M/S LIFE INSURANCE CORPORATION OF INDIA,MUMBAI-400021 vs. DY COMMISSIONER OF INCOME TAX-3(2)(1), MUMBAI

,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 For the Respondent/Department : Smt. R.M. Madhavi Date of conclusion of hearing : 07.12.2022 Date of pronouncement of order : 31.01.2023 O R D E R Per Rahul Chaudhary, Judicial Member: 1. These are three sets of cross appeals pertain to Assessment Years 2012-13, 2018-19 and 2019-20. The appeals were heard together as the same involved identical grounds arising in similar facts and circumstances, and therefore, are being disposed by way of common order.

Assessment Year 2012-13 2. We would first take up cross-appeals for the Assessment Year 2012-13 arising from the order, dated 27.03.2022, passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‗the CIT(A)‘], which in turn arose from the Assessment Order, dated 19.02.2015, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as ‗the Act‘].

―Computation of profits of life insurance business 2. The profits and gains of life insurance business shall be taken to be the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation made in accordance with the Insurance Act, 1938 (4 of 1938), in respect of the last inter-valuation period ending before the commencement of the assessment year, so as to exclude from it any surplus or deficit included therein which was made in any earlier inter-valuation period.‖ 5. All the issues raised in the present cross appeals relate to the computation of taxable income of the Assessee keeping in view the above provisions. Both the sides agreed that the issues are recurring in nature and have been adjudicated upon in the preceding assessment years. In the above background we proceed to adjudicate upon various grounds of appeal raised in the present set of cross appeals.

6. The Assessee 8 grounds of appeal which are taken up in seriatim herein under:

7. Ground No. 1: ―On the basis of facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeal Unit)-1, National Faceless Appeal Centre, Delhi (―CIT(A)‖) erred in confirming the action of the Assessing Officer National Faceless Assessment Centre, Delhi (―Assessing Officer‖) of adding the Negative Reserves of Rs. 22716,17,76,000/- shown in the Form I, by overlooking the provisions of Valuation Process as per IRDAI Regulations.‖ ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 8. While framing assessment vide Assessment Order, dated 19.02.2015, the Assessing Officer made addition of INR 22716,17,76,000/- and increased the surplus computed as per actuarial valuation by the aforesaid amount of ‗Negative Reserve‘.

9. The CIT(A) confirmed the addition and therefore, the Assessee is before us in appeal.

11. We find that the actuarial valuation process requires ascertaining the requirement of creating reserve for servicing insurance policies. This reserve is referred to as the ‗Mathematical Reserve‘. The quantum of Mathematical Reserve is determined by comparing the to the present value of future benefits payable to the insured and the future expenses to be incurred by the insurer as reduced by present value of future premiums receivable in respect of the policies. In case the present value of the future premiums is more than the present value of future benefits/expenses payable, the amount of reserve becomes negative as no provision/reserve is required to be created for servicing the policies and is known as ‗Negative Reserve‘.

12. In the case of the Assessee, according to the applicable guidelines issued by the Insurance Regulatory & Development Authority (IRDA) and IRDA Act, 1999 the Appointed Actuary reduced the amount of ‗Negative Reserve‘ to zero. The report submitted by the Assessee and the surplus determined by way 5 ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 of actuarial valuation was accepted by IRDA. However, the Assessing Officer was of the view that the by taking Negative Reserve as zero the surplus get reduced below the real actuarial valuation and therefore, he added the same to the income of the Assessee. The CIT(A) also confirmed the addition. We note that identical additions made in the preceding as well as succeeding assessment years have been deleted by the Tribunal by following the judgment of the Hon‘ble Supreme Court and the Hon‘ble Bombay High Court.

13. We note that Apex Court has, in the case of the Assessee reported in [1964] 51 ITR 773, held that the Assessing Officer has no power to modify the accounts after Actuarial valuation is done. We have also gone through the judgment of the Hon‘ble Bombay High Court [Income Tax Appeal No. 1759 of 2013, 116 of 2014 and 2162 of 2013, dated 15.09.2105] placed at page 166-169 of the legal paper book wherein appeal preferred by the Revenue on identical issue was dismissed. The relevant extract of the judgment of the Hon‘ble Bombay High Court reads as under: “3. The revenue has urged the following identical questions of law in all the three appeals for our consideration: A. xx B. Whether on the facts and in the circumstances of the case and in law, the ITAT erred in not appreciating that negative reserve has an impact of reducing the taxable surplus as per Form-I and therefore, corresponding adjustment for negative reserve need to be made to arrive at taxable surplus.‖ 4. xx 5. xx 6. In so far as question (B) is concerned, we find that the order of the ITAT has allowed the respondent-assessee's ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 appeal by following its decision in ICICI Prudential Insurance Co. Ltd rendered in respect of Assessment year 2006-07. Mr.Suresh Kumar learned counsel appearing for the revenue very fairly states that the revenue's appeal on this issue from the order of the Tribunal in ICICI Prudential Insurance Co. Ltd being Income Tax Appeal No.711 of 2013 for Assessment year 2006-07 was dismissed on 20th July 2015 by this Court. This inter alia on the ground that the issue stands covered in favour of the respondent-assessee by the decision of the Apex Court in LIC of India vs CIT 51 ITR 773 wherein it has inter alia been held that the Assessing Officer had no power to modify its accounts after Actuarial valuation is done. 7. Accordingly, question (B) also does not give rise to any substantial question of law. Hence, dismissed‖ (Emphasis Supplied) 14. The above judgments have been followed by the Tribunal in the case of the Assessee for preceding and well as succeeding assessment years. The relevant extract of the decision of the Tribunal in the case of the Assessee for the Assessment Year 2013-14 (ITA No. 1714/Mum/2022, dated 29.09.2022) reads as under:

―14. Coming to Ground Nos. 10 to 14 of grounds of appeal which are in respect of addition of negative reserve, Ld. AR brought to our notice that similar ground was raised before the Coordinate Bench in ITA.No. 4459 & 4528/Mum/2015 for the A.Y. 2011-12 and ITA.No. 2908 & 3403/Mum/2019 for the A.Y. 2015-16 and also by the Hon'ble Supreme Court and Hon'ble Jurisdictional High Court in the assessee‘s own case. Coordinate Bench has considered and adjudicated the issue in favour of the assessee. Copy of the orders are placed on record. Ld. AR prayed that the same may be adopted for the assessment year under consideration.

15. Ld. DR fairly agreed with the submissions of the Ld. AR and he relied on the orders of the Authorities below.

16. Considered the rival submissions and material placed on record, we observed that similar issue was considered and adjudicated by the Coordinate Bench in assessee‘s own case for the A.Y. 2015-16 and decided the issue in favour of the ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 assessee. While holding so, the Coordinate Bench held as under: ―12. In ground No.7 & 8 of appeal, the Revenue has assailed the findings of CIT(A) in deleting the addition in respect of negative reserve. The Assessing Officer has made addition of Rs.12233.54 cores on account of negative reserve shown by the assessee in Form-I. The aforesaid addition made by Assessing Officer has resulted in increasing actuarial valuation. The assessee submitted that identical issue with respect to negative reserve has already been considered by the Hon'ble Bombay High Court in assessee‘s own case in Income Tax Appeal No.1759 of 2013(supra). We find that the CIT(A) has deleted the addition by following the decision of Hon'ble Bombay High Court in assessee‘s own case titled CIT vs. Life Insurance Corporation of India(surpa). One of the substantial question of law before Hon'ble Bombay High Court in the aforesaid appeal was: ―B. Whether on the facts and in the circumstances of the case and in law, the ITAT erred in not appreciating that negative reserve has an impact of reducing the taxable surplus as per Form-I and therefore, corresponding adjustment for negative reserve need to be made to arrive at taxable surplus."

The Hon‘ble Court decided the issue in favour of the assessee and against the Revenue by observing as under:-

―6. In so far as question (B) is concerned, we find that the order of the ITAT has allowed the respondent-assessee's appeal by following its decision in ICICI Prudential Insurance Co. Ltd rendered in respect of Assessment year 2006-07. Mr.Suresh Kumar learned counsel appearing for the revenue very fairly, states that the revenue's appeal on this issue from the order of the Tribunal in ICICI Prudential Insurance Co. Ltd being Income Tax Appeal No.711 of 2013 for Assessment year 2006-07 was dismissed on 20th July 2015 by this Court. This inter alia on the ground that the issue stands covered in favour of the respondent –assessee by the decision of the Apex Court in LIC of India vs CIT 51 ITR 773 wherein it has inter ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 alia been held that the Assessing Officer had no power to modify its accounts after Actuarial valuation is done. Accordingly, question (B) also does not give rise to any substantial question of law. Hence, dismissed.‖ Similar addition was made in respect of negative reserve in assessment year 2011-12. The CIT(A) deleted the addition. The revenue carried the issue before the Tribunal. The Co-ordinate Bench following aforementioned decision of the Hon'ble High Court in assessee‘s own case and also referring to the decision of Tribunal in assessee‘s own case for assessment year 2010-11 decided on 24/02/2016 dismissed the ground raised by the Revenue. The ld.Departmental Representative has not been able to controvert the findings of the CIT(A) and no contrary decision has been placed before us by the Revenue. Therefore, we find no reason to take a divergent view. In view of the fact that this issue has already been settled by Hon'ble Bombay High Court in assessee‘s own case in preceding assessment years i.e. assessment year 2007-08, 2008-09 and 2009-10, the ground no. 7 & 8 of the appeal are dismissed being devoid of any merit.

17. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee‘s own case for the A.Y. 2015-16, we allow the ground raised by the assessee on similar terms as directed in A.Y. 2015-16.‖ (Emphasis Supplied)

15. From the above, it is clear that the issue under consideration stands decided in favour of the Assessee by the above judgment of the Hon‘ble Bombay High Court as well as the decisions of the Tribunal in the case of the Assessee. Respectfully following the same, we overturn the order of CIT(A) on this issue and deleted the addition of INR 22716,17,76,000/- made by the Assessing Officer in relation to the ‗Negative Reserve‘. Accordingly, Ground Number 1 raised by the Assessee is allowed.

16. Ground No. 2 ―On the basis of facts and circumstances of the ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 case, the Learned CIT(A) erred in confirming the action of the AO of addition on account of interim bonus of Rs. 1261,61,66,000/- which was already taxed in previous year‘s surplus‖.

18. In appeal, CIT(A) confirmed the order passed by the Assessing Officer in this regard. Therefore, the Assessee is in appeal before us.

19. The Learned Authorised Representative for the Assessee submitted that identical issue has been remitted back to the file of the Assessing Officer in appeal for the Assessment Year 2011-12. Therefore, the issue in the present appeal can also be remanded back to the file of the assessing officer with the same directions. Learned Departmental Representative did not object to the aforesaid submissions.

―5. The next ground raised by the Revenue pertains to deleting the addition made on account of interim bonus paid, ignoring the fact that no deduction on account of interim bonus is required to be made from the total surplus as per the regulation of IDRA, the provisions of Act are not ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 applicable in the case of the assessee. 5.1. During hearing the ld. counsel for the assessee contended that the bonus 95% has to be distributed to the policy holders and remaining 5% goes to the government. Our attention was invited to section 28 of the LIC Act and para 7.3 (page-18 of the impugned order). The Ld. CIT-DR defended the addition made by the Assessing Officer.

5.2. We have considered the rival submissions and perused the material available on record. Before adverting further, we are reproducing here under section 28 of the Life Insurance Corporation Act, 1956 for ready reference: - ―28. Surplus from life insurance business how to be utilized.-- If as a result of any investigation undertaken by the Corporation under section 26 any surplus emerges, ninety-five per cent of such surplus or such higher percentage thereof as the Central Government may approve shall be allocated to or reserved for the life insurance policy-holders of the Corporation and after meeting the liabilities of the Corporation, if any, which may arise under section 9, the remainder shall be paid to the Central Government or, if that Government so directs, be utilised for such purposes and in such manner as that Government may determine.] [28A. Profits from any business (other than life insurance business) how to be utilized.-- If for any financial year profits accrue from any business (other than life insurance business) carried on by the Corporation, then, after making provision for reserves and other matters for which provision is necessary or expedient, the balance of such profits shall be paid to the Central Government.] If section 28 is analyzed, with respect to surplus from life insurance business and its utilization, it is clear that 95% of such surplus or such higher percentage thereof, as the central government may approve shall be allocated to or reserve for life insurance policy holders of the corporation and after meeting the liability of corporation, if any, which may arise u/s 9, the reminder shall be paid to the Central Government or if the Central Government so direct, shall be utilized for such purposes and in such manner as the government may determine. Considering the clear language of the section, we direct the Assessing Officer to examine the factual matrix/utilization of the surplus and decide in accordance with ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 law. The assessee be given opportunity to substantiate its claim. Thus, this ground is allowed for statistical purposes.‖ (Emphasis Supplied)

read as under: i) The CIT-A erred in confirming the action of the AO of adding the income from shareholder‘s funds credited directly to the shareholder‘s Account. ii) The CIT-A erred in his interpretation of Act, the Insurance Act 1938, the IRDA Act and the IRDA (preparation of Financial Statements and Auditor‘s Report of Insurance Companies) Regulations 2002, the IRDA (Assets, Liabilities and Solvency Margin of Insurers) Regulations 2000. iii) The CIT-A erred in not deleting the interest charged by the AO u/s. 234D of the Act. The Appellant craves leave to add to, amend and /or alter all or any of the above Ground of Appeal.

3. At the outset in this case Ld. Counsel of the assessee fairly conceded that ground no. (i) and (ii) are already decided against the assessee by the decision of this Tribunal in assessment year 2009-10 by order dated 03.04.2013 in ITA No. 6221 & others in assessee‘s own ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 case.

4. As regards ground no. (iii) Ld. Counsel of the submitted that he shall not be pressing for this ground.

no.3 against the assessee.

6. Since facts are identical following the above precedent we uphold the order of Ld. CIT-A. Hence the ground raised 16 ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 in this regard stand dismissed.

7. Ground no. 3 is dismissed as not pressed. In the result this appeal file by the assessee stands dismissed. 7.3. In the aforesaid order, the Tribunal has already considered the factual matrix and no contrary decision was brought to our notice by the assessee and further the assessee has fairly agreed that this ground is covered against the assessee, therefore, this ground in the appeal of the assessee is dismissed.‖

27. Respectfully following the above decisions of the Tribunal, we decline to interfere with the order passed by CIT(A) in this regard and confirm the addition of INR 32,11,39,000/- made by the Assessing Officer in respect of income credited to the Shareholders Fund Account. Accordingly No. 3 raised by the Assessee is dismissed.

28. Ground No. 4 : On the basis of facts and circumstances of the case, the Learned CIT(A) erred in confirming the action of the AO of disallowing the claim of deduction under 80G of the Income Tax Act, 1961, to the tune of Rs. 5,00,00,000/-.

29. In the return of income the Assessee had claim deduction of INR 5,00,00,000/- under section 80G of the Act. The Assessing Officer denied the same on the ground that the Assessee had computed taxable income on the basis of actual valuation. The claim for deduction is taken into account and is inbuilt in the actuarial valuation process. Allowing deduction under section 80 of the act would amount to granting double deduction the Assessee. The CIT(A) confirmed the order passed by the Assessing Officer in this regard and therefore, the Assessee is now in appeal before us.

―10. With regard to Ground Nos. 8 and 9 of grounds of appeal which are in respect of disallowance of claim u/s. 80G of the Act, Ld. AR brought to our notice that similar ground was raised before the Coordinate Bench in ITA.No. 2908 & 3403/Mum/2019 for the A.Y. 2015-16. Coordinate Bench has considered and adjudicated the issue in favour of the revenue.

11. Ld. DR fairly agreed with the submissions of the Ld. AR.

12. Considered the rival submissions and material placed on record, we observed that similar issue was considered and adjudicated by the Coordinate Bench in assessee‘s own case for the A.Y. 2015-16 and dismissed the ground raised by the assessee. While rejecting the ground raised by the assessee, the Coordinate Bench held as under: - ―17. The next ground of appeal by the assessee is with respect to disallowance of claim of deduction under section 80G of the Act. The ld. Authorized Representative of the assessee submitted that the assessee had made donations to the tune of Rs.5.00 cores to LIC Golden Jubilee Foundation. The donation to said Foundation are eligible for deduction under section 80G. The assessee claimed deduction under section 80G to the extent of 50% of the amount contributed towards the Foundation. The ld. Authorized Representative of the assessee submitted that for the purpose of computation of income of insurance companies provisions of section 44 of the Act would apply. Section 44 starts with obstinate clause. Hence, the provisions of section 44 of the Act overrides the other provisions of the Act including provisions of sub- section(5A) of section 80G of the Act. The ld.Authorized Representative of the assessee referring to the provisions of section 44 of the Act submits that the non-obstinate clause is only to the extent of computation of income chargeable to tax under the heads mentioned in the section. The benefit of provisions of section 80G is claimed ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 after computation of total income. The ld. Authorized Representative of the assessee submitted that the Assessing Officer cannot go behind the income computed in accordance with the rules contained in First Schedule.

18. On the other hand, ld. Departmental Representative vehemently supported the order of CIT(A). The ld. Departmental Representative submitted that the assessee has claimed donation made to the Foundation in P&L Account and has also claimed deduction under section 80G without adding back the same in computation of income. Thus, this amounts to double deduction in respect of the donation made to the foundation. Once it is claimed as expenditure in the P&L Account and thereafter without adding back the same amount , the assessee claimed benefit of deduction under section 80G on the same amount. Thus, the assessee has taken the benefit of same amount twice, first in computation of income and second time by way of deduction u/s 80G of the Act.

20. The Assessing Officer and the CIT(A) have denied the benefit of deduction under section 80G claimed by the assessee for the reason that the assessee has claimed double benefit of donation amount, first in computation of income and secondly in the form of deduction under section 80G after computation. The assessee has not refuted above contentions of the Revenue. It is a trait law that the Assessing Officer has no power to go behind accounts drawn in First Schedule applicable to insurance companies, however, the Assessing Officer can always examine correctness of the claim of the assessee with regard to deduction claimed after computation of income. The intent of Legislature while framing special provision for insurance companies can by no means be to allow the benefit of double deduction of the same amount. The CIT(A) in para 3.4.9 of the impugned order has illustrated the impact of assessess‘e claim of donation as expenditure in P&L account on actuarial valuation. 20.1 In so far as argument of ld.Authorized Representative of the assessee that section 44 would also override the provisions of sub-section (5A) of section 80G, we do not concur with the same. A bare perusal of section 44 would show that, in an unambiguous terms the provisions of section list out the head of income/section it would override for the purpose of computation of income. The non-obstinate clause does not impinge the powers of Assessing Officer to examine deductions claimed after computation of income. The Assessing Officer after examining the treatment given by assessee to the donation made to the foundation concluded that the assessee has taken undue benefit of double deduction of the same amount, hence, disallowed assessee‘s claim made after computation of income. The findings of the Assessing Officer have been upheld by the CIT(A) . We concur with the findings of the CIT(A) on this issue, hence, ground no.2 raised in the appeal by assessee is dismissed.

,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 13. Respectfully following the above said decision, we reject the ground raised by the assessee and accordingly sustain the order of the Ld.CIT(A) in this regard.‖ (Emphasis Supplied)

31. In view of the above decisions of the Tribunal, we do not find any reason to interfere with the order passed by CIT(A) and confirm the order of the Assessing Officer to the extent the Assessing Officer held that the Assessee was not entitled to claim deduction of INR 5,00,00,000/- under section 80G of the Act. In view of the aforesaid Ground No. 4 raised by the Assessee is dismissed.

33. Ground No. 5 pertains to levy of tax under Section 115O of the Act on distribution of profits and the consequential levy of interest under Section 115P of the Act. Section 115O of the Act provides that a domestic company shall, in addition to the income tax chargeable in respect of its total income for any assessment year, pay additional income tax on the amount declared, distributed or paid by such company by of dividend. During the assessment proceedings the Assessing Officer noted that the Assessee had declared/distributed surplus to its sole shareholder (i.e. Government of India) in accordance with Section 28 and Section 28A of the Life Insurance Corporation Act, 1956. According to the Assessing Officer the Assessee was under obligation to pay tax at the rate of 15% on INR 1281,22,90,000/- being the amount of surplus declared/distributed. Thus the Assessing Officer concluded that additional income tax of INR 207,87,94,053/- was payable by ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 the Assessee under Section 115O of the Act along with interest computed under Section 115P of the Act. The CIT(A) confirmed the order passed by the assessing officer and on this issue and therefore, the Assessee is in appeal before us.

11. xx

12. However, the contention of the Revenue is that definition of the word ‗dividend‘ in section 2(22) of the Act is inclusive definition and therefore its meaning cannot be restricted to clauses (a) to (d) of the said section. According to him, the general meaning of the word ‗dividend‘ has to be applied to adjudicate the issue. We are in agreement with such legal contention of senior Departmental Representative since it is in consonance with the decision of the Apex Court in the case of Hari Prasad Jayantilal & Co. (supra).

,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20

"‗Dividend‘, in its ordinary connotation, means the sum paid to or received by a shareholder proportionate to his shareholding in a company out of the total sum distributed."

The above definition presupposes (i) the existence of shareholders of a company and (ii) payment must be proportionate to his shareholding. In our opinion, these conditions can be fulfilled only when the capital of the company is divided into shares which are held by persons called shareholders. In a given case, all the shares may be held by Government or a holding company etc. Existence of shares representing the capital of the company as well as the shareholder(s) is a sine qua non. Thus, even according to the ordinary meaning of the word ‗dividend‘, it represents proportionate payment to the shareholders according to his shareholding in the company. Therefore, where capital of the company is not divided into shares, the payment to the subscriber to the capital cannot be treated as dividend.

"When words acquire a particular meaning or sense because of their authoritative construction by superior courts, they are presumed to have been used in the same sense when used in a subsequent legislation in the same or similar context."

In view of the above observations, the ordinary meaning of the word ‗dividend‘ as declared by the Apex Court in the case of Nalin Behari Lall Singha (supra) has to be assumed for the purpose of section 2(22) of the Act since the Legislature has not deviated, expressly or impliedly, from the meaning declared by the Apex Court.

(2) The Central Government may, on the recommendation of the Corporation, reduce the capital of the Corporation to such extent and in such manner as the Central Government may determine."

Reading of above section clearly shows that capital of the company is not divided into shares and therefore Central Government cannot be said to be shareholder. The position of the Central Government is akin to the sole proprietor of a business concern. The learned CIT(A) has himself given a finding that Central Government cannot be called a shareholder. This finding has also been upheld by us in the earlier part of the order. Therefore, in our considered opinion, the payment made by the assessee to the Central Government could not be treated as ‗dividend‘ within the ambit of definition clause (22) of section 2 of the Act.

,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 17. Having held that payment by assessee to Central Government is not dividend, it is not necessary for us to deal with the other arguments of the parties since payment of dividend is the condition precedent for invoking the provisions of section 115-O. Accordingly, it is held that the provisions of section 115-O of the Act were not applicable to the present case. Consequently, the assessee could not be declared as assessee in default under section 115Q of the Act. In view of the same, the orders of both the authorities below are quashed. The payment, if recovered, shall be refunded to the assessee in accordance with law.

35. To the same effect are decisions of Mumbai bench of the Tribunal the case of the Assessee for the assessment year 2010-11, 2011-12, 2013-14, 2014-15, 2015-16, 2016–17, and 2017–18. The relevant extract of the order of the Tribunal in (AY 2013-14) reads as under:

22. Coming to Ground Nos. 19 to 21 of grounds of appeal

which are in respect of levy of tax u/s. 115-O of the Act on the distributed profits, Ld.AR brought to our notice that similar ground was raised before the Coordinate Bench in ITA.No. 4459 & 4528/Mum/2015 for the A.Y. 2011- 12 and ITA.No. 2908 & 3403/Mum/2019 for the A.Y. 2015-16. Coordinate Bench has considered and adjudicated the issue in favour of the assessee. Copy of the orders are placed on record. Ld. AR prayed that the same may be adopted for the assessment year under consideration.

23. Ld. DR fairly agreed with the submissions of the Ld. AR and he relied on the orders of the Authorities below.

24. Considered the rival submissions and material placed on record, we observed that similar issue was considered and adjudicated by the Coordinate Bench in assessee‘s own case for the A.Y. 2015-16 and decided the issue in favour of the assessee. While holding so the Coordinate Bench held as under: ―13. In ground No.9 of appeal, the Revenue has assailed the action of CIT(A) in upholding that the provisions of section 115-O r.w.s. 115Q of the Act are not attracted in the case of assessee. The Assessing Officer made addition

ITA. Nos. 927,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 of Rs.32.53 crores holding it to be dividend paid to shareholders. The Assessing Officer held that in the P&L Account an amount of Rs.32.53 crores has been credited in respect of shareholders account (Non technical), however, in computation of total income, total income in respect of policy holders account (technical account) has been shown and there is no income in respect of shareholders account. Thus, the Assessing Officer invoked the provisions of section 115-O r.w.s. 115Q of the Act and made addition of the aforesaid amount. In first appeal the CIT(A) deleted the addition by following the order of Tribunal in assessee‘s own case in for assessment year 1998-99 dated 18/12/2006, which has been subsequently followed by the Tribunal in assessee‘s own case for assessment years 1999-2000, 2000-01 and 2001-02. We find that identical issue has been decided by the Tribunal in assessee‘s own case for assessment year 2011-12. The Co-ordinate Bench following the order of Tribunal in assessee‘s own case for assessment year 2206-07 in ITA No. 4993/M/2007 decided on 23/4/2009 and in AY 2007-08 and 2008-09 decided vide order dated 10/7/2013 decided the issue in favour of the assessee. The Co-ordinate Bench after considering the facts and the decisions of Tribunal in assessee‘s own case in preceding assessment years on this issue concluded as under: ―6.3. In the aforesaid orders, the Tribunal duly examined the factual matrix/provisions of the Act and thereafter dismissed the appeal of the Revenue. The Tribunal in a later decision dated 10/07/2013 also followed the decision of Assessment Year 2006-07. No contrary Life Insurance Corporation of India decision was brought to our notice by the Revenue, thus, we find no infirmity, in the order of the First Appellate Authority, on this issue also‖ No contrary material has been placed on record by the Revenue to disregard the aforesaid decision and take a contrary view. Hence, ground No.9 raised in the appeal by the Revenue is dismissed being devoid of any merit.‖ 25. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee‘s own case for the A.Y. 2015- 16, we allow the ground raised by the assessee.

26. Coming to Ground No. 22 of grounds of appeal which is in respect of interest charged u/s. 115P of the Act, as we have allowed the ground Nos. 19 to 21, it is consequential in nature, accordingly this ground also allowed.‖ 26 ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20

36. Respectfully, following the above decisions of the Tribunal, Ground No. 5 raised by the Assessee is allowed, and additional tax liability of INR.207,87,94,053/- under Section 115O of the Act and interest thereon under Section 115P of the Act is deleted.

37. Ground No. 6 On the basis of facts and circumstances of the case, the Learned CIT(A) erred in confirming charging in interest under Section 234B, 234C &234D of the Income tax- Act, 1961.

38. Ground No. 6 pertains to levy of interest under section 234A/B/C/D of the Act, and is, therefore, disposed off as being consequential nature.

39. Ground No. 7 On the basis of facts and circumstances of the case, the Learned CIT(A) erred in confirming initiation of penalty u/s 271(1)(c) of the Income-tax Act, 1961 by the Assessing Officer.

40. Ground No. 7 pertains to initiation of penalty proceedings under section 271(1)(c) of the Act and is, therefore, being disposed off as being premature nature.

41. Ground No. 8 The Learned CIT(A) erred in his interpretation of the Act, the Insurance Act 1938, the IRDAI Act (Preparation of Financial Statements and Auditor‘s Report of Insurance Companies) Regulations 2002, and the IRDAI (Assets, Liabilities and Solvency Margin of Insurers) Regulations 2000.

42. Ground No. 8 is directed against incorrect interpretation of the provisions of the Insurance Regulatory and Authority Act and Regulations. In view of her findings/adjudication in relation to Ground No. 1 to 5.

ITA. Nos. 927,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 Assessment Year 2012-13 Appeal by Revenue :

43. Revenue has raised 5 grounds of appeal. The connected grounds (i.e. Ground No. 1 & 2, and Ground No. 3 & 4) are taken up together.

44. Ground No. 1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the dividend income of the assessee as exempt u/s 10(34) of the I.T. Act, 1961 ignoring the facts that dividend income is considered as part of Income of the life Insurance Business and is included as an income by actuary, Ground No. 2 Without prejudice to the above whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the dividend income of the assessee as exempt u/s 10(34) of the I.T. Act 1961 ignoring the facts that the actuarial surplus determined is 7% of the gross revenue which is inclusive of dividend income and therefore if at all exemption is to be allowed u/s 10(34) of the I.T. Act, 1961 then it should be allowed only to the extent of dividend included in the surplus determined by actuarial method 45. During the assessment proceedings the Assessing Officer noted that the Assessee had reduced the amount of income worked out as per Rule 2 of First Schedule of the Act by INR 5473,25,98,760/- being the amount of dividend income from domestic companies exempt under Section 10(33) of the Act. The Assessing Officer rejected the aforesaid claim and added the amount of exempt dividend to the income of the Assessee. The CIT(A) allowed the claim of the Assessee and deleted the addition. Revenue is now in appeal before us on this issue.

―31. With regard to Ground No. 1 and 2 which are in respect of disallowance of exemption claimed u/s. 10(34) of the Act, Ld.DR submitted that Ld.CIT(A) erred in disallowing the exemption claimed u/s.10(34) of the Act and he relied on the order of the Assessing Officer. 32. Ld. AR brought to our notice that similar ground was raised before the Coordinate Bench in ITA.No. 4459 & 4528/Mum/2015 31 ITA. Nos. 927,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 for the A.Y.2011-12 and ITA.No. 2908 & 3403/Mum/2019 for the A.Y. 2015-16. Coordinate Bench has considered and adjudicated the issue in favour of the assessee. Copy of the orders are placed on record. Ld. AR prayed that the same may be adopted for the assessment year under consideration.

3.4. We find that the issue of admissibility of provisions of Section 10(34) has been considered by the ‗F‘ Bench of Mumbai Tribunal while deciding the appeals filed by the AO in the cases of ICICI Prudential Insurance (ITA No. 7765/Mum/2010 AY. 2005-06 dt. 14- 09-2012). Ground No.3 filed by the AO reads as under: ―On the facts and in the circumstances of the case and in law, the learned CIT(A)erred in allowing the dividend income of the assessee of Rs.1,56,09,222/- as exempted under section 10(34)of the Income-tax Act,1961 ignoring the facts that dividend income is considered as part of ITA. Nos. 927,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 Income of Life Insurance Business and is included as an income by the actuary.‖ While dealing with the issue, whether exemption u/s. 10 can be allowed to an Insurance company when income is computed u/s. 44 of the Act, Tribunal held that issue was covered in favour of the assessee and against the AO by the orders of the General Insurance Company of India in where in the issue of deduction u/s. 10 of the Act was considered and allowed following the Hon‘ble Bombay High Court Judgment in writ petition No. 2560 of 2011 dt. 01-12-2011. After referring to the order of the GIC of India, which in turn had relied upon the cases of LIC vs. CIT-III Bombay, CIT Vs. New India Assurance Co. Ltd., GIC of India vs. CIT(Supreme Court) Tribunal further held that assessee was entitled to exemption u/s. 10 including the dividend income i.e., exemption available u/s. 10(34) of the Act. We find that facts of the case under consideration are similar to the facts of ICICI Prudential Insurance (supra), decided by the coordinating Bench. Here, we would also like to mention that Hon‘ble Jurisdictional High Court in case of GIC of India has discussed and decided the issue as under: ―11. Section 44 of the Income Tax Act, 1961 stipulates as follows: ―44: Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head ―interest on securities‖, ―Income from house property‖, ―Capital gains‖ or ―Income from other sources‖, or in section 199 or in sections 28 to (43B), the profits and gains of any business of insurance, including any such business curried on by a mutual insurance company or by a cooperative society, shall be computed in accordance with the rules contained in the First Schedule‖. Section 44 provides that the profits and gains of any business of insurance of a mutual insurance company shall be computed in accordance with the rules in the First Schedule. Part ‗A‘ of the First Schedule containing Rules I to 4 deals with profits of life insurance business while Part B consisting of Rule 5 deals with computation of profits and gains of Other insurance business. Rule 5 provides as follows:

,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 ―5. The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the Insurance Act, 1938 (4 of 1938), to be furnished to the Controller of Insurance 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) (………) (c) Such amount carried over to a reserve for unexpired risks as may be prescribed in this behalf shall be allowed as a deduction‖. The Assessing Officer has in the reasons for reopening the assessment proceeded on the premise that in computing the profits and gains of business for an assessee who carries on general insurance business no other section of the Act would apply and that the computation could be carried out only in accordance with section 44 read with Rule 5 of the First Schedule. In Life Insurance Corporation of India, v. Commissioner of Income Tax Bombay City-III a Division Bench of this Court construed the provisions of section 44 and of the First Schedule. The assessee in that case which carried on life insurance business had made a claim to exemption under section 10(15) and section 19(1). In a reference before the Court, the questions referred included whether in computing the profits and gains of the business of insurance under section 44 read with the First Schedule certain items which were ordinarily not includible in the total income were rightly included in the taxable surplus. The Division Bench of this Court held as follows: - ―The question which essentially falls to be - determined in this reference is whether, in view of the provisions in section 44 or rule 2 of the first Schedule, - the Life Insurance Corporation will not ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 be entitled to claim the deductions which a-i-c otherwise admissible in- the- case of an assessee, computation of whose income is go vented by the other provisions of the Act. The argument of Mr. Kolah for the Life Insurance Corporation is that unless there are express provisions which disable the Corporation from claiming the deductions referred to above; the Corporation cannot be deprived of the benefit -of the provisions referred to in the questions Nos. 1 to 6. Section 44, which deals with computation of profits and gains of business of insurance, begins with a non obstante clause, the effect of which is that the provisions of the Act relating to the computation of income chargeable under the head ―Interest on securities‖, ―Income from house property‖ ―Capital gains‖ Or ―Income from other sources‖, do not apply in the case of computation of income from insurance business. The effect of the non-obstante clause so far as the earlier part of section 44 is concerned, therefore, is that the provisions of section 44 will prevail notwithstanding the fact that there are contrary provisions in the Act relating to computation of income chargeable under the four heads mentioned in section 44. The only other overriding effect of section 44 is that its provisions operate notwithstanding the provisions of section 191 and of section 28 to 43A. Thus, the only effect of section 44 is that the operation of the provisions referred to therein is excluded in the case of an assessee who carried on insurance business and in whose case the provisions of rule 2 of the First Schedule are attracted. If the deductions which are claimed by the assessee do not fall within the provisions which are referred to in section 44, it will have to be held that the applicability of those provisions in the case of an assessee whose assessment is governed by section 44 read with rule 2 in the First Schedule- is not excluded‖. This judgment is sought to be distinguished by the Assessing Officer while disposing of the objections on the ground that the decision was rendered in the context of an assessee which- carried on life insurance business to whom Rules 1 to 4 of the First Schedule applied whereas in the case of the assessee in this case which carries on general insurance business Rule 5 could apply. According to the Assessing Officer, Rule 5 ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 would not permit any adjustment to the balance of profit as per annual accounts prepared under the Insurance Act, and hence the judgment would not be applicable. The Assessing Officer has clearly not noticed that the decision in Life Insurance Corporation (supra) though rendered in the context of an assessee which carries on life insurance business, followed an earlier decision of a Division Bench of this Court in Commissioner of Income- Tax v. New India Assurance Co Ltd. That was a case of an assessee which carried on non life insurance business. In New India Assurance Co. Ltd. the Division Bench dealt inter alia with the provisions - of section 1 9(7) of the Income Tax Act, 1922. The questions referred to this Court included whether the assessee was entitled to claim an exemption from tax under section 15B and 15C (4) and in respect of interest on a government loan under a notification issued under section 60. Section 10(7) of the Income Tax Act, 1922 provided that notwithstanding anything to the contrary contained in section 8,9,10,12 or 18, the profits and gains of any business of insurance and the tax payable thereon shall be computed in accordance with the rules contained in the Schedule to the Act. The Division Bench held that upon the language of sub-section (7) of section 10 read along with rule 6 it was impossible to hold that the provisions relating to exemptions stood excluded from operation. In that context the Division Bench held as follows: ―It is only after the profits and gains of a business are computed that any question of granting exemptions arises and if the latter stage were intended to be excluded by the law we should have thought that a clearer provision than is made in sub-section (7) of section 10 and in rule 6 would have been made‖. In the subsequent judgment of the Division Bench in CIT v. Insurance Corporation (supra), the Division Bench noted that there was a difference in the language of section 10(7) of the Act of 1922 when compared with section 44 of the Act of 1961 since section 44 does not refer to the computation of tax but merely to the computation of profits and gains in the business of insurance The Division Bench held that this would however riot make any difference to- the principle laid - - - - --down by the Court in the earlier decision in the case of New India Assurance Co. Ltd. Accordingly, the decision of Life Insurance Corporation (Supra)could not have- been ignored by the ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 Assessing- Officer on the supposition that the decision was rendered in the context of an assessee who carried on life insurance business and was, therefore, not available to an assessee which carries on general insurance business.

by the revenue.‖

51. From the above it is clear that the issue under consideration stands decided in favour of the Assessee by the above judgments of Hon‘ble Bombay High Court and the decisions of the Tribunal in the case of the Assessee. Respectfully following the same, we confirmed the order of CIT(A) of allowing deduction claimed by the Assessee in respect of dividend income of INR 5473,25,98,760/- received from the domestic companies which was exempt under Section 10(33) of the Act.

Ground No. 4 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law by not appreciating that Section 44 does not override section 10(23AAB) of the IT Act, 1961 in view of non-obstante clause in section 44 54. In the return of income the Assessee had worked out its income on the basis of actuarial valuation surplus which was arrived at after setting off the deficit of INR 6749,13,34,427/- from Jeevan Suraksha Fund, a pension fund approved by controller of insurance point by the Central Government. The Assessing Officer rejected the aforesaid claim of set off whereas the CIT(A) allowed the claim. Revenue in now in appeal before us on this issue.

―40. With regard to Ground No. 4 and 5 which are in respect of disallowance of loss from Jeevan Suraksha Fund, Ld.DR submitted that Ld.CIT(A) erred in disallowing the loss and he relied on the order of the Assessing Officer.

pertains to deleting the addition made on account of loss from Jeevan Suraksha Fund ignoring the settled position of law that income includes loss thus the loss form Jeevan Suraksha Fund can be set off against taxable income of the assessee corporation despite the fact that Jeevan Suraksha is covered u/s 10(23AAB) of the Income Tax Act, 1961 (hereinafter the Act) and further ignoring the fact that non- obstante clause in section 44 of the Act is not extended to section 10(23)AAB of the Act.

2. During hearing of these appeals, the ld. counsel for the assessee, Shri F.V. Irani, contended that the impugned issue is covered in favour of the assessee in its own case by the decision of Hon'ble Bombay High Court in Income

ITA. Nos. 927,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 Tax Appeal Nos.3693, 3623, 3691, 3692 and 5001 of 2010 for the Assessment Years 2002-03 to 2006-07, vide order dated 02/08/2011 and also by the decision of the Tribunal in vide order dated 24/02/2016. The Ld. CIT-DR, Shri R.P. Meena, though defended the addition but did not controvert the assertions made by the assessee to the effect that the impugned issue is covered by the aforesaid decisions 2.1 We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing the relevant para from the aforesaid order of Hon'ble High Court for ready reference and analysis:- ―18. The object of inserting Section 10(23AAB) as per the Board Circular No.762 dated 18th February 1998 was to enable the assessee to offer attractive terms to the contributors. Thus, the object of inserting Section 10(23AAB) was not with a view to treat the pension fund like Jeevan Suraksha Fund outside the purview of insurance business but to promote insurance business by exempting the income from such fund. Therefore, in the facts of the present case, the decision of the Income Tax Appellate Tribunal in holding that even after insertion of Section 10(23AAB), the loss incurred from the pension fund like Jeevan Suraksha Fund had to be excluded while determining the actuarial valuation surplus from the insurance business under Section 44 of the Income Tax Act, 1961 cannot be faulted. Accordingly, questions (c) and (d) are answered in the affirmative, that is, in favour of the assessee and against the Revenue.‖ 2.2. It is also noted that the Tribunal vide aforesaid order dated 24/02/2016 observed/held as under:- ―6. It was a common point between the parties that the judgement of the Hon'ble Bombay High Court in the case of the assessee for Assessment Years 2002- 03 to 2006-07, which has been relied upon by the CIT(A), continues to hold the field, and therefore, we find no reason to interfere with the impugned decision of the CIT(A). As a consequence, Ground nos. 1 & 1.1 of appeal are dismissed.‖ We find that in the aforesaid order, the Hon'ble High Court vide order dated 02/08/2011 clearly held that the object of insert in section 10(23AAB), as per Board Circular No.762 dated 18/02/1998, was to enable the assessee to offer 43 ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 attractive terms to the contributors. The order of the Tribunal with respect to section 10(23AAB) that the loss incurred from the pension fund like Jeevan Suraksha Fund has to be excluded while determining the accrual surplus from the insurance business u/s 44 of the Act cannot be faulted, resultantly, the issue was decided in favour of the assessee. Respectfully following the decision from Hon'ble jurisdictional High Court and considering the decision of the Coordinate Bench, we don‘t find any infirmity in the conclusion of the First Appellate Authority. Thus, the impugned grounds are dismissed.

18. The object of inserting Section 10(23AAB) as per the Board Circular No.762 dated 18th February 1998 was to enable the assessee to offer attractive terms to the contributors. Thus, the object of inserting Section 10(23AAB) was not with a view to treat the pension fund like Jeevan Suraksha Fund outside the purview of insurance business but to promote insurance business by exempting the income from such fund. Therefore, in the facts of the present case, the decision of the Income Tax Appellate Tribunal in holding that even after insertion of Section 10(23AAB), the loss incurred from the pension fund like Jeevan Suraksha Fund had to be excluded while determining the actuarial valuation surplus from the insurance business under Section 44 of the Income Tax Act, 1961 cannot be faulted. Accordingly, questions (c) and (d) are answered in the affirmative, that is, in favour of the assessee and against the Revenue.‖ Thus, in the light of decision of Hon'ble Bombay High Court in assessee‘s own case ground No.5 & 6 of appeal are dismissed.‖ ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 44. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee‘s own case for the A.Y. 2011-12 and 2015- 16, we reject the ground raised

by the revenue.‖

58. In view of the above, Ground Number 3 and 4 raised by the Revenue in its appeal are dismissed.

Assessment Year 2018-19 Appeal by Assessee :

Assessment Year 2018-19

79. Ground No. 1 pertains to order of CIT(A) deleting the addition of INR 1554,79,18,000/- on account of interim bonus.

80. While disposing off Ground No. 1 raised in the appeal by the Assessee, we have already remanded the issue related to interim bonus paid (final additional bonus and loyalty addition) to the file of the Assessing Officer. Accordingly, we remit the issue under consideration to the file of the Assessing Officer with the directions to examine the factual matrix/utilization of the surplus and decide the issue raised in the present ground in accordance with law after giving the Appellant an opportunity of being heard. In terms of the aforesaid directions, Ground No.1 raised by the Revenue is allowed for statistical purposes.

81. Ground No. 2 & 3 pertains to order of CIT(A) allowing exemption under Section 10(34) of the Act in respect of dividend income of INR 10530,18,91,089/-

82. In view of paragraph 44 to 52 above, we confirmed the order of ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 CIT(A) of allowing deduction claimed by the Assessee in respect of dividend income of INR 10530,18,91,089/-received from the domestic companies which was exempt under Section 10(33) of the Act. Accordingly, Ground Number 2 & 3 raised by the Revenue in its appeal are dismissed.

83. Ground No. 4 pertains to disallowance of INR 219500,00,00,000/- made by the Assessing Officer under Section 14A of the Act which was deleted by the CIT(A). Ground No. 4 read as under:

―Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 219500,00,00,000/- u/s 14A r.w.r. 8D by holding that the AO cannot go beyond the provisions of section 44 and Schedule 1 of the I.T. Act, 1961 without appreciating the fact that the assessee itself had declared expenses that was relatable to the earning of such exempt income and ignoring the decision of the Hon‘ble Supreme Court in the case of Maxopp Investment Ltd., 91 Taxmann.com 154 wherein the Apex Court has upheld the principle of disallowance u/s 14A r.w.r. 8D?‖ 84. We have considered the rival submissions and perused the material on record. We note that this stands decided in favour of the Assessee by following the decision of Mumbai Bench of the Tribunal. - (Assessment Year 2011-12, dated 31.10.2022) - ITA No. 1566/Mum/2022 (Assessment Year 2010-11, dated 29.09.2022) - ITA No. 1711, 1712, & 1713/Mum/2022 (Assessment Year 2014-15, 2016-17 & 2017-18 , dated 27.09.2022) - ITA No. 2908 & 3403/Mum/2019 (Assessment Year 2015-16, dated 08.04.2022)

,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 85. The relevant extract of the decision of the Tribunal in the case of the Assessee for the Assessment Year 2011-12 (ITA No. 1567/Mum/2022, dated 31.10.2022) read as under:

―2. Briefly stated facts necessary for adjudication of the issues at hand are: the assessee, Life Insurance Corporation of India (LIC) a corporation established by the Life Insurance Corporation Act, 1956 and is into the business of life insurance. Assessee filed return of income of Rs.1,78,60,14,90,717/- which was subjected to scrutiny. Assessee is required to maintain its own funds and its accounts are subject to audit. Assessing Officer (AO) by way of issuance of notice to the assessee under section 154 of the Income Tax Act, 1961 (for short the Act') proposing an addition under section 14A read with rule SD of the Act, to which assessee filed comprehensive submissions. Declining the contentions raised by the assessee the AO proceeded to make disallowance under section 14A read with rule 8D(2)(i) and 8D(2)(iii) thereby passed an order under section 154 of the Act. ―6. We are of the considered view that when initial disallowance made by the AO declining the deductions claimed by the assessee on dividend income vide assessment order passed under section 143(3) dated 31.03.2014 has been deleted by the Ld. CIT(A) in appeal, again making same disallowance under section 14A read with rule 8D by invoking the provisions contained under section 154 of the Act is not sustainable in the eyes of law. Because the assessment order initially passed by the AO stood merged with the appeal order passed by Ld. CIT(A). In other words it amounts to reopening the assessment proceedings by again applying his mind as if he is making the initial assessment.

7. More particularly, when the initial assessment order passed by the AO making similar disallowance declining the deductions claimed by the assessee on dividend income has already been set aside by the Ld. CIT(A) in appeal much prior to the order passed under section 154 of the Act by deleting the said addition, the order under section 154 is a nullity, hence not sustainable in the eyes of law, 8. Ld. A.R. for the assessee further contended that even on merits the disallowance made by the AO under section 154 is not sustainable having the issue already been decided in favour of the assessee in its own case in order dated 08.04.2022 for A.Y. 2015-16. We have perused the order passed by the co-ordinate Bench of the Tribunal which is on ITA. Nos. 927,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 identical issue as to, "whether the disallowance under section 14A read with rule 8D can be made in case of assessee engaged in the insurance business". The said issue is decided in favour of the assessee by returning the following findings: "8. The Revenue in ground No. 4 of appeal has assailed the findings of CIT(A) in deleting the disallowance made u/s14A r.w.r.8D. In assessment proceedings the Assessing Officer observed that the assessee has claimed dividend income as exempt u/s. 10(34) of the Act, therefore, the assessee cannot take the stand that no expenditure is disallowable u/s.14A r.w.r.8D. The Assessing Officer made disallowance of Rs.11636.73 crores u/s. 14A r.w.r. 8D on protective basis. In the first appellate proceedings the CIT(A) deleted the disallowance by following the decision of Tribunal rendered in the case of Birla Sunlife Insurance Co. Ltd. in for assessment year 2004-05 decided 09/09/2010. The on ld. Departmental Representative pointed that during the period relevant to the assessment year under appeal the assessee is earning income not only from insurance business, hence, the entire disallowance cannot be deleted. To substantiate his points the ld. Departmental Representative referred to the observations made by CIT(A) in page 48 and 50 of the impugned order. The ld. DR asserted that the decision rendered in the case of Birla Sunlife Insurance Co. Ltd.(supra) is in respect of income from Insurance business only, therefore the said decision would not apply to the facts of present case.

9. Submissions made by ld. Departmental Representative heard. We find that in para 48 and 50 of the order of CIT(A) referred to by the Departmental is the reproduction of the order Tribunal in Nos.3702, 6221, 3703/Mum/2012 for assessment year 2009-10. There is no finding by the that the assessee is having income from any other source other than insurance business during the period relevant to the year under appeal. Hence, the argument made by ld. Departmental is devoid of any merit. The issue whether the disallowance under section 14A r.w.r. 8D can be made in the assessee in insurance business is squarely covered by the decision of Co-ordinate Bench in the case of Birla Sunlife Insurance Co. Ltd.(supra). The Co-ordinate Bench placing reliance on Oriental Insurance Co. Ltd vs. Assistant CIT reported as 130 TTJ 388 (Delhi) has held that no disallowance under section. 14A of the Act can be made in the case of company engaged in insurance business. The relevant extract of the findings of Tribunal on this issue are as under:

,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 ―9. We have carefully considered the submissions of the rival parties and perused the material available on record. We find merit in the plea of the ld. the Assessing Officer after examining the relevant details as discussed in para 5.16 and 5.17 of the has disallowed the expenses of Rs.30,18,496/- earning dividend income, therefore, the plea taken by the ld. DR that the issue may be set aside to the file of the Assessing Officer any merit. This being so, and keeping in view that the Tribunal in Oriental Insurance Co. Ltd. vs. TIOL - 172-ITAT-DEL after discussing the identical issue at length has held that sec.44 provides for application of special provisions for computation of profits and gains of insurance business in accordance with Rule of Schedule and, therefore, it is not permissible to the Assessing Officer to travel beyond sec.44 and Schedule-1 and make disallowance by applying sec.14A of the Act. The above order has consistently been followed by the Tribunal in the above three cases relied on by the ld. Counsel for the assessee. In the absence of any distinguishing feature brought on record the ld. DR we respectfully, following the consistent view of the Tribunal hold that it is not permissible to the Assessing Officer to travel beyond sec.44 and Schedule-I and make A,Y:04-05 disallowance by applying sec.14Aof the Act and accordingly the disallowance of Rs.30,18,496/- made by the Assessing Officer and sustained by the ld. CIT(A) is deleted. The ground taken by the assessee is therefore, allowed". No contrary decision has been brought to our notice by the Revenue, hence, following the aforesaid decision we uphold the finding of CIT(A) on this issue and dismiss ground No.4 of the appeal."

We have remitted the issue raised in Ground No. 1 to the file of Assessing Officer and have dismissed Ground No. 2 to 6 raised in the present appeal. Accordingly, Ground No. 7 raised in the present appeal is disposed off as being partly allowed.

Assessment Year 2019-20 Appeal by Assessee :

Assessment Year 2019-20 Appeal by Revenue :

105. Ground No. 1 pertains to order of CIT(A) deleting the addition of INR 1649,31,00,000/- on account of interim bonus.

106. In view of paragraph 16 to 22 above, we remit the issue under consideration to the file of the Assessing Officer with the directions to examine the factual matrix/utilization of the surplus and decide the issue raised in the present ground in accordance with law after giving the Appellant an opportunity of being heard. In terms of the aforesaid directions, Ground No.1 raised by the Revenue is allowed for statistical purposes.

107. Ground No. 2 & 3 pertains to order of CIT(A) allowing exemption ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 under Section 10(34) of the Act in respect of dividend income of INR 1,11,26,11,14,613/-

108. In view of paragraph 44 to 52 above, we confirmed the order of CIT(A) of allowing deduction claimed by the Assessee in respect of dividend income of INR 1,11,26,11,14,613/- received from the domestic companies which was exempt under Section 10(33) of the Act. Accordingly, Ground Number 2 & 3 raised by the Revenue in its appeal are dismissed.

109. Ground No. 4 pertains to disallowance of INR 46,10,68,00,000/- made by the Assessing Officer under Section 14A of the Act which was deleted by the CIT(A).

110. In view of our findings/adjudication in relation to Ground No. 4 in paragraph 83 to 86 above, respectfully following the above decisions of the Tribunal, we confirmed the order of CIT(A) deleting the disallowance of 46,10,68,00,000/- made by the Assessing Officer under Section 14A of the Act. Accordingly, Ground No. 4 raised by the Revenue is dismissed.

111. Ground No. 5 & 6 pertains to the order of CIT(A) allowing the claim of set off of the loss of INR 88,16,23,00,000/- from Jeevan Suraksha Fund.

112. In view of paragraph 53 to 58 above, Ground No. 5 & 6 raised by the Revenue are dismissed.

113. Ground No. 7 contains prayer to set aside the order passed by the CIT(A) and restore the issue raised by the Revenue in the present appeal to the file of the Assessing Officer.

114. We have remitted the issue raised in Ground No. 1 to the file of ,957, 983,1021, 1074 & 1339/Mum/2022 Assessment Years: 2012-2013, 2018-19 & 2019-20 Assessing Officer and have dismissed Ground No. 2 to 6 raised in the present appeal. Accordingly, Ground No. 7 raised in the present appeal is disposed off as being partly allowed.

In result, present set of three cross-appeals are disposed off as under: - Appeal by Assessee ( Appeal by Revenue (ITA No. 1339//Mum/2022) for Assessment Year 2012-13 are partly allowed. - Appeal by Assessee (ITA No. 957/Mum/2022) and Appeal by Revenue (ITA No. 1021//Mum/2022) for Assessment Year 2018-19 are partly allowed. - Appeal by Assessee (ITA No. 927//Mum/2022) and Appeal by Revenue (ITA No. 983/Mum/2022) for Assessment Year 2019-20 are partly allowed.

Order pronounced on 31.01.2023