M/s Exide Life Insurance Company limited , Bangalore V. Assistant Commissioner of Income Tax Circle-2(1)(2), Bangalore

ITA 840/BANG/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6262 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-07-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 22-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Keywords: Rule of consistency; Question of law; Rule 8D; CHAPTER IV
• Section: 14A; 201; 13; 28; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER IT(TP)A NO.1296 & 1297/BANG/2016, ITA NOS.838 & 840/BANG/2019 ASSESSMENT YEAR S : 2011 - 12, 2011 - 12, 2012 - 13 & 2014 - 15 EXIDE LIFE INSURANCE COMPANY LTD. (FORMERLY KNOWN AS ING VYSYA LIFE INSURANCE COMPANY LTD.), NO.3/1, 3 RD FLOOR, J P TECHNO PARK, MILLERS ROAD, BENGALURU 560 001. PAN: AAACI 7940L VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, LTU, BANGALORE. THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, CIRCLE 1, BANGALORE . APPELLANT RESPONDENT APPELLANT BY : S MT. TANMA YEE RAJKUMAR, ADVOCATE RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, CIT(DR) (ITAT), BENGALURU . DATE OF HEARING : 0 2 .0 2 .202 1 DATE OF PRONOUNCEMENT : 03 .0 2 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER IT(TP)A NOS.1296 & 1297/BANG/2016 ARE CROSS APPEAL S BY THE ASSESSEE AND REVENUE AGAINST THE ORDER DATED 27.04. 2016 OF THE CIT(APPEALS)-14, LTU, BANGALORE FOR THE AY 2011-12 . ITA NOS. 838 & 840/BANG/2019 ARE APPEALS BY THE ASSESSEE AGAINST T HE SEPARATE ORDERS, BOTH DATED 18.02.2019 OF THE CIT(APPEALS), BENGALUR U-2, BENGALURU FOR THE AYS 2012-13 & 2014-15. SINCE CERTAIN ISSUES ARE CO MMON IN NATURE, THESE IT(TP)A NO.1296 & 1297/BANG/2016, ITA NOS.838 & 840/BANG/2019 PAGE 2 OF 6 APPEALS WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE COMMON GROUND IN ALL THE ASSESSEES APPEALS IS WITH REGARD TO DISALLOWANCE U/S. 14A OF THE INCOME-TAX ACT, 1961 [ THE ACT]. THE ASSESSEE IS ENGAGED IN LIFE INSURANCE BUSINESS AND ACCORDING LY COMPUTED INCOME AS PER THE PROVISIONS OF SECTION 44 OF THE ACT READ WI TH FIRST SCHEDULE OF THE ACT. SECTION 44 OF THE ACT BEGINS WITH A NON OBSTANTE CLAUSE AND THUS OVERRIDES THE OTHER PROVISIONS GOVERNING THE COMPUT ATION OF INCOME IN THE ACT. 3. IT WAS ARGUED BEFORE THE AO THAT ASSESSEE IS GOV ERNED BY SECTION 44 OF THE ACT READ WITH FIRST SCHEDULE OF THE ACT WHICH ARE SPECIAL PROVISIONS GOVERNING THE COMPUTATION OF INCOME OF I NSURANCE BUSINESS AND THE SAID PROVISIONS DO NOT PROVIDE FOR MAKING ANY A DDITION/DISALLOWANCE U/S. 14A OF THE ACT. HOWEVER, FOR THE AYS 2011-12 & 201 4-15, THE AO MADE DISALLOWANCE U/S. 14A OF THE ACT. THE CIT(APPEALS) CONFIRMED THE ACTION OF THE AO. FOR THE AY 2012-13 AGAINST THE ORDER PASSE D U/S. 154 MAKING DISALLOWANCE U/S. 14A, ASSESSEE WENT IN APPEAL BEFO RE THE CIT(APPEALS) WHICH WAS REJECTED. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OP INION THAT THIS ISSUE WAS CONSIDERED BY THE HONBLE DELHI HIGH COURT IN T HE CASE OF PR. CIT V. THE ORIENTAL INSURANCE CO. LTD. IN ITA NO.172/2020. THE HONBLE HIGH COURT VIDE JUDGMENT DATED 4.3.2020 IN PARA 9 HELD A S UNDER:- 9. WE HAVE HEARD LEARNED COUNSELS AND ARE OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSI DERATION. THE TRIBUNAL HAS INTERPRETED SECTION 44 READ WITH THE F IRST SCHEDULE AND CONCLUDED THAT APPLICABILITY OF SECTION 14A IS EXCLUDED IN RELATION TO COMPUTATION OF INCOME OF AN INSURANCE C OMPANY. WE HAVE EXAMINED THE RELEVANT PROVISIONS. SECTION 44 B EGINS WITH A NON-OBSTANTE CLAUSE AND OVERRIDES THE OTHER PROVISI ONS OF THE ACT IT(TP)A NO.1296 & 1297/BANG/2016, ITA NOS.838 & 840/BANG/2019 PAGE 3 OF 6 AS MENTIONED THEREIN INCLUDING SECTION 14A. WE ARE NOT CONVINCED WITH THE SUBMISSION OF MR. AJIT SHARMA TH AT SECTION 14A WOULD BE APPLICABLE IN RESPECT OF THE RESPONDEN T. SECTION 14A DOES NOT HAVE INDEPENDENT LEGS TO STAND ON. SEC TION 14A INTER ALIA BEGINS WITH THE WORDS ' FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION S HALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED. . . . . . . . . '. THE CHAPTER IN QUESTION IS CHAPTER IV. THIS CHAPTER ALS O CONTAINS THE PROVISIONS RELATING TO COMPUTATION OF PROFITS AND G AINS OF BUSINESS OR PROFESSION. SECTION 44 SPECIFICALLY EXC LUDES THE PROVISIONS OF THE ACT RELATING TO COMPUTATION OF IN COME, INTER ALIA, THOSE CONTAINED IN 'SECTION 28 TO 43B'. THUS, THE EXCLUSION WOULD TAKE WITHIN ITS SWEEP SECTION 14A WHICH IS AN EXEMPTION FOR DEDUCTIONS AS ALLOWABLE UNDER THE ACT, AS PROVI DED UNDER SECTION 28 TO 43B. FURTHER, SECTION 44 IS A SPECIAL PROVISION APPLICABLE IN THE CASES OF INSURANCE COMPANIES AND APPLIES, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE PROVISIONS OF THE INCOME-TAX ACT RELATING TO THE CO MPUTATION OF INCOME CHARGEABLE UNDER DIFFERENT HEADS. FOR COMPUT ING THE PROFITS AND GAINS OF THE BUSINESS OF INSURANCE COMP ANY, THE AO HAD TO RESORT TO SECTION 44 AND THE PRESCRIBED RULE S, AND COULD NOT HAVE APPLIED SECTION 28 TO 43B, SINCE THE SAME WERE EXCLUDED FROM THE PURVIEW OF SECTION 44. THIS NECESSARILY IN CLUDES THE EXCEPTION PROVISION ENSHRINED UNDER SECTION 14A OF THE ACT. THEREFORE, IN OUR VIEW, THE AO COULD NOT HAVE TRAVE LLED BEYOND SECTION 44 IN THE FIRST SCHEDULE OF THE ACT. BESIDE S, THE TRIBUNAL HAS ALSO INVOKED THE RULE OF CONSISTENCY SINCE THE SAME VIEW OF THE TRIBUNAL HAS PREVAILED IN RESPECT OF THE EARLIE R ASSESSMENT YEARS I.E. 2000-01, 2001-02 AND 2005-06. 10. WE ALSO DO NOT FIND MERIT IN THE SUBMISSION O F MR. SHARMA THAT THE TRIBUNAL SHOULD HAVE REMANDED BACK THE MAT TER TO THE ASSESSING OFFICER FOR COMPUTATION OF INCOME OF THE RESPONDENT- ASSESSEE IN TERMS OF FIRST SCHEDULE OF THE ACT, SIN CE THAT WAS NOT EVEN A GROUND URGED BY THE REVENUE BEFORE THE TRIBU NAL. AT THIS STAGE, IT IS TOO LATE IN THE DAY FOR THE REVENUE TO ARGUE THAT NOTWITHSTANDING THE GROUNDS URGED TO CHALLENGE THE ORDER OF THE CIT (A), THE TRIBUNAL SHOULD HAVE VENTURED INTO EXA MINING THE MERITS OF THE COMPUTATION OF INCOME OF THE RESPONDE NT ASSESSEE IN TERMS OF SECTION 44 READ WITH THE FIRST SCHEDULE OF THE ACT. NO DOUBT, THE TRIBUNAL IS A FINAL FACT-FINDING BODY. H OWEVER, WHEN IT(TP)A NO.1296 & 1297/BANG/2016, ITA NOS.838 & 840/BANG/2019 PAGE 4 OF 6 THE REVENUE CONFINED ITS CHALLENGE ONLY IN RESPECT OF THE APPLICABILITY OF SECTION 14A, WE CANNOT FIND FAULT IN THE IMPUGNED ORDER, ON THE BASIS OF SUBMISSIONS NOT ADVANCED BEF ORE THE TRIBUNAL. WE, THEREFORE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW ARISING IN RELATION TO THE VIEW TAKEN BY THE TR IBUNAL. 5. BEING SO, IN OUR OPINION, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 6. AS FAR AS THE OBJECTION OF THE LD. DR REGARDING RAISING AN ISSUE OF DISALLOWANCE U/S. 14A OF THE ACT IN THE PROCEEDINGS U/S. 154 IS CONCERNED, IN AY 2012-13 THE AO HIMSELF DEALT WITH THIS ISSUE IN THE PROCEEDINGS U/S. 154 OF THE ACT DATED 23.03.2016 AND SPECIFICALLY OB SERVED THAT THE DISALLOWANCE U/S. 14A INCLUDES EXPENDITURE RELATING TO PENSION ACCOUNT AND SINCE THE ENTIRE LOSSES FROM PENSION ACCOUNT ARE EX CLUDED FROM THE COMPUTATION AND THE ABOVE EXPENDITURE ARE INCLUDED IN THE LOSSES, THE COMPUTATION OF DISALLOWANCE U/S. 14A WAS MISTAKE AP PARENT FROM THE RECORD. AS SUCH, THE LD. DR IS PRECLUDED IN OBJECT ING TO ENTERTAINING A GROUND RELATING TO DISALLOWANCE U/S. 14A IN THE PRO CEEDINGS U/S. 154 OF THE ACT BY THIS TRIBUNAL. ACCORDINGLY THE GROUND OF AP PEAL BY THE ASSESSEE WITH REGARD TO DISALLOWANCE U/S. 14A OF THE ACT IS ALLOWED IN FAVOUR OF THE ASSESSEE. 7. THE OTHER COMMON GROUND IN THE APPEALS OF THE AS SESSEE WITH REGARD TO QUANTIFICATION OF DISALLOWANCE U/S. 14A H AS BECOME INFRUCTUOUS IN VIEW OF OUR FINDING IN THE FIRST GROUND OF APPEAL W ITH REGARD TO DISALLOWANCE U/S. 14A OF THE ACT AND ACCORDINGLY THE SAME IS DIS MISSED AS INFRUCTUOUS. 8. THUS, ALL THE ASSESSEES APPEALS ARE ALLOWED. 9. IN THE REVENUES APPEAL, THE ISSUE IN GROUND NO. 2 IS WITH REGARD TO ALLOWING RELIEF IN RESPECT OF PROVISIONS OF SECTION 10(23AAB) OF THE ACT. THE AO DID NOT ALLOW THE LOSS OF RS.95,42,99,278 INCURR ED FROM PENSION FUND WHICH IS EXEMPT U/S. 10(23AAB) OF THE ACT TO BE EXC LUDED WHILE IT(TP)A NO.1296 & 1297/BANG/2016, ITA NOS.838 & 840/BANG/2019 PAGE 5 OF 6 DETERMINING THE ACTUARIAL VALUATION SURPLUS U/S. 44 OF THE ACT. THE CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE BY PLACING RELIANCE ON EARLIER ORDER OF THE CIT(APPEALS), LTU IN ASSESSEES OWN CASE FOR AY 2009-10 AND ALSO THE JUDGMENT OF HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT V. LIFE INSURANCE CORPORATION OF INDIA, [2011] 338 ITR 212 (BOM) . AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US . 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2010-11 IN ITA NO.243/BANG/2015 AND THE TRIBUNAL VIDE ORDER DATED 24.04.2019 HELD AS UNDER:- 49. WE HAVE HEARD AND CONSIDERED THE RIVAL SUBMIS SIONS. IN OUR VIEW THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT(A) VS. LIC OF INDIA LTD., (2011) 12 TAXMANN.COM 388 (BOM) AS EXPLAINED WHILE DEALING WITH SIMILAR ISSUE IN AY 2009- 10 IN THE EARLIER PART OF THIS ORDER. THE CONTENTIO N OF THE REVENUE IN THIS REGARD IS THAT THE HON'BLE SUPREME COURT IN THE CASE OF HARPRASAD (SUPRA) HAS HELD THAT WHEN ANY INCOME IS EXEMPT AT SOURCE, THE LOSS WOULD NOT ALSO CONSEQUENTLY ENTER INTO COMPUTATION OF INCOME. AS RIGHTLY CONTENDED BY THE LD COUNSEL FOR THE ASSESSEE IT WOULD BE THE CASE WHEN INCOME I S COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT. HOWEVER, IN THE CASE OF ASSESSEE'S ENGAGED IN LIFE INSURANCE BUSINESS INCOM E HAS TO BE COMPUTED AS LAID DOWN U/S 44 OF THE ACT. SECTION 44 OF THE ACT STARTS WITH A NON OBSTANTE CLAUSE AND OVERRIDES THE PROVISIONS OF THE ACT RELATING TO COMPUTATION OF INCOME UNDER THE VARIOUS HEADS OF INCOME INCLUDING INCOME UNDER THE HEAD PRO FIT AND GAINS OF BUSINESS OF INSURANCE. THEREFORE, WE ARE O F THE VIEW THAT STAND TAKEN BY THE DRP CANNOT BE ACCEPTED. WE, THER EFORE, DIRECT THAT LOSS FROM PENSION FUND WHICH IS EXEMPT U/S10(2 3AAB) BE EXCLUDED WHILE DETERMINING SURPLUS AS PER ACTUARIAL VALUATION SURPLUS U/S 44 OF THE ACT. GROUND II RAISED BY THE ASSESSEE IS ALLOWED. IT(TP)A NO.1296 & 1297/BANG/2016, ITA NOS.838 & 840/BANG/2019 PAGE 6 OF 6 11. TAKING A CONSISTENT VIEW, WE ARE INCLINED TO DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. HENCE THIS GROUND OF REVENUE IS DISMISSED. 12. GROUND NO.3 RELATES TO DISALLOWANCE U/S. 14A OF THE ACT, WHICH WE HAVE CONSIDERED IN ASSESSEES APPEAL IN ITA NO.1296 /BANG/2016 WHEREIN IT HAS BEEN HELD THAT IN CASE OF AN ASSESSEE BEING AN INSURANCE COMPANY, THERE IS NO APPLICATION OF THE PRESENT SECTION 14A R.W. RULE 8D. AS SUCH, THIS GROUND IS DISMISSED AS INFRUCTUOUS. 13. HENCE, THE REVENUES APPEAL IS DISMISSED. 14. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED, WHILE THE APPEAL OF REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF FEBRUARY, 2021. SD/- SD/- ( BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 3 RD FEBRUARY, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.