BIRLA SUNLIFE INSURANCE COMPANY LTD, MUMBAI V. DCIT 8(1), MUMBAI

ITA 8356/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71939 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-12-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 01-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Period of limitation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 8356/MUM/2010 (ASSESSMENT YEAR: 2005-06) BIRLA SUNLIFE INSURANCE CO. LTD. D C I T - 8(1) 16TH FLOOR, TOWER 1, ONE INDIA MUMBAI BULLS CENTRE, 841 SENAPAT BAPAT VS. MARG, MUMBAI 400013 PAN - AABCB4623J APPELLANT RESPONDENT ITA NO.8357 & 8358/MUM/2010 (ASSESSMENT YEAR: 2006-07 & 2007-08) BIRLA SUNLIFE INSURANCE CO. LTD. A C I T (OSD) - 8( 3) 16TH FLOOR, TOWER 1, ONE INDIA MUMBAI BULLS CENTRE, 841 SENAPAT BAPAT VS. MARG, MUMBAI 400013 PAN - AABCB4623J APPELLANT RESPONDENT APPELLANT BY: SHRI RONAK DOSHI RESPONDENT BY: SHRI RAVI PRAKASH DATE OF HEARING: 19.12.2013 DATE OF PRONOUNCEMENT: 19.12.2013 O R D E R PER D. MANMOHAN, V.P. THESE APPEALS BY THE ASSESSEE COMPANY ARE DIRECTED AGAINST THE ORDERS PASSED BY THE CWT (APPEALS), 16, MUMBAI AND THEY PE RTAIN TO A.YS. 2005-06 TO 2007-08. 2. AT THE OUTSET IT MAY NOTICED THAT THOUGH THE OPENIN G PART OF THE ORDER SHOWS THAT THE ORDERS WERE PASSED BY THE OFFICE OF THE COMMISSIONER OF WEALTH TAX (APPEALS) 16, MUMBAI BUT IT WAS SINGED BY SHRI S.S. RANA IN HIS CAPACITY AT COMMISSIONER OF INCOME TAX (APPEALS ) 16, MUMBAI; AT ANY RATE NO OBJECTION WITH REGARD TO THIS CLERICAL MIST AKE WAS RAISED BY THE ASSESSEE AND THEREFORE WE PROCEED TO DISPOSE OF THE SE APPEALS ON MERITS. ITA NO. 8356/MUM/2010 BIRLA SUNLIFE INSURANCE CO. LTD. 2 3. THE ONLY ISSUE INVOLVED IN THESE APPEALS BEING IDEN TICAL WE PROCEED TO DISPOSE OF THESE APPEALS BY A COMBINED ORDER FOR TH E SAKE OF CONVENIENCE. 4. THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY RE FERABLE TO INCREASE IN SHARE CAPITAL WAS CLAIMED AS DEDUCTION ON THE GROUND THAT SECTION 44 READ WITH FIRST SCHEDULE OF THE ACT COME S INTO PLAY AND SUCH CLAIM IS PERMISSIBLE WHEREAS THE AO AS WELL AS THE CIT(A) ARE OF THE OPINION THAT ANY EXPENDITURE RELATABLE TO INCREASE IN THE A UTHORISED SHARE CAPITAL CANNOT BE CONSIDERED AS REVENUE IN NATURE IN THE LI GHT OF THE DECISION OF THE APEX COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL D EVELOPMENT CORPORATION LTD. 225 ITR 792. 5. THE CASE OF THE ASSESSEE BEFORE THE AO WAS THAT THE COMPANY IS ENGAGED IN THE BUSINESS OF LIFE INSURANCE AND HENCE PROVISIONS OF SECTION 44 OF THE ACT ARE APPLICABLE AND THE ACCOUNTS ARE MAIN TAINED IN ACCORDANCE WITH THE PRESCRIPTION ISSUED BY THE IRDA; THE INCRE ASE IN SHARE CAPITAL WAS NECESSITATED ON ACCOUNT OF IRDA REGULATIONS AND HEN CE THE EXPENDITURE IN CONNECTION WITH INCREASE IN AUTHORISED SHARE CAPITA L SHOULD BE ALLOWED AS DEDUCTION BY TREATING IT AS REVENUE IN NATURE. IT W AS ALSO CONTENDED THAT THE INCREASE IN SHARE CAPITAL IS REQUIRED TO AUGMENT TH E BUSINESS GROWTH AND SOLVENCY REQUIREMENT AS PRESCRIBED BY IRDA AND HENC E THE RATIO LAID DOWN BY THE APEX COURT WITH REFERENCE TO THE EXPENDITURE INCURRED BY INSURANCE COMPANIES SHOULD BE APPLIED. THE AO AS WELL AS THE CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE. IT MAY BE NOTICED THAT THE LEARNED CIT(A) OBSERVED THAT ANY ARGUMENT BASED ON ACCOUNTING PRAC TICE VIS--VIS A PARTICULAR LINE OF BUSINESS CANNOT BE A BASIS FOR J USTIFICATION UNLESS THE CLAIM IS SUPPORTED BY ANY PROVISION OF THE STATUTE. HE FURTHER OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE TO SHOW THAT SUCH EXPENDITURE WAS SPECIFICALLY REFERRED TO AS REVENUE IN NATURE U NDER THE IRDA GUIDELINES. HE, THEREFORE, PREFERRED TO FOLLOW THE DECISION OF THE HON'BLE SUPREME COURT CITED SUPRA. FURTHER AGGRIEVED, ASSESSEE IS IN APPE AL BEFORE US. 6. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS AN INCREASE IN SHARE CAPITAL IN EACH YEAR AND THE EXPENDITURE WAS INCURRED WITH REGARD TO THE INCREASE IN SHARE C APITAL AND AN IDENTICAL ITA NO. 8356/MUM/2010 BIRLA SUNLIFE INSURANCE CO. LTD. 3 ISSUE WAS CONSIDERED BY THE ITAT B BENCH, MUMBAI IN ASSESSEES OWN CASE FOR A.Y. 2004-05 (ITA NO. 602/MUM/2009 DATED 09.09. 2010) WHEREIN THE BENCH HAD TAKEN INTO CONSIDERATION THE DECISION OF THE HON'BLE SUPREME COURT AND HON'BLE HIGH COURTS CITED BY THE AO AS WE LL AS THE CIT(A) BUT CHOSE TO FOLLOW THE PRINCIPLES LAID DOWN BY THE APE X COURT IN THE CASE OF LIFE INSURANCE CORPORATION OF INDIA VS. CIT 51 ITR 773 T O HOLD THAT PROVISIONS OF SECTION 44 READ WITH FIRST SCHEDULE OF THE INCOME T AX ACT ARE APPLICABLE VIS- -VIS THE EXPENDITURE INCURRED BY THE ASSESSEE COMP ANY WITH REFERENCE TO INCREASE IN SHARE CAPITAL AND THE COMPUTATION OF PR OFITS AND GAINS OF INSURANCE BUSINESS SHALL HAVE TO BE IN ACCORDANCE W ITH RULE 5 OF THE FIRST SCHEDULE AND, BY THUS HOLDING, THE ITAT B BENCH, MUMBAI CONCLUDED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE HAS TO BE ALLOWED AS DEDUCTION. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RE LIANCE ON ANOTHER DECISION OF THE ITAT C BENCH, MUMBAI IN THE CASE OF HDFC STANDARD LIFE INSURANCE COMPANY LTD. (AND GROUP) (ITA NO. 2203/MU M/2012 DATED 20.09.2013) IN SUPPORT OF ITS CONTENTION THAT ITAT MUMBAI BENCHES HAVE BEEN CONSISTENTLY HOLDING THE VIEW THAT IN THE CASE OF AN ASSESSEE COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF LIFE INSURANCE, THE EXPENDITURE INCURRED WITH REGARD TO INCREASE IN SHARE CAPITAL IS ALLOWAB LE AS DEDUCTION BY TREATING IT AS REVENUE IN NATURE. 7. THE LEARNED D.R. FAIRLY SUBMITTED THAT DESPITE THE DECISIONS CITED BY THE AO AND THE LEARNED CIT(A), ON WHICH HE STRONGLY RELIED UPON, THE ITAT HAD BEEN CONSISTENTLY TAKING A VIEW THAT WITH REGAR D TO LIFE INSURANCE BUSINESS COMPUTATION OF PROFITS AND GAINS HAS TO BE IN ACCORDANCE WITH RULE 5 OF THE FIRST SCHEDULE AND THE ASSESSEE HAVING CLA IMED DEDUCTION BY ADHERING TO THE PROCEDURE PRESCRIBED THEREIN THE CL AIM MADE THEREIN IS IN TUNE WITH THE DECISIONS OF ITAT CITED BY THE LEARNE D COUNSEL FOR THE ASSESSEE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN THE LIGHT OF THE DECISION OF THE ITAT (C ITED SUPRA) WE ARE OF THE VIEW THAT THE ARGUMENTS ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSEE DESERVES TO BE ACCEPTED. BY RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT ITA NO. 8356/MUM/2010 BIRLA SUNLIFE INSURANCE CO. LTD. 4 B BENCH, MUMBAI IN ASSESSEES OWN CASE FOR A.Y. 2 004-05 WE DIRECT THE AO TO ALLOW THE CLAIM OF DEDUCTION. 9. IN THE RESULT, GROUND NO. 1 OF THE ASSESSEE, IN ALL THE THREE APPEALS, IS ALLOWED. 10. THE ASSESSEE, VIDE LETTER DATED 4 TH NOVEMBER, 2011, FILED ONE ADDITIONAL GROUND, FOR ALL THE THREE YEARS, REQUEST ING THE TRIBUNAL TO CONSIDER THE LOSS FROM PENSION FUND WHILE DETERMINI NG THE SURPLUS/(DEFICIT) FROM THE INSURANCE BUSINESS FOR THE PURPOSE OF SECT ION 44 OF THE INCOME TAX ACT, 1961. THE LEARNED COUNSEL FOR THE ASSESSEE COM PANY SUBMITTED THAT THE ASSESSEE INCURRED LOSS FROM PENSION BUSINESS AND IN THE COMPUTATION OF INCOME THE SAID LOSS WAS REDUCED FROM THE TOTAL DEF ICIT UNDER A WRONG NOTION THAT INCOME FROM PENSION FUND IS EXEMPT FROM TAX UN DER SECTION 10(23AAB) OF THE ACT IN WHICH EVENT THE LOSS WOULD ALSO NOT T O BE CONSIDERED FOR THE PURPOSE OF COMPUTING SURPLUS/(DEFICIT) FROM THE INS URANCE BUSINESS UNDER SECTION 44 OF THE ACT BUT SUBSEQUENTLY THE HON'BLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. LIFE INSURANCE CORPORATION OF I NDIA 338 ITR 212 CLARIFIED, VIDE JUDGEMENT DATED 2 ND AUGUST, 2011, THAT WHILE DETERMINING THE SURPLUS/(DEFICIT) FROM THE INSURANCE BUSINESS FOR T HE PURPOSE OF SECTION 44 OF THE ACT LOSS FROM PENSION FUND HAS TO BE CONSIDE RED IRRESPECTIVE OF THE FACT THAT INCOME FROM SUCH FUND IS EXEMPT OR NOT. I MMEDIATELY THERE AFTER, I.E. ON 4 TH NOVEMBER, 2011 THE ASSESSEE MOVED AN ADDITIONAL GR OUND BEFORE THE TRIBUNAL AND THUS THERE WAS JUSTIFIABLE CAUSE F OR NOT RAISING THE ISSUE BEFORE THE AO AS WELL AS THE CIT(A) BUT SINCE ALL T HE FACTS ARE ALREADY ON RECORD A LEGAL PLEA CAN BE RAISED AT ANY STAGE. 11. ON THE OTHER HAND, THE LEARNED D.R. SUBMITTED THAT THE ASSESSEE IS DEBARRED FROM RAISING AN ADDITIONAL GROUND BEFORE T HE TRIBUNAL SINCE SUCH CLAIM WAS NOT MADE BEFORE THE AO. IN THIS REGARD HE RELIED UPON THE DECISION OF THE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD . 284 ITR 323. 12. THE CASE OF THE ASSESSEE IS THAT IN THE CASE OF GOE TZE (INDIA) LTD. THE APEX COURT WAS CONCERNED WITH THE SCOPE AND AMBIT O F SECTION 139(4) I.E. BEYOND THE PERIOD OF LIMITATION PRESCRIBED IF AN AS SESSEE MAKES A CLAIM SUCH CLAIM CANNOT BE CONSIDERED BY THE AO BUT AT THE SAM E TIME A NEW GROUND ITA NO. 8356/MUM/2010 BIRLA SUNLIFE INSURANCE CO. LTD. 5 URGED BEFORE THE APPELLATE AUTHORITY ALWAYS ALSO BE CONSIDERED IN THE LIGHT OF THE POWER VESTED IN THE APPELLATE AUTHORITY UNDER T HE PROVISIONS OF THE ACT AND IN THIS REGARD HE RELIED UPON THE DECISION OF T HE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS AND SH AREHOLDERS P. LTD. 349 ITR 336. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. ITAT MUMBAI BENCHES HAVE BEEN CONSISTENTLY TAKING A VIEW THAT THE TRIBUNAL IS EMPOWERED TO ADMIT ANY ADDITIONAL GROUN D IN THE INTEREST OF SUBSTANTIAL JUSTICE IF ALL THE FACTS ARE ALREADY ON RECORD. IT IS NOT THE CASE OF THE REVENUE THAT TO CONSIDER THE PLEA OF THE ASSESS EE SOME ADDITIONAL FACTS ARE REQUIRED. SUCH BEING THE CASE, IN THE LIGHT OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT CITED SUPRA, WE ADMIT THE ADDITIO NAL GROUND AND DIRECT THE AO TO CONSIDER THE PLEA AFRESH IN THE LIGHT OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF LIFE INSURANCE COR PORATION OF INDIA. 14. IN THE RESULT, AS PRONOUNCED IN THE OPEN COURT, THE APPEALS FILED BY THE ASSESSEE COMPANY ARE TREATED AS ALLOWED FOR STA TISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DECEMBER, 2013. SD/- SD/- (RAJENDRA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 19 TH DECEMBER, 2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 16, MUMBAI 4. THE CIT 8, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.