GENERAL INSURANCE CORPORATION OF INDIA, MUMBAI V. DCIT RG 1(3), MUMBAI

ITA 8824/MUM/2011

• Counselvise Citation: 882419914 RSA 2011
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 28-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Tangible material; Difference of opinion; Benefit of exemption; Revised return; Change of opinion
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 8824/M/2011 ASSESSMENT YEAR: 2008 - 09 M/S. GENERAL INSURANCE CORPORATION OF INDIA, SURAKSHA, 170, J. TATA ROAD, CHURCHGATE, MUMBAI 400 020 PAN: AAACG0615N VS. D Y. COMMISSIONER OF INCOME TAX, CIRCLE - 1(3) , AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI FARROKH V. IRANI, A.R. REVENUE BY : SHRI SANTOSH KUMAR, D.R. DATE OF HEARING : 28.11. 201 3 DATE OF PRONOUNCEMENT : 15.01.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 01. 11.11 RELEVANT TO ASSESSMENT YEAR 2008 - 09 . THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE READ AS UNDER: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN AFFIRMING THE ORDER OF T HE ASSESSING OFFICER ('A.O.') DISALLOWING THE EXEMPTION CLAIMED BY THE APPELLANT ON ACCOUNT OF PROFIT ON SALE OF INVESTMENTS OF RS.9,26,67, 16,815 / - AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PRO VISIONS OF INCOME TAX ACT, 1961, AND RULES MADE THEREUNDER. 1.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE ORDERS OF THE HON'BLE INCOME TA X APPELLATE TRIBUNAL FOR ASSESSMENT YEAR 2002 - 03 T O 2006 - 07 AND THE REASONS ASSIGNED FOR THE SAME ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE AND PROVISIONS OF THE ACT AND RULES MADE THEREUNDER. ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 2 1 .3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) OUGHT TO HAVE ALLOW ED THE APPELLANT'S CLAIM FOR DEDUCTION IN RESPEC T OF INVESTMENTS WRITTEN OFF WHICH WAS WITHOUT PREJUDICE TO THE APPELLANT ' S CLAIM FOR EXEMPTION OF THE PROFIT ON SALE OF INVESTMENTS AND NOT DOING SO I S WRONG AND CONTRARY TO THE FACTS OF THE CASE AND THE PRO VISIONS OF THE INCOME TAX ACT, 1961, AND RULES MADE THEREUNDER. 1 . 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DISALLOWANCE OF THE INVESTMENTS WRITTEN OFF AND DEBITED TO PROFIT & LOSS A CCOUNT WAS CONTRARY TO THE PROVISIONS OF S ECTION 44 OF THE ACT AND THE RULE 5 OF THE FIRST SCHEDULE THERETO. 1.5 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE DISALLOWANCE OF INVESTMENT S WRITTEN OFF A LONG WITH THE DISALLOWANCE OF THE PROFIT ON SALE OF INVESTMENT AMOUNTS TO DOUBLE ADDITION AS ANY PROFIT REALIZED ON INVESTMENT WRITTEN OFF IS INCLUDED IN THE PROFIT ON SALE OF INVESTMENTS. 1.6 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED THE APPELLANT'S CLAIM FOR DEDUCTION IN RESPECT OF AMORTIZATION OF PREMIUM ON INVESTMENT DEBITED TO THE PROFIT & LOSS ACCOUNT AND NOT DOING SO IS WRONG AND CONTRARY TO THE FACTS OF THE CASE AND PROVI SIONS OF THE INCOME TAX ACT, 1961 AND RULES MADE THEREUNDER . 1.7 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DENIAL OF THE DEDUCTION IN RESPECT OF AMORTIZATION OF PREMIUM ON INVESTMENT AL ONG WITH DISALLOWANCE OF THE CLAIM FOR DEDUCTION IN RESPECT OF PROFIT ON SALE OF INVESTMENTS AMOUNTS TO DOUBLE ADDITION AS THE AMORTIZATION OF PREMIUM ON INVESTMENT WOULD RESULT IN CORRESPONDING HIGHER PROFIT AT THE TIME OF SALE OF THE INVESTMENT . 1.8 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE AMORTIZATION OF PREMIUM WAS ADDED BACK TO THE PROFIT AS PER PROFIT & LOSS ACCOUNT AS THE ENTIRE PROFIT ON SALE OF INVESTMENT WAS CLAIMED AS EXE MPT AND HENCE THIS GROUND WAS RAISED WITHOUT PREJUDICE TO THE GROUND RELATING TO DEDUCTION OF PROFIT ON SALE OF INVESTMENT . 1.9 WITHOUT PREJUDICE TO THE ABOVE GROUND AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW OUGHT TO HAVE GIVEN THE BENEFIT OF EXEMPTION U/S. 10(38) IN RESPECT OF PROFIT ON SALE OF INVESTMENTS, AND REBATE U/S. 88E AND THE CONCESSIONAL RATE OF TAX UNDER SECTION 111 A OF THE INCOME TAX ACT, 1961 AND NOT DOING SO IS WRONG AND ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 3 CONTRARY TO THE FA CTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF INCOME TAX ACT, 1961, AND RULES MADE THEREUNDER . 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN AFFIRMING THE ORDER OF THE A.O D ISALLOWING THE EXEMPTION CLAIMED BY THE APPELLANT OF RS. 3 , 71,64,388 / - U/S. 10(15) ON ACCOUNT OF INTEREST ON TAX FREE BONDS AND DIVIDEND INCOME OF RS. 2,31 ,44, 1 0 ,397 / - ULS 10(34) AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF INCOME TAX ACT, 1961, AND RULES MADE THEREUNDER. 2.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN TREATING INCOME OF RS. 3,71,64,388/ - AN D RS. 2,31,44,10,397/ - ON ACCOUNT OF INTEREST ON TAX FREE BONDS AND DIVIDEND INCOME EARNED FROM INVESTMENT IN SECURITIES AS TAXABLE INCOME OF THE BUSINESS OF INSURANCE BY HOLDING THAT NO EXEMPTION CAN BE CLAIMED BY THE APPELLANT COMPANY UNDER ANY OTHER PROV ISIONS OF THE ACT AS THE SAME CANNOT BE TAKEN OUT UNDER RULE 5 OF THE FIRST SCHEDULE TO THE INCOME TAX ACT, 1961 AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF INCOME TAX ACT, 1961 , AN D RULES MADE THEREUNDER . 3 .1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEA R NED CIT(A) HAVING HELD THAT THE PROVISIONS OF SECTION 115LB ARE NOT APPLICABLE TO THE APPELLANT SHOULD NOT HAVE TREATED THE GROUND RAISED IN THIS RESPECT B EFORE HIM AS INFRUCTUOUS AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRAR Y TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF INCOME TAX ACT , 1961, AND RULES MADE THEREUNDER. 3 .2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT HAD OFFERED TOTAL INCOME A S COMPUTED U/S L15LB IN THE RETURN OF INCOME THERE BEING LOSS UNDER TH E NORMAL PROVISIONS OF THE ACT THOUGH THE A.O IN THE ASSESSMENT ORDER H A D ASSESSED TOTAL IN COME UNDER THE NORMAL PROVISIONS OF THE ACT THE SAME BEIN G HIGHER THAN THE BOOK PROFIT COMPUTED BY HIM (THE A.O) U / S 115LB. 3.3 WITHOUT PREJUDICE TO THE ABOVE GROUND AND ON THE FACTS AND IN LA W, TH E AUTHORITIES BELOW ERRED IN REDUCING AN AMOUNT OF R S. 3 , 88 , 98 , 971 / - B EI N G DEPRECIATION AS PER INCOME TAX ACT , 1961 AS AGAINST RS. 5 , 01,74 , 274 / - BEIN G TH E AMOUNT OF DEPRECIATION DEBITED TO THE PROFIT & LOSS ACCOUNT AS PROVIDED IN C LAUSE (IIA) OF EXPLANATION 1 TO SUB SECTION 2 OF SECTION 115J B AND DOING S O IS W RONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE , PROVISION S O F T HE INCOME TAX ACT, 1961 AND RULES MADE THEREUNDER. ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 4 T H E AP PELLANT CRA V ES LEAVE TO ADD, AMEND , ALTER , MODIFY AND / OR DELETE AN Y O F T H E A BO VE G ROUNDS OF APPEAL ON OR BEFORE THE DA TE OF HEARING. 2. THE LD. REPRESENTATIVE OF THE ASSESSEE AT THE OUTSET HAS SUBMITTED A CHART TO SHOW THAT THE VARIOUS GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL HAVE BEEN COVERED BY THE EARLIER ORDERS OF THE TRIBUNAL/HONBLE HIGH COURT IN THE OWN CASES OF THE ASSESSEE FOR PRECEDING ASSESSMENT YEARS. THE ISSUES RAISED VIDE ABOVE GROUNDS OF APPEAL ARE DISCUSSED AS HEREIN UNDER: GROUND NO.1.1 & 1.2 : ADDITION ON ACCOUNT OF PROFITS ON SALE OF INVESTMENTS 3. THROUGH THE CHART , THE LD. REPRESENTATIVE OF TH E ASSESSEE HAS DEMONSTRATED THAT THE ISSUE RAISED IN THE ABOVE GROUNDS OF APPEAL IS RELATING TO ADDITION ON ACCOUNT OF PROFIT ON SALE OF INVESTMENTS. THE ASSESSEE COMPANY CLAIMED PROFIT ON SALE OF INVESTMENT OF RS. 9,26,67,16,815/ - AS EXEMPT. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND TREATED THE SAME AS TAXABLE INCOME OF THE ASSESSEES INSURANCE BUSINESS U/S 44 AND RULE 5 OF FIRST SCHEDULE TO INCOME TAX ACT, 1961. THE LD. CIT(A) , FOLLOWING THE ORDER OF HIS PREDECESSOR ON THE ISSU E FOR ASSESSMENT YEAR 2007 - 08 , CONFIRMED THE ADDITIONS MADE BY THE AO ON THIS ISSUE. 4. THE LD. A.R. HAS BROUGHT OUR ATTENTION TO THE FACT THAT THE IDENTICAL ISSUE HAD BEEN RAISED IN THE OWN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2002 - 03 TO ASSESS MENT YEAR 2007 - 08 AND THE SAME HAS BEEN CONSISTENTLY DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO - ORDINATE BENCHES OF THE TRIBUNAL. IN THE CASE IN HAND , THE ADDITIONS WERE CONFIRMED BY THE CIT(A) FOLLOWING THE ORDER OF HIS PREDECESSOR FOR A SSESSMENT YEAR 2007 - 08, H OWEVER , IN FURTHER APPEAL , THE ITAT VIDE ORDER DATED 25.02.12 PASSED IN ITA ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 5 NO.3554/M/11 , DELETED THE ADDITIONS. THE CO - ORDINATE BENCH OF THE TRIBUNAL WHILE DELETING THE ADDITIONS ON THE IDENTICAL ISSUE HAS OBSERVED AS UNDER: 3. ISSUE NO.1: ADDITION ON ACCOUNT OF 'PROFITS ON SALE OF INVESTMENTS'. (MODIFIED GROUND OF APPEAL NO.1.1 (ORIGINAL GROUND 1.1 AND 1.2)). THE ASSESSEE HAD EARNED AN AMOUNT OF `819,26,24,325/ - AS PROFIT ON SALE OF INVESTMENT WHICH WAS CLAIMED AS EXEMPT. THE A SSESSING OFFICER HAD CONSIDERED THAT AMOUNT HAS TO BE BROUGHT TO TAX WHICH WAS AFFIRMED BY THE CIT (A). AT THE OUTSET IT WAS SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED AND ADJUDICATED UPON BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE AY 2005 - 06 IN IT A NO.7437/MUM/2007 VIDE ORDER DATED 14/02/2009. THE SAME WAS ALSO FOLLOWED IN ASSESSEE'S OWN CASE FOR AY 2006 - 07 IN ITA NO.6260/MUM/08, DATED 10TH DECEMBER, 2010. THE TRIBUNAL HAS ADJUDICATED THIS ISSUE IN PARA 5 TO 8 IN AY 2005 - 06 AS UNDER: '5. THE FIRST GROUND RELATES TO CONFIRMING ADDITION OF RS.4,648,476,597/ - ON ACCOUNT OF PROFIT ON SALE OF INVESTMENT. 6. THE LD. A.R. OF THE ASSESSEE STATED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN EARLIER YEARS. COPY OF THE ORDER OF THE TRIBUNAL FOR ASST. YEARS 2002 - 03, 2003 - 04 & 2004 - 05 DECIDED IN ITA NOS. 6500, 6501 & 6502/M/05 DATED 22 - 10 - 2009 IS ALSO FILED. 7. ON THE OTHER HAND, THE LD. D.R. PLACED RELIANCE ON THE ORDER OF THE CIT(A) . 8. AFTER CONSIDERING THE SUBMISSIONS AND THE ORDER OF THE TRIBUNAL (SUPRA), WE FIND THAT THIS ISSUE HAD BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. WE NOTE THAT THE TRIBUNAL, FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH IN BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. DECIDED IN IT A NO.1447/PN/07 VIDE ORDER DATED 31 - 8 - 2009, BY WHICH SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, ALLOWED THE APPEALS OF THE PRESENT ASSESSEE FOR THE THREE ASSESSMENT YEARS. THE FINAL FINDINGS OF THE TRIBUNAL HAVE BEEN RECORDED IN PARAGRAPHS 8, 9 & 10 OF ITS ORDER DATED 22 - 10 - 2009 , WHICH ARE AS UNDER : '8. WE HAVE ALSO NOTICED THAT THE LEGISLATURE HAS NOW BROUGHT IN A PROSPECTIVE AMENDMENT , WITH EFFECT FROM ASSESSMENT YEAR 2011 - 12, IN RULE 5(B)(I) OF FIRST SCHEDULE TO THE INCOME TAX ACT. BY THE VI RTUE OF THIS AMENDMENT, PROFITS ON SALE OF INVESTMENTS, IN THE CASE OF INSURANCE COMPANIES WILL BE TAXABLE W E F 2011 - 12.SINCE THE AMENDMENT SO MADE IN THE STATUTE, WHICH CANNOT BE INFER RED TO BE A SUPERFLUOUS AMENDMENT, IS WITH EFFECT FROM 2011 - 12, THE C ONCLUSION ARRIVED AT BY THE PUNE BENCH STANDS FURTHER FORTIFIED. THIS FORTIFIES THE STAND TAKEN BY THE CO ORDINATE BENCH IN THE CASE OF BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. (SUPRA), WE UPHOLD THE GRIEVANCE OF THE ASSESSEE. 9. IN VIEW OF THESE DISCUSSIO NS, AS ALSO FOLLOWING THE COORDINATE BENCH DECISION IN THE CASE OF BAJAJ ALLIANZ GENERAL INSURANCE COMPANY ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 6 ASSESSEE. THE PROFITS ON SALE OF INVESTMENT IN THE YEARS BEFORE US, WHICH ARE YEAR PRIOR TO THE YEARS WITH EFFECT FROM WHICH PROSPECTIVE AMENDMENT IS MADE, ARE NOT TAXABLE IN THE HANDS OF THE ASSESSEE. THE TAXABILITY OF INCOME OF INSURANCE COMPANIES UNDER THE HEAD 'INCOME FROM BUSINESS AND PROFESSION' AS GOVERNED BY PROVISIONS OF SECTION 44 READ WITH FIRST SCHEDULE TO THE INCOME TAX ACT, DOES NOT EXTEN D TO TAXABILITY OF PROFITS ON SALE OF INVESTMENTS - SO FAR AS THE ASSESSMENT YEARS BEFORE US ARE CONCERNED. 10. FOR THE REASONS SET OUT ABOVE, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE PROFITS ON SALE OF INVESTMENTS FROM INCOME OF THE ASSESSEE LIABLE TO B E TAXED. THE ASSESSEE GETS THE RELIEF ACCORDINGLY.' FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR EARLIER YEARS, WE ALLOW THE GROUND FOR THE YEAR UNDER CONSIDERATION ALSO. ACCORDINGLY FOLLOWING THE ORDERS OF AY 2005 - 06, WHICH IN TU RN WAS FOLLOWED IN AY 2006 - 07 IN ASSESSEE'S OWN CASE, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE ADDITION MADE ON ACCOUNT OF PROFIT ON SALE OF INVESTMENT IS ACCORDINGLY DELETED. THE ASSESSEE'S COUNSEL ALSO PLACED ON RECORD S IMILAR DECISIONS IN THE FOLLOWING CASES IN SUPPORT OF ITS CONTENTION: I) ITAT PUNE IN BAJAJ ALLIANZ (ITA NO.1447/PUNE/07 - PARA 3 TO 8) II) ITAT MUMBAI IN HDFC ERCO GIC (ITA NO.338/MUM/ 2009 - PARA 2 TO7). III) TATA AIG GENERAL INSURANCE CO. LTD (ITA NO.25 97/MUM/2009 (PARA 17 TO 20). IV) RELIANCE GENERAL INSURANCE CO LTD VS. DCIT - 3(3) IN ITA NO/781/1520/6262 DT 30 - 04 - 2010. V) RELIANCE GENERAL INSURANCE CO LTD VS. JT.CIT - 3(3) - IN ITA NO3083 ETC DTD. 02 - 02 - 2010 SINCE THE ISSUE IS COVERED BY ASSESSEE'S OWN CA SE, THERE IS NO NEED TO DISCUSS/EXTRACT THE RELEVANT ORDERS QUOTED ABOVE INTO THIS ORDER. SUFFICE TO SAY THAT THIS ISSUE IS COVERED IN ASSESSEE'S FAVOUR IN VARIOUS ORDERS AND ACCORDINGLY THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. MODIFIED GROUND NO.1. 1 IS ACCORDINGLY ALLOWED. SO, R ESPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNAL GIVEN ON THE IDENTICAL ISSUE, IN THE OWN CASE OF THE ASSESSEE FOR EARLIER ASSESSMENT YEARS , THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 7 GROUND NO.1.3 TO 1. 9: DEDUCTION IN RESPECT OF INVESTMENTS WRITTEN OFF 5 . THE LD. A.R. HAS CONTENDED THAT IF THE ISSUE RELATING TO ADDITION ON ACCOUNT OF PROFITS ON SALE OF INVESTMENTS IS DECIDED IN FAVOUR OF THE ASSESSEE , THEN THE ISSUE RAISED VIDE ABOVE GROUNDS WILL NOT SU RVIVE. SINCE WE HAVE ALREADY DECIDED THE ISSUE RAISED VIDE GROUND NO.1.1 & 1.2 I.E. ADDITION ON ACCOUNT OF PROFIT ON SALE OF INVESTMENTS , HENCE, THE ISSUES RAISED VIDE ABOVE GROUNDS DO NOT SURVIVE AND THE SAME ARE DISMISSED BEING RENDERED INFRUCTUOUS. GROUND NO.2.1 & 2.2 : ADDITION ON ACCOUNT OF INTEREST ON TAX FREE BONDS AND DIVIDEND INCOME 6 . THE ASSESSE E COMPANY CLAIMED A SUM OF RS. 3,71,64,388/ - AND RS.2,31,44,10,397/ - ON ACCOUNT OF INTEREST ON TAX FREE BONDS AND DIVIDEND INCOME , CLAIMED AS EXEMPT I NCOME U/S.10(15) AND 10(34) RESPECTIVELY. THE LD. AO , IN PURSUANCE OF DIRECTIONS ISSUED U/S. 144A BY THE ADDITIONAL COMMISSIONER OF INCOME TAX , MADE AN ADDITION BY HO LDING THAT THE SAID INCOME FORMED AS PART OF THE PROFIT AND LOSS ACCOUNT WAS TAXABLE UN DE R SECTION 44 AND RULE 5 OF THE FIRST SCHEDULE OF THE INCOME TAX ACT, 1961 WHICH FINDING WAS FURTHER CONFIRMED BY THE CIT(A) . 7 . THE LD. A.R. HAS BROUGHT OUR ATTENTION TO THE FACT THAT THE IDENTICAL ISSUE RAISED IN THE OWN CASE OF THE ASSESSEE FOR ASSESSME NT YEAR 200 6 - 0 7 HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 01.12. 20 11. HE HAS FURTHER BROUGHT OUR ATTENTION TO THE FACT THAT FOR ASSESSMENT YEAR 2007 - 08 , THE SIMILAR ISSUE HAS BEEN DECIDED BY THE T RIBUNAL IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 25.02.12 PASSED IN ITA NO.3554/M/11 . FOR THE SAKE OF CONVENIENCE THE RELEVANT FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT GIVEN ON THE ISSUE ARE REPRODUCED AS UNDER: THE QUESTION WHETHER AN ASSES SEE WHO CARRIES ON GENERAL INSURANCE BUSINESS WOULD BE ENTITLED TO AVAIL OF AN EXEMPTION UNDER SECTION 10 DID ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 8 NOT ARISE. THE ISSUE AS TO WHETHER THE ASSESSEE WHICH CARRIES ON THE BUSINESS OF GENERAL INSURANCE WOULD BE ENTITLED TO THE BENEFIT OF AN EXEMPTI ON UNDER CLAUSES (15), 23(G) AND (33) OF SECTION 10 IS DIRECTLY GOVERNED BY THE DECISION RENDERED BY THE DIVISION BENCH IN LIFE INSURANCE CORPORATION VS. COMMISSIONER OF INCOME - TAX (SUPRA) FOLLOWING THE EARLIER DECISION IN COMMISSIONER OF INCOME - TAX VS. NE W INDIA ASSURANCE CO. LTD . (SUPRA). THE ASSESSING OFFICER COULD NOT HAVE IGNORED THE BINDING PRECEDENT CONTAINED IN THE TWO DIVISION BENCH DECISIONS OF THIS COURT. MOREOVER, THE ASSESSING OFFICER IN ALLOWING THE BENEFIT OF THE EXEMPTION IN THE ORDER OF A SSESSMENT UNDER SECTION 143(3) SPECIFICALLY RELIED UPON THE VIEW TAKEN BY THE CBDT IN ITS COMMUNICATION DATED 21 FEBRUARY 2006 TO THE CHAIRMAN OF IRDA. THE COMMUNICATION CLARIFIES THAT THE EXEMPTION AVAILABLE TO ANY OTHER ASSESSEE UNDER ANY CLAUSES OF SEC TION 10 IS ALSO AVAILABLE TO A PERSON CARRYING ON NON - LIFE INSURANCE BUSINESS SUBJECT TO THE FULFILLMENT OF THE CONDITIONS, IF ANY, UNDER A PARTICULAR CLAUSE OF SECTION 10 UNDER WHICH EXEMPTION IS SOUGHT. IT NEEDS TO BE EMPHASISED THAT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAD FAILED TO FULFIL THE CONDITION WHICH ATTACHED TO THE PROVISIONS OF THE RELEVANT CLAUSES OF SECTION 10 IN RESPECT OF WHICH THE EXEMPTION WAS ALLOWED. THIS OF COURSE IS APART FROM CLAUSE (38) OF SECTION 10 WHERE T HE ASSESSING OFFICER HAD REJECTED THE CLAIM FOR EXEMPTION IN THE ORIGINAL ORDER OF ASSESSMENT UNDER SECTION 143(3). THE ASSESSING OFFICER ABOVE ALL WAS BOUND BY THE COMMUNICATION OF THE CBDT. HAVING FOLLOWED THAT IN THE ORDER UNDER SECTION 143(3) HE COUL D NOT HAVE TAKEN A DIFFERENT VIEW WHILE PURPORTING TO REOPEN THE ASSESSMENT. HAVING APPLIED HIS MIND SPECIFICALLY TO THE ISSUE AND HAVING TAKEN A VIEW ON THE BASIS OF THE COMMUNICATION NOTED EARLIER, THE ACT OF REOPENING THE ASSESSMENT WOULD HAVE TO BE RE GARDED AS A MERE CHANGE OF OPINION WHICH HAS ALSO NOT BEEN BASED ON ANY TANGIBLE MATERIAL. CONSEQUENTLY, WE HOLD THAT THE REOPENING OF THE ASSESSMENT IS CONTRARY TO LAW. THE PETITION WOULD HAVE, THEREFORE, T O BE ALLOWED. 8 . THE HONBLE HIGH COURT , THU S, CATEGORICALLY HELD THAT NOT ONLY THE EXEMPTION UNDER SECTION 10 OF THE ACT WAS AVAILABLE TO THE ASSESSEE BUT ALSO THE REOPENING ON THE BASIS OF MERE CHANGE OF OPINION WAS BAD IN LAW. FOLLOWING THE ABOVE FINDINGS GIVEN BY THE HONBLE BOMBAY HIGH COURT, THE IDENTICAL ISSUE FOR ASSESSMENT YEAR 2007 - 08 IN THE CASE OF THE ASSESSEE, HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO - ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 25.02.12 PASSED IN ITA NO.3554/M/11 . ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 9 SO RESPECTFULLY FOLLOWING THE ABOVE FIN DINGS OF THE HONBLE JURISDICTIONAL HIGH COURT AND FURTHER FOLLOWED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL , IT IS HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 10 OF THE I.T. ACT. THIS GROUND OF THE APPEAL IS ACCORDINGLY ALLOWED. GRO UND NO.3.1 TO 3.3: NON APPLICABILITY OF PROVISION OF SECTION 115AB 9. THE LD. A.R. HAS CONTENDED THAT THE ASSESSEE IS AN INSURANCE COMPANY AND COMPUTATION OF ITS PROFITS AND GAINS OF BUSINESS WERE GOVERNED BY THE PROVISIONS OF SECTION 44 READ WITH RULE 5 O F THE FIRST SCHEDULE TO THE INCOME TAX ACT, 1961, HENCE , THE PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT, 1961 WERE NOT APPLICABLE TO IT. HE HAS FURTHER CONTENDED THAT THE AO HAD ERRED IN COMPUTING BOOK PROFITS OF RS.10,67,27,14,373/ - BY INVOKING TH E PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT, 1961. THE LD. A.R. HAS BROUGHT TO OUR ATTENTION THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 25.02.12 PASSED IN ITA NO.3554/M/11 IN THE OWN CASE OF THE ASSESSEE FOR IMMEDIATE PRECEDING YEAR I.E. ASSESSMENT YEAR 2007 - 08. 10. WHILE DEALING WITH THE IDENTICAL ISSUE , THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS OBSERVED AS UNDER: 10. ISSUE NO.7 NON - APPLICABILITY OF P ROVISIONS OF SECTION 115JB I.E. MAT (MODIFIED GROUND OF APPEAL NO.4 - ORIGINAL GROUND OF APPEAL NO.4). THE ASSESSEE HAD OFFERED INCOME UNDER SECTION 115JB BOOK PROFIT IN THE ORIGINAL RETURN AND SUBSEQUENTLY IN REVISED RETURN. BEFORE THE CIT (A) IT RAISED AN ADDITIONAL GROUND WHERE IT WAS CONTENDED THAT PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO THE ASSESSEE. AS THIS GROUND GOES TO THE ROOT OF TAXABILITY OF BOOK PROFIT UNDER SECTION 115JB, THE SAME WAS ADMITTED BY THE CIT (A) AND ADJUDICATED AS UNDE R: '15.2 IN THE COURSE OF APPELLATE PROCEEDINGS, IT HAS BEEN INFORMED THAT THE ACCOUNTS OF APPELLANT ARE PREPARED IN ACCORDANCE WITH THE INSURANCE ACT AND NOT IN ACCORDANCE WITH SCHEDULE VI OF THE COMPANIES ACT. IN PARTICULAR MY ATTENTION HAS BEEN DRAWN T O THE PROVISIONS OF SECTION 211 OF THE COMPANIES ACT WHICH DEALS WITH THE FORM AND CONTENTS OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. IT HAS BEEN ARGUED THAT THE PROVISO TO SUB - SECTION1 CATEGORICALLY SPECIFIES THAT THE PROVISIONS SHALL NOT BE APPLICAB LE FOR AN ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 10 INSURANCE OR BANKING COMPANY. SIMILARLY IT HAS BEEN ARGUED THAT THE PROVISO TO SUB - SECTION 2 OF THIS SECTION RELATING TO THE PROFIT AND LOSS ACCOUNT ALSO SPECIFIES THAT SCHEDULES VI PART II SHALL NOT BE APPLICABLE TO ANY INSURANCE OR BANKING COM PANY. THEREFORE, IT HAS BEEN ARGUED THAT THE BASIC PREMISE OF APPLICABILITY OF SECTION 115JB DOES NOT STAND AND CONSEQUENTLY THIS SECTION DOES NOT APPLY TO APPELLANT COMPANY. MY ATTENTION HAS ALSO BEEN DRAWN TO THE DECISION OF HON'BLE MUMBAI ITAT IN THE CA SE OF KRUNG THAI BANK PCL IN ITA NO.3390 OF 2009 WHERE IT HAS BEEN HELD THAT PROVISIONS OF SECTION 115JB CAN COME INTO PLAY ONLY WHEN ASSESSEE IS REQUIRED TO PREPARE ITS ACCOUNTS IN ACCORDANCE WITH PART II AND PART III OF SCHEDULE VI OF THE COMPANIES ACT. 15.3 I HAVE PERUSED THE FACTS OF THE CASE. I FIND THAT HON'BLE TRIBUNAL HAVE GIVEN A CATEGORICAL FINDING THAT IF ACCOUNTS ARE NOT REQUIRED TO BE PREPARED UNDER PART II AND PART III OF SCHEDULE VI OF THE COMPANIES ACT, SECTION 115JB CANNOT BE INVOKED. A SIM ILAR DECISION WAS DELIVERED IN THE CASE OF MAHARASHTRA STATE ELECTRICITY BOARD (82 ITD 422) AND IN THE UNREPORTED DECISION OF RELIANCE ENERGY LTD. THE ISSUE INVOLVED IS IDENTICAL AND THEREFORE, THE RATIO LAID DOWN BY HON'BLE ITAT HAS TO BE FOLLOWED. IT IS THEREFORE HELD THAT SECTION 115JB CANNOT BE INVOKED IN THE CASE OF APPELLANT. HOWEVER, IT IS NOTICED THAT IN THE RETURN OF INCOME APPELLANT HAD ON ITS OWN OFFERED INCOME UNDER PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT TO THE EXTENT OF `15,13,60,66, 509/ - . TO THIS EXTENT, APPELLANT CANNOT BE GRANTED RELIEF SINCE ASSESSED INCOME CANNOT BE BELOW THE RETURNED INCOME. RELIANCE IS PLACED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD REPORTED IN 284 ITR 323. TO THE EXTENT OF THI S DECLARED INCOME THEREFORE, RELIEF CANNOT BE GRANTED. HOWEVER, ANY FURTHER ADDITIONS TO THIS INCOME CANNOT BE UPHELD. THE ADDITIONAL GROUND OF APPEAL IS DECIDED ACCORDINGLY'. ( EMPHASIS PROVIDED) EVEN THOUGH THERE WAS A FINDING THAT PROVISIONS OF SECTION 115JB CANNOT BE INVOKED IN THE CASE OF THE ASSESSEE, THE FINDING OF WHICH WAS NOT CONTESTED BY THE REVENUE SINCE THERE IS NO CROSS APPEAL, THE ASSESSEE'S CONTENTION WAS THAT HAVING GIVEN A FINDING THAT PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE, THE CI T (A) IS BOUND TO ALLOW THE GROUND AND CANNOT REJECT THE ADDITIONAL GROUND BASED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD REPORTED IN 284 ITR 323. 11. IT WAS SUBMITTED BY THE LEARNED COUNSEL THAT THE ISSUE OF NON APPLI CABILITY OF 115JB WAS DECIDED BY THE COORDINATE BENCH IN THE CASE OF KRUNG THAI BANK PCL VS. JT DIT IN ITA NO.3390 OF 2009. IT WAS FURTHER SUBMITTED THAT THE CIT (A) IS BOUND TO GRANT RELIEF FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F NATIONAL THERMAL POWER CORPORATION VS. CIT 229 ITR 383 FOLLOWED BY THE HON'BLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF SET SATELLITE (SINGAPORE) PTE LTD VS.DDIT 307 ITR 205. IT WAS ALSO SUBMITTED THAT THE COORDINATE BENCH IN THE CASE OF CHICAGO PNEUMATIC INDIA LIMITED (15 SOT 252) ALSO CONSIDERED THAT ASSESSING OFFICER IS BOUND TO ASSESS THE CORRECT INCOME AND HE MAY GRANT RELIEF/REFUNDS SUO MOTTO AND CAN DO SO ON BEING POINTED OUT BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR WHICH THE ASSESSEE HAS NOT FILED REVISED RETURN. ON THE PRINCIPLES LAID DOWN IN THE ABOVE CASES, IT WAS SUBMITTED THAT THE CIT (A) ERRED IN NOT GRANTING THE RELIEF AND REQUESTED FOR GRANTING RELIEF FROM APPLICATI ON OF PROVISIONS OF SECTION 115JB. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER, RELIED ON THE ORDERS OF ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 11 THE CIT (A) AND SUBMITTED THAT THE ASSESSEE CANNOT CLAIM EXEMPTION HAVING ADMITTED THE INCOME AND RELIED ON THE ORDER OF THE CIT (A). 12. WE HAVE CO NSIDERED THE ISSUE. SINCE THERE IS NO CHALLENGE TO THE CIT (A) FINDING THAT PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO ASSESSEE THERE IS NO NEED TO ADJUDICATE ON THIS ISSUE. THE CIT (A) HAVING COME TO THE CONCLUSION THAT PROVISIONS OF 115JB ARE NOT APPLICABLE, HE SHOULD HAVE GRANTED RELIEF AS SOUGHT BY THE ASSESSEE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SET SATELLITE (SINGAPORE) PTE. LTD. VS.DDIT 307 ITR 205 HAD ALREADY PRONOUNCED THAT MERELY BECAUSE TAX ON INCOME WAS PAID FOR EARLIER AYS THA T WOULD NOT STOP THE ASSESSEE FROM CONTENDING THAT ITS INCOME IS NOT LIABLE TO TAX. SIMILAR PROPOSITIONS WERE ALSO CONSIDERED BY THE COORDINATE BENCH IN THE CASE OF CHICAGO PNEUMATIC INDIA LIMITED (15 SOT 252). THE HON'BLE SUPREME COURT ALSO IN THE CASE OF NATIONAL THERMAL POWER CORPORATION VS. CIT 229 ITR 383 CONSIDERED THE POWER OF ITAT TO ADJUDICATE THE ISSUE EVEN IT WAS RAISED FOR THE FIRST TIME BEFORE THE ITAT. SINCE THE ISSUE HAS ALREADY CAME UP BEFORE THE CIT (A) AND HAVING GIVEN A FINDING THAT PROVISIONS OF SECTION 115 JB ARE NOT APPLICABLE TO THE ASSESSEE, IT IS APPROPRIATE ON THE PART OF THE CIT (A) TO GRANT RELIEF. HAVING NOT DONE SO, WE DIRECT THE ASSESSING OFFICER TO EXEMPT THE ASSESSEE FRO M THE APPLICABILITY OF PROVISIONS OF SECTION 115JB, FOLLOWING THE PROVISIONS LAID DOWN BY THE COORDINATE BENCH IN THE CASE OF KRUNG THAI BANK PCL VS. JT. DIT. ACCORDINGLY, THE GROUND IS ALLOWED. RESPECTFULLY FOLLOWING THE FINDINGS OF THE TRIBUNAL GIVEN O N THE IDENTICAL ISSUE IN THE IMMEDIATE PRECEDING YEAR IN THE OWN CASE OF THE ASSESSEE , THIS ISSUE, FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO, IS ACCORDINGLY ALLOWED AND THE AO IS DIRECTED TO EXEMPT THE ASSESSEE FROM THE APPLICABILITY OF PROVISIONS O F SECTION 115JB ACCORDINGLY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.01. 201 4 . SD/ - SD/ - ( P.M. JAGTAP ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 15.01. 201 4 . * KISHORE COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI ITA NO .8824/M/2011 M/S. GENERAL INSURANCE CORPORATION OF INDIA 12 THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.