DCIT(OSD), CR BUILDING vs. MAX LIFE INSURANCE COMPANY LIMITED, GURGAON

2.2. That the Ld. CIT(A) erred in not following the decision of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd v CIT: [1998] 229 ITR 383 wherein it was held that assessee can raise a question of law before an appellate authority even though it was not raised earlier.”

Page 3 of 15 & 1562/DEL/2024 [A.Y. 2017-18] Max Life Insurance 4. Facts relating to deduction u/s 80G of the Act are that during the A.Y under consideration, the assessee has claimed expenses of Rs.

10,03,97,000/- on account of expenditure incurred on corporate social responsibility ('CSR') in Profit and Loss account/ Shareholders' account.

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“41. The 2nd additional ground is with respect to the claim of deduction u/s 80 G of the income tax act with respect to the donation disallowed in the hands of the assessee. As the donation expenditure has been disallowed in the hence of the assessee and added to the total income of the assessee naturally, the assessee is entitled to deduction under Chapter VI- A of the income tax act with respect to the donation u/s 80 G of the act. As the requisite details as required by that section has not been furnished before us we direct the assessee to furnish the relevant information before the assessing officer in accordance with the law to claim any deduction under section 80G of the income tax act along with all donation receipts and the 80G certificates issued by the Donee to the assessee within one month of this order. The learned assessing officer may verify the detail in accordance with the law and if found proper, may grant the deduction. Accordingly the 2nd additional ground of the appeal of the assessee is allowed with above direction.”

“12. Having heard the rival submission, we find that the Supreme Court in NTPC (supra) has held as follows:

Page 6 of 15 & 1562/DEL/2024 [A.Y. 2017-18] Max Life Insurance "5. Under section 254 of the Income-tax Act, 1961, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is, thus, expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.”

the recent decision of the Hon'ble Bombay High Court cited by the ld AR in the case of Siva Equipment (P.) Ltd. v. ACIT [2020] 423 ITR 20 (Bombay) which held that a taxpayer is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before the appellate authorities. In view of the above, we admit the additional ground raised

14. We are of the considered view that the though the facts of the investments in PSU Bonds and debentures are available in the audited accounts, the assessing officer needs to examine the same with regard to the eligibility of assessee’s claim considering the eligibility criteria laid down in section 10(15)(iv)(h). For this purpose, we find it fit to set aside this issue to the file of the assessing officer for examining the claim of the assessee. Where the claim made is as per the law, the same should be allowed. The additional ground is allowed for statistical purpose.”

Page 8 of 15 & 1562/DEL/2024 [A.Y. 2017-18] Max Life Insurance 13. As a result, the appeal of the Assessee is partly allowed for statistical purposes.

2. Ld. CIT(A) has erred both in law and facts by deleting the addition of Rs. 213,34,09,000/- being profit from sale of investment made by AO relied upon the Hon'ble Delhi ITAT decision in the case of ICICI Prudential Insurance Co. Ltd. and direct the Assessing Officer to take profit shown in shareholders profit and loss account as income derived from life insurance business.

3. Ld. CIT(A) has erred both in law and facts by deleting the addition of Rs. 92,91,66,000/- made by AO on account of amount appropriated towards Funds for Future Appropriation (FFA) and addition of Rs. 852,27,09,000/- made by AO on account of bonus allocated to policy holder respectively by treating FFA and bonus as charge on the profit while determining the profit and gains from the life insurance business. 3.1 Whether the Ld. CIT(A) is legally justified in allowing deduction of bonus allocated to policy holders and amount appropriated to funds for future appropriation out of taxable actuarial surplus in contravention to Rule 2 of First Schedule of Income Tax Act, 1961 (the Act) which does not stipulate such deduction?

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3.2 Whether the Ld. CIT(A) is legally justified in allowing deduction of bonus allocated to policy holders and amount appropriated to funds for future appropriation out of taxable actuarial surplus because ascertainable liabilities are allowable as deduction in computing total income by ignoring that the provisions of Rules contained in the first schedule stipulate for taxation of actuarial surplus as determined by IRDA regulation and not under other provisions of the Act? 4 Whether the Ld. CIT(A) has erred both in law and facts by deleting the addition of Rs 7,14,54,500/- on account of expenditure incurred towards dividend income clamed as exempt u/s 10(34) of the Act? 5. The appellant craves leave to, add to, alter, amend or vary from the above grounds of appeal at or before the time of hearing.

15. Ground no 1 relates to the taxability of the assessee life insurance business and it being governed under specific provisions prescribed under Section 44 read with the First Schedule to the Act and that normal provisions from section 28 to 43B of the Act are not applicable on the assessee. We find that the issue is covered by the ITAT order in the assessee’s own case for AY 2010-11 and AY 2015-16 & AY 2016-17. The ITAT in the AY 2010-11 held as under:

“68. We noted that Section 44 of the Act start with a non-obstante clause and overriding other provisions of the Act, provides for profits and gains from life insurance business to be computed in accordance with the rules contained in the First Schedule to the Act. As per rule 2 of the First Schedule to the Act, profits and gains of life insurance business has to 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, in respect of the last inter valuation period ending before the commencement of the Page 10 of 15 & 1562/DEL/2024 [A.Y. 2017-18] Max Life Insurance assessment year, so as to exclude any surplus or deficit included therein, which was made in any earlier inter valuation period. According this rule as is applicable from A.Y.1977-78, the surplus or deficit between two inter valuation periods disclosed by the actuarial valuation made in accordance with Insurance Act, 1938, can only be taken as income or loss of the period. The old Rule 2 which was in existence prior to amendment made by Finance Act, 1976 contains two methods of determining profits and gains of the insurance business and greater of these two method was regarded to be the profit and gains of life insurance business. The first method prescribes calculation of net income = Gross external incomings of the previous year from that business less the management expenses of that year. Clause (2) of old rule 2 restricts the deduction of management expenses under old Rule (1). Old Rule 2 (2) refers to average surplus arrived at by adjusting the surplus disclosed in the actuarial valuation made with regard to the Insurance Act, 1938 in respect of inter valuation period. We noted by amendment made by Finance Act 1976 Sub Rule (1) of Rule 2 was omitted but sub rule (2) has been substituted by new Rule 2 in amended form, which does not require computation of profit and gains of the life insurance business on the basis of gross external income and deducting therefrom the management expenses. New Rule 2 prescribes the profits and gains of the life insurance business to be taken 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 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 intern valuation period. *****

Respectfully following the ITAT decision in AY 2010-11, the ground no 1 is dismissed.

Page 11 of 15 & 1562/DEL/2024 [A.Y. 2017-18] Max Life Insurance 16. Ground no 2 relating to Profit on sale of investments being treated as income from insurance business, we find that the same has been decided in favour of the assessee by the ITAT in its own case in AY 2006-07 to AY 2016-17. The ITAT in AY 2007-08 and 2009-10 held as under:

“8. Following the decision rendered by the coordinate Bench of the Tribunal for AY 2006-07 in assessee's own case (supra), we are of the considered view that investment made by the assessee are part and parcel of insurance business and the assessee has rightly treated the income from sale of investment as part of business of insurance. Moreover, in 2005-06, the Revenue itself has decided this issue in favour of the assessee by holding that profit and loss arising from the sale of investment is not chargeable to tax separately. In other words, it is beyond the purview of section 44 of the Act. Consequently, we are of the considered view that AO/CIT(A) have erred in making addition on account of income from sale of investment and as such are ordered to be deleted, thus grounds no.1 & 2 of AYs 2007-08, 2008-09 & 2009-10 are determined in favour of the assessee”.

As no contrary decision has been cited by the ld DR we, following the above decision of ITAT, dismiss the ground no 2 of the Revenue.

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The order is pronounced in the open court on 04.06.2025