PNB Metlife India Insurance Company Limited, Bangalore V. Pr. CIT, Bangalore

ITA 756/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0406 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K P KUMAR SENIOR
• Keywords: Source of fund; Valuation report

Judgement Text

ITA.756/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAY PAL RAO, JUDICIAL MEMBER I.T.A NO.756/BANG/2015 (ASSESSMENT YEAR : 2010-11) M/S. PNB METLIFE INDIA INSURANCE CO. LTD, NO.5, BRIGADE SESHMAHAL, VANI VILAS ROAD, BASAVANAGUDI, BANGALORE 560 004 .. APPELLANT PAN : AACCM6448H V. PRINCIPAL COMMISSIONER OF INCOME-TAX- 5, BANGALORE .. RESPONDENT ASSESSEE BY : SHRI. K. P. KUMAR, SENIOR COUNSEL REVENUE BY : SHRI. G. R. REDDY, CIT DR-I HEARD ON : 29.03.2016 PRONOUNCED ON : .04.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE IT ASSAILS AN ORDE R DT.19.03.2015 PASSED BY THE PR. CIT -5, BENGALURU, U/S.263 OF THE INCOME-TAX ACT, 1961 ('THE ACT' IN SHORT). ITA.756/BANG/2015 PAGE - 2 2. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN LIFE-INS URANCE BUSINESS HAD FILED ITS RETURN DECLARING LOSS OF RS.2,75,96,8 7,000/- . ASSESSMENT WAS COMPLETED BY THE AO ON 15.03.2013 U/S.143(3) OF THE ACT, ACCEPTING THE LOSS RETURNED BY THE ASSESSEE, AFTER SEEKING AND O BTAINING EXPLANATIONS OF THE ASSESSEE ON VARIOUS ASPECTS OF THE RETURN FILED . THEREAFTER ON 22.04.2014, A SHOW-CAUSE NOTICE WAS ISSUED BY THE C IT REQUIRING THE ASSESSEE TO EXPLAIN WHY THE ASSESSMENT OUGHT NOT BE CONSIDERED AS PREDUCIAL AND ERRONEOUS TO THE INTERESTS OF REVENUE . AS PER THE CIT, ASSESSEE HAD MIXED UP PROVISIONS OF SECTION 44 OF T HE ACT APPLICABLE TO INSURANCE COMPANY WITH NORMAL PROVISIONS OF THE ACT AND IN THE PROCESS AVAILED INELIGIBLE BENEFITS. CIT NOTED THAT AS PER SECTION 115B OF THE ACT, INCOME FROM INSURANCE BUSINESS WAS REQUIRED TO BE T AXED AT 12.5%, WHEREAS BALANCE OF THE TOTAL INCOME WAS TO BE TAXED AT NORMAL RATES. AS PER THE CIT, PROFITS AND GAINS OF LIFE-INSURANCE BUSINE SS HAD TO BE CARVED OUT OF THE TOTAL INCOME OF THE ASSESSEE WHICH WAS NOT DONE BY THE AO. AS PER THE CIT PROFITS AND GAINS OF LIFE-INSURANCE BUSINESS C OULD ALONE BE TAXED AT THE CONCESSIONAL RATE OF 12.5%, WHEREAS THE BALANCE OF INCOME WHICH RELATED TO SHAREHOLDERS' ACCOUNT WAS TO BE TAXED AT NORMAL RAT ES. THUS ACCORDING TO HIM THERE WAS OMISSION TO BRING TO TAX INCOME OF RS .24,31,68,000/- APPEARING IN THE SHAREHOLDERS ACCOUNT. ITA.756/BANG/2015 PAGE - 3 3. ASSESSEE IN ITS REPLY MENTIONED THAT ITS BUSINESS W AS COVERED BY INSURANCE ACT, 1938 AND INSURANCE REGULATORY AND DE VELOPMENT AUTHORITY (IRDA) ACT, 1999. AS PER THE ASSESSEE IT WAS ALL A LONG FILING THE RETURN OF INCOME BY AGGREGATING THE RESULT OF THE SHAREHOLDER S PROFIT AND LOSS ACCOUNT AND POLICY HOLDERS REVENUE ACCOUNT. THIS COMPUTATI ON AS PER THE ASSESSEE WAS IN ACCORDANCE WITH SECTION 44 R.W. RULE 2 OF TH E FIRST SCHEDULE TO THE INCOME-TAX ACT. ASSESSEE ALSO POINTED OUT TO THE C IT THAT AS PER THE REPORTING FORMATS PRESCRIBED UNDER IRDA (PREPARATIO N OF FINANCIAL STATEMENTS AND AUDITORS REPORT OF INSURANCE COMPANI ES) REGULATIONS, 2002, PRESENTATION OF ACCOUNTS OF LIFE-INSURANCE CO MPANIES HAD TO BE DONE IN A SEGREGATED MANNER, ONE AS SHAREHOLDERS PROFIT AND LOSS ACCOUNT AND THE OTHER AS POLICY HOLDERS SURPLUS/DEFICIT ACCOUNT. A SSESSEE ALSO POINTED OUT THAT THE ISSUE REGARDING AGGREGATION OF RESULTS IN THE SHAREHOLDERS ACCOUNT AND REVENUE ACCOUNT HAD COME UP BEFORE THE MUMBAI T RIBUNAL IN THE CASE OF ICICI PRUDENTIAL LTD V. ACIT ((2013) 140 ITD 41) . AS PER THE ASSESSEE, IT WAS HELD BY THE MUMBAI BENCH IN THE SAID DECISIO N THAT INCOME IN THE SHAREHOLDERS ACCOUNT WERE TO BE TAXED AS A PART OF LIFE-INSURANCE BUSINESS ONLY. FURTHER AS PER THE ASSESSEE, WHILE COMPUTING ITS PROFIT AND GAINS FROM LIFE-INSURANCE BUSINESS, IT HAD CONSIDERED THE ACTU AL VALUATION MADE IN ACCORDANCE WITH INSURANCE ACT, 1938. ASSESSEE ALSO POINTED OUT THE IRDA ITA.756/BANG/2015 PAGE - 4 REGULATIONS WHICH SPECIFICALLY REQUIRED CONSIDERATI ON OF ASSETS OF BOTH POLICY HOLDERS FUND AND SHAREHOLDERS FUND FOR MEETI NG SOLVENCY MARGIN REQUIREMENTS. AGAIN AS PER THE ASSESSEE, SECTION 2 7A OF THE INSURANCE ACT, 1938 REQUIRED A LIFE-INSURANCE COMPANY TO PLACE INV ESTMENT OUT OF A CONTROLLED FUND, WHICH MEANT ALL FUNDS OF AN INSURE R WITHOUT ANY DISTINCTION BETWEEN SHAREHOLDERS FUND AND POLICY HOLDERS FUND. ARGUMENT OF THE ASSESSEE WAS THAT THE SEGREGATION DONE WAS ONLY FO R WORKING OUT THE SOLVENCY MARGIN. ACCORDING TO IT, THE BALANCE SHEE T WAS ONLY ONE. IN ANY CASE AS PER THE ASSESSEE, THERE WAS SUBSTANTIAL LOS S IN POLICY HOLDERS ACCOUNT AND IF THIS WAS SET OFF AGAINST THE SURPLUS AVAILAB LE IN THE SHAREHOLDERS ACCOUNT NO PREJUDICE WOULD STILL RESULT TO THE REVE NUE. THUS ACCORDING TO IT THERE WAS NO ERROR IN THE ORDER OF THE AO AND NO PR EJUDICE CAUSED TO THE REVENUE. 4. HOWEVER, THE CIT WAS NOT IMPRESSED BY THE ABOVE REP LY. ACCORDING TO HIM, EVENTHOUGH ASSESSEE WAS A SINGLE ENTITY, I TS INCOME HAD TO BE DIVIDED INTO PROFITS FROM THE BUSINESS OF INSURANCE AND PROFITS PERTAINING TO SHAREHOLDERS ACCOUNT. HE WAS OF THE OPINION THAT T HE ENTIRE ISSUE REQUIRED FRESH CONSIDERATION BY THE AO. HE SET ASIDE THE O RDER OF THE AO WITH A DIRECTION TO THE AO TO REDO THE ASSESSMENT AFRESH. ITA.756/BANG/2015 PAGE - 5 5. NOW BEFORE US, LD. AR SUBMITTED THAT ALL THE REQUIR ED PARTICULARS REGARDING COMPUTATION OF INCOME WAS ASKED FOR BY TH E AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND FURNISHED BY T HE ASSESSEE. ACCORDING TO HIM THE DIVISION OF PROFIT AND LOSS AC COUNT INTO TWO VIZ., REVENUE ACCOUNT AND SHAREHOLDERS ACCOUNT WAS TO COM PLY WITH IRDA REGULATIONS. RELYING ON THE REGULATIONS ISSUED BY IRDA ON 30.03.2002. PLACED AT PAPER BOOK PAGES 2 TO 4, LD. AR SUBMITTED THAT A PERSON CARRYING ON LIFE-INSURANCE BUSINESS WAS REQUIRED TO COMPLY W ITH SCHEDULE 'A' OF THE SAID REGULATIONS. ACCORDING TO HIM, PART-V OF THE SAID SCHEDULE STIPULATED PREPARATION OF REVENUE ACCOUNT (POLICY HOLDERS ACCO UNT) PROFIT AND LOSS ACCOUNT (SHAREHOLDERS ACCOUNT), AND BALANCE SHEET I N FORM A -RA, A-PL AND A-BS RESPECTIVELY. THUS ASSESSEE HAD TO COMPLY WITH THE SUCH REGULATIONS AND WAS REQUIRED TO SEPARATELY PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE POLICY HOLDERS AND FOR THE SHAREHOL DERS ACCOUNT. THIS ACCORDING TO HIM DID NOT MEAN THAT ASSESSEE WAS DOI NG TWO TYPES OF BUSINESS. ASSESSEE AS PER THE LD. AR WAS DOING ONE BUSINESS WHICH WAS OF LIFE-INSURANCE. LD. AR SUBMITTED THAT LIABILITY IN RESPECT OF LIFE-INSURANCE POLICIES BASED ON ACTUARIAL VALUATION WAS CONSIDERE D IN THE REVENUE ACCOUNT OF THE POLICY HOLDERS. THERE WAS SUBSTANTIAL DEFIC IT IN THE SAID ACCOUNT. SHAREHOLDERS WERE RESPONSIBLE TO FINANCE THE DEFICI T IN THE POLICY HOLDERS ITA.756/BANG/2015 PAGE - 6 ACCOUNT. AS PER THE LD. AR ASSESSEE BY VIRTUE OF SE CTION 2(7A)(C) OF THE INSURANCE ACT 1938, A PERSON WHO WAS CARRYING ON ON LY LIFE-INSURANCE BUSINESS COULD DO NOTHING ELSE. INVESTMENTS MADE B Y THE ASSESSEE WERE IN THE COURSE OF SUCH BUSINESS FOR GENERATING INCOME FOR THE INSURANCE BUSINESS. ALL THESE ASPECTS, WERE EXAMINED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. RELYING ON THE DECISION OF MUMBAI BENCH IN THE CASE OF ICICI PRUDENTIAL CO. LTD (SUPRA), LD. AR SUBMITTED THAT SIMILAR ISSUE HAD COME UP AND IT WAS HELD THAT THE ENTIRE T RANSACTIONS BOTH UNDER POLICY HOLDERS AND SHAREHOLDERS ACCOUNT HAD TO BE C ONSOLIDATED INTO ONE. AS PER THE LD. AR, TRANSFER FROM ONE ACCOUNT TO ANO THER REMAINED TAX NEUTRAL. THUS ACCORDING TO HIM, THE VIEW TAKEN BY THE AO WAS NOT ONLY A POSSIBLE ONE UNDER LAW, BUT THE ONLY ONE THAT COULD HAVE BEEN TAKEN. IN ANY CASE AS PER THE LD. AR, CIT WAS UNABLE TO BRING OU T ANY ERROR IN THE ORDER OF AO MUCH LESS ANY ERROR PREJUDICIAL TO THE INTERE STS OF REVENUE. 6. PER CONTRA, LD. DR SUBMITTED THAT SECTION 11(1A) AN D 11(1B) OF THE INSURANCE ACT, 1938 CLEARLY DIFFERENTIATED THE GAIN S ARISING TO AN INSURANCE COMPANY FROM SHAREHOLDERS ACCOUNT AND POLICY HOLDE RS ACCOUNT. ONLY RELATIONSHIP BETWEEN THESE TWO, AS PER THE LD. AR W AS THE REQUIREMENT TO REPLENISH THE DEFICIT IN POLICY HOLDERS ACCOUNT FRO M THE SHAREHOLDERS ITA.756/BANG/2015 PAGE - 7 ACCOUNT. IRDA REGULATIONS MANDATED SEPARATION OF A CCOUNTS SO AS TO ENSURE SAFETY OF THE POLICY HOLDERS MONEY. THUS TH ERE WAS A CLEAR DEMARCATION BETWEEN SHAREHOLDERS FUND WHICH WERE US ED FOR THE PURPOSE OF INSURANCE AND SHAREHOLDERS FUNDS WHICH WERE USED FO R OTHER PURPOSES. THE PROFITS FROM LATTER, AS PER THE LD. DR, WAS NOT ELI GIBLE FOR ANY BENEFICIAL TAX TREATMENT. IN ANY CASE, AS PER THE LD. DR, AO HAD NOT VERIFIED CORRECTLY THE BASIS ON WHICH THE ASSESSEE HAD PREPARED ITS REVENU E ACCOUNT NOR VERIFIED THE DEFICITS. VIS-A-VIS, CONTENTION OF THE LD. AR THAT NO PREJUDICE WOULD BE CAUSED SINCE THE LOSS IN REVENUE ACCOUNT COULD BE S ET OFF AGAINST THE PROFITS IN SHAREHOLDERS ACCOUNT, LD. DR SUBMITTED THAT THI S WENT AGAINST SECTION 115B OF THE ACT WHICH REQUIRED DIFFERENT TREATMENT FOR BOTH TYPES OF INCOME. 7. WE HAVE PERUSED THE MATERIAL ON RECORD AND HEARD TH E RIVAL CONTENTIONS. CIT HAD CONSIDERED THE ASSESSMENT ORD ER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE FOR THE FOL LOWING REASONS : THE AOS ORDER IS ERRONEOUS AND PREJUDICIAL TO THE REVENUE DUE TO THE FACT THAT, THE INCOME FROM SHAREHOLDERS ACCOUNT AMOUNTING TO RS.24,31,68,000/- HAS BEEN FAILED TO BE TAXED. THE REFORE, REVISIONARY PROCEEDINGS U/S.263 ARE INITIATED IN THIS CASE. AS PER THE CIT THOUGH ASSESSEE WAS A SINGLE ENTITY, TOTAL INCOME OF THE ITA.756/BANG/2015 PAGE - 8 ENTITY HAVING BEEN DIVIDED INTO PROFITS OF SHAREHOL DERS AND PROFITS FROM INVESTMENTS DONE BY SHAREHOLDERS, FORMER ALONE WOUL D BE ELIGIBLE FOR CONCESSIONAL RATE OF 12.5%, WHEREAS THE LATTER SUM HAD TO BE TAXED UNDER THE NORMAL PROVISIONS OF THE ACT. FIRST QUESTION TO BE ANSWERED BY US IS WHETHER THE ISSUE REGARDING SEPARATION OF ACCOUNTS BETWEEN SHAREHOLDERS ACCOUNT AND POLICY HOLDERS ACCOUNT AND METHOD OF DE ALING WITH THE RESULTS WAS IN THE MIND OF THE AO WHILE DOING THE ORIGINAL ASSESSMENT. IN REPLY TO A NOTICE ISSUED BY THE AO ON 12.10.2012, ASSESSEE H AD STATED AS UNDER : ITA.756/BANG/2015 PAGE - 9 8. ASSESSEE IN THE ABOVE REPLY HAD CLEARLY BROUGHT OUT ITS UNDERSTANDING ON THE RULES OF AGGREGATION. ACCORDING TO IT, RULE 2 OF FIRST SCHEDULE OF INCOME-TAX ACT, PROVIDED FOR AGGREGATION OF PROFITS AS PER POLICY HOLDERS ACCOUNT AND SHAREHOLDERS ACCOUNT. NO DOUBT, ASSESS MENT ORDER PASSED BY THE AO WHICH HAS BEEN SUBJECTED TO 263 PROCEEDINGS BEFORE US IS CRYPTIC WITHOUT ANY REFERENCE TO THE ABOVE MENTIONED LETTER SUBMITTED BY THE ASSESSEE. HOWEVER, IT IS CLEAR FROM THE ABOVE MENTI ONED REPLY GIVEN BY THE ASSESSEE, THAT AO HAD REQUIRED THE ASSESSEE TO EXPL AIN ITS STAND REGARDING AGGREGATION OF PROFITS / LOSS AS IT APPEARED IN POL ICY HOLDERS ACCOUNT AND AS IT APPEARED IN SHAREHOLDERS ACCOUNT AND ASSESSEE HA D GIVEN AN EXPLANATION. WE CANNOT SAY THAT AO WAS NOT AWARE OF THE ISSUE OF AGGREGATION. 9. NOW COMING TO THE VIEW TAKEN BY THE CIT THAT THESE TWO ACCOUNTS ITA.756/BANG/2015 PAGE - 10 HAD TO BE CONSIDERED SEPARATELY, AND BENEFIT OF SEC TION 115B OF THE ACT, COULD BE GIVEN ONLY TO THE PROFITS FROM LIFE-INSURA NCE BUSINESS, THERE IS NO DISPUTE THAT ASSESSEE WAS DOING ONLY LIFE-INSURANCE BUSINESS AS REGULATED BY THE IRDA. CIT HIMSELF HAS MENTIONED THAT ASSESSEE WAS ENGAGED IN LIFE- INSURANCE BUSINESS. QUESTION WHETHER POLICY HOLDER S ACCOUNT AND SHAREHOLDERS ACCOUNT, IN THE CASE OF AN ASSESSEE CA RRYING ON ONLY THE BUSINESS OF LIFE-INSURANCE BUSINESS WAS TO BE SEPAR ATED OR CONSOLIDATED, HAD COME BEFORE THE TRIBUNAL IN ICICI PRUDENTIAL LTD, ( SUPRA). PARA 32 OF THIS ORDER DT.14.09.2012 IS REPRODUCED BELOW : 32. IRDA REGULATIONS SPECIFICALLY REQUIRE TO MAINTA IN THE POLICYHOLDERS ACCOUNT AND THE SHAREHOLDERS ACCOUN T SEPARATELY AND PERMITS TRANSFER OF FUNDS FROM SHAREHOLDERS AC COUNT TO POLICYHOLDERS ACCOUNT AS AND WHEN THERE IS A DEFIC IT IN POLICYHOLDERS ACCOUNT. AS RIGHTLY NOTED BY THE HON 'BLE BOMBAY HIGH COURT, AS A POLICY, COMPANY IS TRANSFERRING FU NDS/ASSETS FROM SHAREHOLDERS ACCOUNT TO POLICYHOLDERS ACCOUNT EVE N DURING THE YEAR PERIODICALLY AS AND WHEN THE ACTUARIAL VALUATI ON WAS ARRIVED AT IN POLICYHOLDERS ACCOUNT. MOST OF THE COMPANIES ARE REQUIRED TO SUBMIT QUARTERLY ACCOUNTS UNDER THE COMPANY LAW, TH ERE IS REQUIREMENT OF ACTUARIAL VALUATION REPORT PERIODICA LLY AND ACCORDINGLY ASSESSEE WAS TRANSFERRING FUNDS FROM TH E SHAREHOLDERS ACCOUNT TO POLICYHOLDERS ACCOUNT. SINCE THE INSURA NCE BUSINESS WILL NOT YIELD THE REQUIRED PROFITS IN THE INITIAL 7 TO 10 YEARS, LOT OF CAPITAL HAS TO BE INFUSED SO AS TO BALANCE THE DEFI CIT IN THE POLICYHOLDERS ACCOUNT. DURING THE YEAR AS ALREADY STATED ASSESSEE HAS ISSUED FRESH CAPITAL TO THE EXTENT OF `.250 CRO RES AND TRANSFERRED FUNDS TO THE EXTENT OF `.233 CRORES FROM THE SHAREH OLDERS ACCOUNT TO POLICYHOLDERS ACCOUNT. SINCE ASSESSEE IS HAVING ON LY ONE BUSINESS OF LIFE INSURANCE, THE ENTIRE TRANSACTIONS BOTH UND ER THE POLICYHOLDERS AND SHAREHOLDERS ACCOUNT DO PERTAIN TO THE LIFE ITA.756/BANG/2015 PAGE - 11 INSURANCE BUSINESS ONLY AS IT WAS NOT PERMITTED TO DO ANY OTHER BUSINESS. ONCE ASSESSEE IS IN THE LIFE INSURANCE BU SINESS, THE COMPUTATION HAS TO BE MADE IN ACCORDANCE WITH THE R ULE-2 AS PER PROVISIONS OF SECTION 44. THEREFORE, THERE IS A VAL ID ARGUMENT RAISED BY ASSESSEE THAT BOTH THE POLICYHOLDERS & SHAREHOL DERS ACCOUNT HAS TO BE CONSOLIDATED INTO ONE AND TRANSFER FROM O NE ACCOUNT TO ANOTHER IS TAX NEUTRAL. WHAT AO HAS DONE IS TO TAX THE SURPLUS AFTER THE FUNDS HAVE BEEN TRANSFERRED FROM SHAREHOLDERS ACCOUNT TO THE POLICYHOLDERS ACCOUNT AT THE GROSS LEVEL WHILE IGN ORING SUCH TRANSFER IN SHAREHOLDERS ACCOUNT, WHILE BRINGING T O TAX ONLY THE INCOMES DECLARED IN THE SHAREHOLDERS ACCOUNT THAT TOO UNDER THE HEAD OTHER SOURCES OF INCOME. IN FACT WHILE GIVIN G THE FINDING THAT ASSESSEE IS IN THE LIFE INSURANCE BUSINESS ONLY AND INCOMES ARE TO BE TREATED AS INCOME FROM LIFE INSURANCE BUSINESS, THE CIT (A) SURPRISINGLY IN SUBSEQUENT ASSESSMENT YEARS APPEALS ACCEPTED AOS CONTENTION THAT SURPLUS IN SHAREHOLDERS ACCOUNT IS TO BE TAXED AS OTHER SOURCES OF INCOME. BUT ONCE THE PROVISIONS OF SECTION 44 OF IT ACT ARE INVOKED ANYTHING CONTAINED IN THE HEADS OF INCOME LIKE INCOME FROM OTHER SOURCES, CAPITAL GAINS, HOUSE PRO PERTY OR EVEN INTEREST ON SECURITIES DOES NOT COME INTO PLAY AND ONLY FIRST SCHEDULE HAS TO BE INVOKED TO ARRIVE AT THE PROFIT. THEREFORE, IN OUR OPINION BOTH THE POLICYHOLDERS AND SHAREHOLDERS A CCOUNT HAS TO BE CONSOLIDATED FOR THE PURPOSE OF ARRIVING AT THE DEF ICIT OR SURPLUS. THERE IS A CLEAR OPINION EXPRESSED BY THE MUMBAI BE NCH THAT WHEN SECTION 44 OF THE ACT IS APPLIED, DISTINCTION BETWEEN VARIO US HEADS OF INCOME PALED INTO INSIGNIFICANCE. ASSESSEE HAD IN ITS RETURN, S EPARATELY SHOWN THE REVENUE IN ITS SHAREHOLDERS ACCOUNT AND REVENUE DER IVED FROM ITS POLICY HOLDERS ACCOUNT. REVENUE ACCOUNT FOR POLICY HOLDER S ACCOUNT CLEARLY REFLECTED THE CHANGE IN VALUATION OF LIABILITY IN R ESPECT OF LIFE-POLICIES WHICH WERE ACCOUNTED. ITA.756/BANG/2015 PAGE - 12 10. THUS IN OUR OPINION NOT ONLY WAS THE AO AWARE ABOUT THE METHOD OF AGGREGATION FOLLOWED BY THE ASSESSEE, HE HAD ALSO TAKEN A LAWFUL AND POSSIBLE VIEW. IN THE CIRCUMSTANCES WE DO NOT FIND ANY ERROR IN THE ORDER OF THE AO WHICH CAN BE VESTED BY A SECTION 263 JURISDI CTION. THE TWIN CONDITIONS VIZ., THERE SHOULD BE AN ERROR AND SUCH ERROR SHOULD BE PREJUDICIAL TO THE INTERESTS OF REVENUE ARE NOT SAT ISFIED. WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER OF CIT. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF APRIL, 2016. SD/- SD/- (VIJAY PAL RAO) (ABR AHAM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR