATIVE. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT (SUPRA) IN THE OWN CASE OF THE ASSESSEE, HENCE RESPECTFULLY FOLLOWING THE SAME, THIS ISSUE IS ACCO RDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. THE GROUND NO.1 OF THE APPEAL IS THEREFOR E DISMISSED. LIFE INSURANCE CORPORATION OF INDIA 4 6. THE 2 ND GROUND IS AGAINST THE DELETION OF ADDITIONAL TAX O F RS.139,36,73,675/- BEING 15% OF AMOUNT PAID TO GOVT. OF INDIA BY THE A SSESSEE. 7. THE FACT OF THE CASE ARE THAT THE ASSESSEE PAID RS.929,11,837/- TO THE GOVT. OF INDIA IN TERM OF SECTION 28 AND 28A OF LIC ACT,1956 . THE AO TREATED THE SAME AS PAYMENT/DISTRIBUTION OF INCOME TO GOVT. OF INDIA OU T OF PROFITS /SURPLUS OF THE ASSESSEE AND THUS INVOKED THE PROVISIONS OF SECTION 115-O AND THUS LEVIED ADDITIONAL TAX @15% OF THE TOTAL AMOUNT PAID. 8. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESS EE BY HOLDING THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER O F THIS TRIBUNAL IN ITS OWN CASE IN ITA NO.3938/MUM/2012 AY 2007-08 AND ITA NO. 3939/M UM/2012 AY 2008- 09 DECIDED VIDE CONSOLIDATED ORDER DATED 10 TH JULY, 2013. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS AND RECO RDS BEFORE US. THE LD. AR OF THE ASSESSEE HAS BROUGHT OUR ATTENTION TO THE VA RIOUS DECISIONS OF THIS TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR EARLIER ASSESSMENT YEARS WHEREIN IT HAS BEEN HELD THAT CENTRAL GOVT. IS NOT A SHAREHOLDER AND THE AMO UNT PAID BY THE ASSESSEE LIC FROM THE PROFIT OF LIFE INSURANCE BUSINESS TO GOVT. OF INDIA UNDER STATUTORY OBLIGATION IN TERMS OF SECTION 28 AND SECTION 28A O F THE LIC ACT, 1956 IS NOT DIVIDEND AND THAT THE PROVISIONS OF SECTION 115-O A RE NOT APPLICABLE TO THE ABOVE PAYMENTS. RELIANCE CAN BE PLACED ON THE DECISIONS O F THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR AY 1998-99 IN ITA NO. 2025 DATE D 18.12.2006, FOR AY 199-00 TO 2001-02 VIDE CONSOLIDATED ORDER DATED 15.10.2007 AND FURTHER VIDE ITA NO.3938 AND 3939 (SUPRA),. RESPECTFULLY FOLLOWING T HE ABOVE DECISIONS, WE THEREFORE, UPHELD THE ORDER OF THE LD. CIT(A) ON TH IS ISSUE ALSO AND DISMISS THE GROUND NO.2. LIFE INSURANCE CORPORATION OF INDIA 5 11. IN THE RESULT, THE APPEAL IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 19.08.2015 SD/- SD/- SD/ - G.S. PANNU ACCOUNTANT MEMBER SD/ - SANJAY GARG JUDICIAL MEMBER MUMBAI, DATED: 19-08-2015 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 PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI