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Facts
The Revenue appealed against the CIT(A)'s order, which partly allowed the assessee's appeal against the assessment order. The Assessing Officer made an addition under Section 14A of the Income Tax Act, which the CIT(A) deleted based on a previous Tribunal decision.
Held
The Tribunal held that Section 14A of the Income Tax Act is not applicable to insurance companies, as their profits are computed under Section 44, which has an overriding effect. The CIT(A) rightly deleted the disallowance made by the AO.
Key Issues
Whether Section 14A of the Income Tax Act is applicable to an insurance company, given the provisions of Section 44 and the overriding effect thereof.
Sections Cited
14A, 44, 143(3), 143(3A), 143(3B), 10, 8D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
(Assessment Year: 2018-2019) Income Tax Department Room No. 450, 4th floor, Kautilya Bhawan, BKC Mumbai- 400051 …………. Appellant Vs Reliance Nippon Life Insurance Company Limited Unit No. 401 B, 402, and 403 and 404 G Block Inspire Adani, BKC, Bandra Mumbai-400051 …………. Respondent [PAN:AADCA1410E] Appearance For the Appellant/Department : Shri Jitendra Sanghvi For the Respondent/Assessee : Smt. Sanyogita Nagpal Date Conclusion of hearing : 12.03.2025 Pronouncement of order : 27.03.2025
O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Revenue is directed against the order, dated 13/11/2024, passed by the Commission of Income Tax Appeals-54, Mumbai [hereinafter referred to as ‘the CIT(A)’] whereby the Ld. CIT(A) had partly allowed the appeal against the Assessment Order, dated 25/02/2021, passed under Section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2018-19.
The Revenue has raised following grounds of appeal : “i. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition done by the AO u/s 14A of the Act as per Rule 8D of the Income tax Rules without appreciating the fact that the arrangement given is only section 44
1. Assessment Year 2018-19 is applicable on insurance company and has an over-riding effect on other sections where the assessee cannot take the benefit of section 10 as well as section 44?" ii. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition done by the AO u/s 14A of the Act as per Rule 8D of the Income tax Rules without appreciating the fact the CBDT Circular No. 5 of 2014 dated 11/02/2014 which has clarified that the disallowance u/s 14A is to be made even if no exempted income had been earned by the assessee during the year under consideration?" iii. "Your appellant craves leave to add, alter or amend any of the Grounds of appeal
."
3. The relevant facts in brief are that assessee is a company engaged in life insurance business. For the Assessment Year 2018-19, the Assessee filed return of income on 29/10/2018 which was selected for regular scrutiny. The Assessing Officer while passing Assessment Order, dated 25/02/2021, under Section 143(3) read with Section 143(3A)/(3B) of the Act made an addition of INR.47,98,64,183/- under Section 14A of the Act. In appeal preferred by the Assessee challenging the aforesaid addition/disallowance, the CIT(A) deleted the same by placing reliance upon the decision of the Tribunal in the case of the Assessee for the Assessment Year 2011-12 [ITA No. 5999/Mum/2012, dated 24/08/2016]. Being aggrieved, the Revenue has now preferred the present appeal before this Tribunal on the grounds reproduced in paragraph 2 above.
We have heard both the sides and have perused the material on record. We find that in the case of the Assessee for the Assessment Year 2011-12, it was held by the Tribunal that the provisions contain under Section 14A of the Act would not be applicable to the Assessee-company engaged in insurance business in view of the specific provisions contained in Section 44 of the Act. We find that the CIT(A) has deleted the disallowance made by the Assessing Officer under Section 14A of the Act by placing reliance upon the aforesaid decision of the Co-ordinate Bench of the Tribunal the 2 Assessment Year 2018-19 relevant extract of which reads as under: “7. We have considered the submissions of the parties and perused the material available on record in the light of the decisions cited before us. Undisputedly, the assessee is engaged in the business of life insurance. The Assessing Officer himself in the assessment order has observed that profits of the assessee has to be computed in terms of section 44 r/w rule 2 of the First Schedule to the Income Tax Act, 1961 We have noted, the Tribunal in a series of decisions, as referred to above, has clearly and categorically held that as the profits of insurance companies is to be computed under section 44, which has an overriding effect on all other provisions of the Act, no disallowance under section 14A r/w rule 8D can be made. In other words, section 14A would not be applicable in respect of an insurance company. In fact, the Department is not disputing the fact that the Tribunal has decided the issue in favour of the assessee. However, as observed by the Assessing Officer, since in respect of other companies, the Department has preferred appeal in the High Court, to keep the issue alive, the Assessing Officer has made the disallowance. Be that as it may, as per the ratio laid down in the decisions of the Tribunal referred to above, which still holds the field, provisions contained in section 14A are not applicable to insurance companies by virtue of specific provisions of section 44. That being the case, the disallowance made by the Assessing Officer under section 14A r/w rule 8D has been rightly deleted by the learned Commissioner (Appeals) following the consistent view of the Tribunal in similar nature of cases. Accordingly, we uphold the order of the learned Commissioner (Appeals) by dismissing the grounds raised
by the Department.” (Emphasis Supplied)
5. To the same effect is the decision of the Tribunal in the case of the Assessee for the Assessment Year 2012-2013 [ITA No. 2578/Mum/2016, dated 14/10/2017].
The Revenue has failed to bring on record any material to persuade us to take a view of the matter different from the one taken by the Co-ordinate Benches of the Tribunal in the case of the Assessee for the Assessment Years 2011-2012 and 2012-2013. Therefore, we do not find any infirmity in the order passed by CIT(A) deleting the disallowance of INR.47,98,64,183/- made by the Assessing Officer under Section 14A of the Act. Accordingly, respectfully following the
In result, the present appeal preferred by the Revenue is dismissed.
Order pronounced on 27.03.2025.