DEPUTY COMMISSIONER OF INCOME TAX 1(1)(2), MUMBAI V. HDFC STANDARD LIFE INSURANCE COMPANY LIMITED , MUMBAI

MA 249/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5673 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-08-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 05-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rectification of order
• Section: 43B; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER M.A. NO. 249/MUM./2018 ( ARISING OUT OF ITA NO. 4079 / MUM . /201 5 ) ( ASSESSMENT YEAR : 20 11 12 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 1(1)(2), MUMBAI . APPELLANT V/S HDFC STANDARD LIFE INSURANCE CO. LTD. RAMAN HOUSE, H.T. PAREKH MARG 165, BACKBAY RECLAMATION MUMBAI 400 020 . RESPONDENT M.A. NO. 250 /MUM./2018 ( ARISING OUT OF ITA NO.407 8 /MUM./2015) ( ASSESSMENT YEAR : 20 10 11 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 1(1)(2), MUMBAI . APPELLANT V/S HDFC STANDARD LIFE INSURANCE CO. LTD. RAMAN HOUSE, H.T. PAREKH MARG 165, BACKBAY RECLAMATION MUMBAI 400 020 . RESPONDENT ASSESS EE BY : MS. AARTI VISANJI REVENUE BY : SHRI MANOJ KUMAR SINGH DATE OF HEARING 17 .0 5 .2019 DATE OF ORDER 02.08.2019 2 HDFC STANDARD LIFE INSURANCE CO. LTD. O R D E R PER SAKTIJIT DEY. J.M. THE AFORESAID APPLICATIONS HAVE BEEN FILED BY THE REVENUE SEEKING RECTIFICATION OF MISTAKE S WHICH HAVE CREPT INTO ORDER DATED 23 RD AUGUST 2017, PASSED IN ITA NO.4078 & 4079/MUM./2015. 2 . AS STATED IN THESE APPLICATIONS AND SUBMITTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, WHILE DISPOSING OF REVENUES APPEAL S , T HE TRIBUNAL HAS NOT ADJUDICATED GROUNDS NO.2, 3 AND 6, WHICH ARE COMMON IN BOTH THE APPEALS. 3 . THE LEARNED AUTHORISED REPRESENTATIVE ALSO AGREED WITH THE AFORESAID SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. HOWEVER, LEARNED COUNSEL APPEARING FOR BOTH THE PARTIES HAVE ALSO A GREED BEFORE US THAT THE ISSUES RAISED IN THESE GROUNDS ARE COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AS WELL AS IN CASE OF ANOTHER INSURANCE COMPANY. 4 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON CAREFU LLY GOING THROUGH THE APPEAL ORDER PASSED BY THE TRIBUNAL, IT IS NOTICED THAT GROUNDS NO.2, 3 AND 6, WHICH ARE COMMON IN BOTH THE APPEALS HAVE NOT BEEN DEALT WITH BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEALS. HOWEVER, IT IS RELEVANT TO OBSERVE , IN THE 3 HDFC STANDARD LIFE INSURANCE CO. LTD. A PPEAL ORDER ITSELF, THE TRI B UNAL HAS RECORDED THE SUBMISSIONS OF THE DEPARTMENTAL AUTHORITIES TO THE EFFECT THAT ALL THE GROUNDS RAISED BY TH E REVENUE IN THE APPEALS ARE COVERED BY THE DECISION S OF THE TRIBUNA L AND HONBLE JURISDICTIONAL HIGH COURT IN ASSE SSEES OWN CASE AS WELL AS IN CASE OF ANOTHER INSURANCE COMPANY VIZ., ICICI PRUDENTIAL INSURANCE CO. LTD. V/S ACIT, [2013] 140 ITD 41 (MUM.). IN FACT, IN COURSE OF HEARING OF THE PRESENT APPLICATIONS ALSO, LEARNED COUNSEL S APPEARING FOR THE PARTIES HAVE AG REED THAT ALL THE GROUNDS RAISED BY THE REVENUE , INCLUDING GROUNDS NO.2, 3 AND 6 , ARE COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE. THUS, IN VIEW OF THE AFORESAID, THERE IS AN INADVERTENT MISTAKE BY THE TRIBUNAL IN NOT DISPOSING OF GROUND S NO.2, 3 AND 6, WHICH COMES WITHIN THE AMBIT OF MISTAKE APPARENT ON THE FACE OF RECORD AS PER SECTION 254(2) OF THE ACT, HENCE, REQUIRES RECTIFICATION. SINCE , THERE IS CONSENSUS BETWEEN THE PARTIES THAT GROUNDS WHICH HAVE NOT BEEN DECIDED EARLIER ARE ALSO COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE BUT WHICH COULD NOT BE DECIDED INADVERT ENTLY, WE PROCEED TO DISPOSE OF THEM IN TERMS OF EARLIER DECISION OF THE T R IBUNAL IN ASSESSEES OWN CASE, IN THE FOLLOWING MANNER. 5 . AFTER PARA 7 OF THE APPEAL ORDER, THE FOLLOWING PARAGRAPH S SHOULD BE ADDED 7(A) AND 7(B) : 4 HDFC STANDARD LIFE INSURANCE CO. LTD. 7(A) IN GROUNDS NO.2 AND 3, THE REVENUE HAS CHALLENGED CERTAIN OBSERVATIONS OF THE LEARNED COMMISSIONER (A PPEALS) WITH REFERENCE TO APPLICABILITY OF THE UNAMENDED INSURANCE ACT, 1983 R/W SECTION 44 OF THE ACT AND RULE 2 OF THE FIRST SCHEDULE. AS DISCUSSED IN PARA 6 AND 7, OF THE APPEAL ORDER, LEARNED COMMISSIONER (APPEALS) WHILE DECIDING THE ISSUE RELATING TO ADJUSTMENT OF EARLIER YEARS SURPLUS AS PER ACTUARIAL VALUATION HAD OBSERVED THAT ASSESSEES INCOME HAS TO BE COMPUTED IN TERMS WITH SECTION 44 OF THE ACT R/W RULE CONTAINED UNDER THE FIRST SCHEDULE. THE AFORESAID DECISION OF THE LEARNED COMMISSIONER (APPEA LS) WAS UPHELD BY THE TRIBUNAL FOLLOWING ITS DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 09 AND ALSO THE DECISION OF THE BENCH IN ICICI PRUDENTIAL INSURANCE CO. LTD. (SUPRA) HAS HELD AS UNDER: 2.5.1 SO, WE WOULD LIKE TO DECIDE THE ISS UE OF COMPUTING SURPLUS / DEFICIT DISCLOSED BY THE ACTUARIAL VALUATION AS PER RULE 2 OF THE FIRST SCHEDULE. AS PER THE ASSESSEE, SURPLUS / DEFICIT HAD TO BE CALCULATED IN FORM NI OF THE FOURTH SCHEDULE TO THE INSURANCE ACT, 1938, PRIOR TO ITS AMENDMENT BY THE INSURANCE (AMENDMENT) ACT, 2002. WE FIND THAT SIMILAR ISSUE HAD ARISEN IN THE CASE IPLIC (SUPRA). DECIDING THE MATTER MUMBAI BENCH OF THE TRIBUNALS HAS DEALT THE ISSUE AS UNDER: 27. RESPECTFULLY FOLLOWING THE ABOVE PRINCIPLES AND EXAMINING THE PROVISIONS OF IT ACT, WE ARE OF THE OPINION THAT THE 'ACTUARIAL VALUATION MADE IN ACCORDANCE WITH THE INSURANCE ACT, 1938' DO MEAN THAT THE ACTUARIAL VALUATION DONE IN ACCORDANCE WITH THE I NSURANCE ACT, 1938. IN ARRIVING AT THE ABOVE DECISION WE HAVE ALSO TAKEN INTO CONSIDERATION THAT RULE - 5 IN PART - B OF THE FIRST SCHEDULE WITH REFERENCE TO 'OTHER INSURANCE BUSINESS' DID INCORPORATE THE IRDA AND ITS REGULATIONS AS AMENDED BY THE FINANCE ACT 2009 W.E.F. 1.4.2011 WHICH IS AS UNDER: 'B - OTHER INSURANCE BUSINESS: 5 HDFC STANDARD LIFE INSURANCE CO. LTD. COMPUTATION OF PROFITS AND GAINS OF OTHER INSURANCE BUSINESS. 5 . THE PROFITS AND GAINS OF ANY BUSINESS OF INSURANCE OTHER THAN LIFE INSURANCE SHALL BE TAKEN TO BE THE PROFIT BEFORE TAX AND APPROPRIATIONS AS DISCLOSED IN THE PROFIT & LOSS A/C PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THE INSURANCE ACT, 1938 (.J OF 1 938) OR THE RULES MADE THEREUNDER OR THE PROVISIONS OF THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT, 1999 (I OF 1999) OR THE REGULATIONS MADE THEREUNDER SUBJECT TO THE FOLLOWING ADJUSTMENTS: - (A) SUBJECT TO THE OTHER PROVISIONS OF THIS RULE, ANY EXPENDITURE OR ALLOWANCE INCLUDING ANY AMOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT EITHER BY WAY OF A PROVISION FOR ANY TAX, DIVIDEND, RESERVE OR ANY OTHER PROVISION AS MAY BE PRESCRIBED WHICH IS NOT ADMISSIBLE UNDER THE PROVISIONS OF SECTION 30 TO 43B IN COMPUTING THE PROFITS AND GAINS OF A BUSINESS SHALL BE ADDED BACK: ( B ) (I) ANY GAIN OR LOSS ON REALIZATION OF INVESTMENTS SHALL BE ADDED OR DEDUCTED, AS THE CASE MAY BE, IF SUCH GAIN OR LOSS IS NOT CREDITED OR DEBITED TO THE PROFIT & LOSS A/C; ( C ) SUCH AMOUNT CARRIED OVER TO A RESERVE FOR UNEXPIRED RISKS AS MAY BE PRESCRIBED IN THIS BEHALF SHALL BE ALLOWED AS A DEDUCTION '. (EMPHASIS SUPPLIED) THIS INDICATES THAT THE LEGISLATURE CONSCIOUSLY OMITTED INCORPORATING THE PROVISIONS OF IRDA OR THE REGULATIONS MADE THERE UNDER IN RULE 2 WHICH STILL REFERS TO THE INSURANCE ACT 1938 ONLY. 28. FURTHER, WE ALSO NOTICE THAT THE INSURANCE ACT ITSELF WAS AMENDED ALONG WITH THE INTRODUCTION OF IRDA ACT 1999. ALONG WITH THE SAID IRDA ACT, THERE ARE VARIOUS AMENDMENTS PROPOSED IN THE INSURANCE ACT IN TUNE WITH IRDA ACT BY AMENDING THE RELEVANT PROVISIONS OF INSURANCE ACT 1938. HOWEVER, SINCE THE RULE 5 WAS AMENDED IN THE FIRST SCHE DULE BY SPECIFICALLY REFERRING TO THE IRDA ACT 1999 OR THE REGULATIONS MADE THERE UNDER, WE ARE OF THE OPINION THAT THE LEGISLATURE INTENDED NOT TO MOD JFY OR AMEND THE RULE - 2. THIS INDICATES THE INTENTION OF LEGISLATURE THAT THE ACTUARIAL VALUATION HAS TO BE MADE IN ACCORDANCE WITH THE UNAMENDED INSURANCE ACT, 1938. WE ARE OF THE FIRM OPINION THAT THE UNAMENDED PROVISIONS OF INSURANCE ACT 1938 WERE ONLY INCORPORATED INTO THE INCOME TAX ACT AS FAR AS LIFE INSURANCE BUSINESS IS CONCERNED. THEREFORE, AO'S ACTION IN FOLLOWING THE FORMAT PRESCRIBED UNDER THE REGULATIONS OF IRDA ACT IS NOT IN ACCORDANCE WITH THE SPIRIT OF RULE - 2 AND PROVISIONS AS MADE APPLICABLE 6 HDFC STANDARD LIFE INSURANCE CO. LTD. UNDER THE INCOME TAX ACT. 30. THE FIRST TO FOURTH SCHEDULE OF THE INSURANCE ACT 1938 WAS OMITTED B Y THE INSURANCE AMENDMENT ACT 2002 AFTER INCORPORATION OF THE RELEVANT SCHEDULES IN THE IRDA ACT. EVEN THOUGH THE SAID SCHEDULES WERE OMITTED FROM THE INSURANCE ACT, 1938, WE ARE OF THE OPINION THAT AS FAR AS RULE - 2 IS CONCERNED BY THE PRINCIPLE OF 'LEGISLATION BY INCORPORATION' UNAMENDED INSURANCE ACT, 1938 IS APPLICABLE AND THE ACTUARIAL VALUATION HAS TO BE MADE IN ACCORDANCE WITH THE THEN EXISTING PART - I OF THE FOURTH SCHEDULE AND IN CONFORMITY WITH THE REQUIREMENTS O F PART - II OF THAT SCHEDULE. THEREFORE, ASSESSEE'S CONTENTION THAT THE IRDA REGULATIONS EVEN THOUGH ARE APPLICABLE TO ASSESSEE SINCE IT HAS COMMENCED BUSINESS AFTER THE COMMENCEMENT OF THE IRDA ACT, 1999, FOR THE PURPOSE OF RULE - 2, THE ACTUARIAL VALUATION H AS TO BE DONE IN ACCORDANCE WITH THE REGULATIONS CONTAINED IN ERSTWHILE FOURTH SCHEDULE PART - I AND PART - II . THIS IS WHAT ASSESSEE IS CONTENDING AND MERGING THE ACCOUNTS OF POLICY - HOLDERS' AND SHARE - HOLDERS' ACCOUNT AND ARRIVING AT THE ACTUARIAL DEFICIT, WI THOUT TAKING INTO CONSIDERATION THE TRANSFER OF FUNDS FROM THE SHARE - HOLDERS' ACCOUNT TO POLICY - HOLDERS' ACCOUNT.' RESPECTFULLY, FOLLOWING THE SAME WE HOLD THAT THE ACTUARIAL VALUATION HAS TO BE DONE IN ACCORDANCE WITH THE REGULATIONS CONTAINED IN ERSTWHI LE FOURTH SCHEDULE PART - I AND PART - 11. GROUNDS NO. I AND 2 ARE DECIDED IN FAVOUR OF THE ASSESSEE. ' (EMPHASIS SUPPLIED) 7(B) FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO ORDINATE BENCH IN ASSESSEES OWN CASE, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. GROUNDS RAISED IN BOTH THE APPEALS ARE DISMISSED. 6 . AFTER PARAGRAPH NO.8 , THE FOLLOWING PARAGRAPH S ARE TO BE ADDED AS PARA 8(A) AND 8(B) : 8(A) IN GROUND NO.6, THE REVENUE HAS RAISED THE ISSUE OF INCOME ARISING IN SHARE HOLDERS ACCOUNT WHETHER TO BE 7 HDFC STANDARD LIFE INSURANCE CO. LTD. ASSESSED AS INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. 8(B) AS COULD BE SEEN, GROUND NO.6, IS A N OFF SHOOT OF GROUND NO.5. WHILE DECIDING GROUND NO.5, THE TRIBUNAL FOLLOWING THE DECISION IN ASSESSEES OWN CASE IN ASSESSMENT YEAR S 2002 03 TO 2009 10 AND THE DECISION OF THIS BENCH IN ICICI PRUDENTIAL INSURANCE CO. LTD. (SUPRA), HAS HELD THAT INCOME ARISING FROM THE SHAREHOLDERS ACCOUNT BEING PART OF INSURANCE BUSINESS OF THE ASSESSEE HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS IRRESPECTIVE OF NOMENCLATURE GIVE N BY THE ASSESSEE. IN VIEW OF THE AFORESAID, THE GROUND RAISED BY THE REVENUE BEING OF MERE ACADEMIC IMPORTANCE , DOES NOT REQUIRE ADJUDICATION, HENCE, THE GROUND RAISED IS DISMISSED. 7 . THE APPEAL ORDER DATED 23 RD AUGUST 2017, PASSED IN ITA NO.4078 & 4079/M UM./2015, IS MODIFIED TO THE EXTENT INDICATED ABOVE. 8 . IN THE RESULT, MISC. APPLICATIONS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 02.08.2019 SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 02.08.2019 8 HDFC STANDARD LIFE INSURANCE CO. LTD. 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 ASSISTANT REGISTRAR ITAT, MUMBAI