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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 26.07.2022 passed by the National Faceless Appeal Centre (NFAC), Delhi, (hereinafter shall be referred as ‘Ld. First Appellate Authority’) for assessment year 2018-19, raising following grounds:
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. 1. Whether, on the tads and cir , on the tads and circumstances of the case and in Law, cumstances of the case and in Law, the Ld. CIT(A) the Ld. CIT(A) wasjustified in holding that the surplus in the wasjustified in holding that the surplus in the Shareholders Account cannot be considered as y income from Shareholders Account cannot be considered as y income from Shareholders Account cannot be considered as y income from other business activity other business activity and cannot be taxed separately. and cannot be taxed separately. 2. Whether, on the facts and circumstances of the case and in Law, Whether, on the facts and circumstances of the case and in Law, Whether, on the facts and circumstances of the case and in Law, the Ld CIT(A) was the Ld CIT(A) was justified in holding that provisions of section justified in holding that provisions of section 14A of the Act did not apply insurance business. 14A of the Act did not apply insurance business. 3. Whether, on the facts and circumstances of the case and in Law, Whether, on the facts and circumstances of the case and in Law, Whether, on the facts and circumstances of the case and in Law, the Ld CIT(A) erredin deleting the addition made by the AO of Rs. the Ld CIT(A) erredin deleting the addition made by the AO of Rs. the Ld CIT(A) erredin deleting the addition made by the AO of Rs. 203.23.09.790/ 203.23.09.790/- on account of incrementalNegative reserve of incrementalNegative reserve without appreciating that negative reserve has an impact of without appreciating that negative reserve has an impact of without appreciating that negative reserve has an impact of reducing the'taxable surplus' as per Form reducing the'taxable surplus' as per Form-I and therefore I and therefore corresponding adjustment for 'negative reserve need to be made corresponding adjustment for 'negative reserve need to be made corresponding adjustment for 'negative reserve need to be made to arrive at 'taxable surplus.* to arrive at 'taxable surplus.* 4. The Appellan The Appellant prays that the order of the CIT(Appeals) on the t prays that the order of the CIT(Appeals) on the above ground be set aside 5. The Appellant craves leave to above ground be set aside 5. The Appellant craves leave to above ground be set aside 5. The Appellant craves leave to amend or alter any ground or to submit additional new ground, amend or alter any ground or to submit additional new ground, amend or alter any ground or to submit additional new ground, and that of the Assessing Officer be restored. and that of the Assessing Officer be restored.
Briefly stated, facts of the case a Briefly stated, facts of the case are that the assessee is a re that the assessee is a company engaged in the business of life insurance including company engaged in the business of life insurance including company engaged in the business of life insurance including annuity plans in the year under consideration. The assessee filed annuity plans in the year under consideration. The assessee filed annuity plans in the year under consideration. The assessee filed return of income on 27.09.2018 declaring total income of return of income on 27.09.2018 declaring total income of return of income on 27.09.2018 declaring total income of ₹340,26,88,880/-. The assessee filed revised re The assessee filed revised return of income on turn of income on 27.11.2018. The revised return of income filed by the assessee 27.11.2018. The revised return of income filed by the assessee 27.11.2018. The revised return of income filed by the assessee selected for scrutiny and statutory notices under the Income-tax selected for scrutiny and statutory notices under the Income selected for scrutiny and statutory notices under the Income
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. Act, 1961 (in short ‘the Act’) were issued and complied with. In Act, 1961 (in short ‘the Act’) were issued and complied with. In Act, 1961 (in short ‘the Act’) were issued and complied with. In view of international transactions carried ou view of international transactions carried out by the assessee in t by the assessee in the year under consideration, the matter of determination of Arm’s the year under consideration, the matter of determination of Arm’s the year under consideration, the matter of determination of Arm’s Length Price was referred to the Ld. Transfer Pricing Officer who in Length Price was referred to the Ld. Transfer Pricing Officer who in Length Price was referred to the Ld. Transfer Pricing Officer who in his order dated 03.07.2021 did not recommend any transfer his order dated 03.07.2021 did not recommend any transfer his order dated 03.07.2021 did not recommend any transfer pricing adjustment. The Assessing Officer pricing adjustment. The Assessing Officer passed the assessment passed the assessment order u/s 143(3) r.w.s. 144B of the Act on 25.09.2021 wherein he order u/s 143(3) r.w.s. 144B of the Act on 25.09.2021 wherein he order u/s 143(3) r.w.s. 144B of the Act on 25.09.2021 wherein he made addition of ₹75,50,69,723/ 75,50,69,723/- fordisallowance u/s 14A disallowance u/s 14A, of the Act addition for negative reserves of ₹203,23,09,790/ Act addition for negative reserves of 203,23,09,790/- and addition of ₹125,28,23,000/ 125,28,23,000/- as surplus from policy shareholders policy shareholders account under the head ‘income from other business activity’. In account under the head ‘income from other business activity’. In account under the head ‘income from other business activity’. In this manner, the total taxable income this manner, the total taxable income was assessed was assessed at ₹619,00,68,393/-.
On further appeal, the Ld. CIT(A) has partly allowed the On further appeal, the Ld. CIT(A) has partly allowed the On further appeal, the Ld. CIT(A) has partly allowed the appeal.
Aggrieved, the Revenue is Aggrieved, the Revenue is in appeal before the Tribunal by in appeal before the Tribunal by way of raising grounds as reproduced above. way of raising grounds as reproduced above.
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. 5. At the outset, the Ld. Counsel of the assessee submitted that At the outset, the Ld. Counsel of the assessee submitted that At the outset, the Ld. Counsel of the assessee submitted that issue-in-dispute involved in the grounds raised by the Revenue are dispute involved in the grounds raised by the Revenue are dispute involved in the grounds raised by the Revenue are covered by the order of the Tribunal in earli covered by the order of the Tribunal in earlier years. er years.
The Ld. Departmental Representative (DR) though relied on The Ld. Departmental Representative (DR) though relied on The Ld. Departmental Representative (DR) though relied on the order of the lower authorities could not controvert the fact that the order of the lower authorities could not controvert the fact that the order of the lower authorities could not controvert the fact that issue-in-dispute are covered in favour of the assessee. dispute are covered in favour of the assessee. dispute are covered in favour of the assessee.
We have heard rival submission of the parties on the i We have heard rival submission of the parties on the i We have heard rival submission of the parties on the issue- in-dispute and perused the relevant material on record. In ground dispute and perused the relevant material on record. In ground dispute and perused the relevant material on record. In ground No. 1, the Revenue is aggrieved No. 1, the Revenue is aggrieved with the findings of the Ld. CIT(A) with the findings of the Ld. CIT(A) that surplus in the shareholders account cannot be considered as that surplus in the shareholders account cannot be considered as that surplus in the shareholders account cannot be considered as income from other business activity. The facts in brief qua issue- income from other business activity. The facts in br income from other business activity. The facts in br in-dispute are that the assessee was maintaining two different dispute are that the assessee was maintaining two different dispute are that the assessee was maintaining two different a policy holders accounts in respect of source of income firstly accounts in respect of source of income firstly, a policy holders account account (Technical (Technical Account) Account) Form Form A-RA A RA and and secondly, secondly, shareholders account ccount (Non-technical (Non technical Account) Account) From F A-PL. According to the Assessing Officer, the income from policy holders According to the Assessing Officer, the income from policy holders According to the Assessing Officer, the income from policy holders account is the only income from Life Insurance Business and is account is the only income from Life Insurance Business and is account is the only income from Life Insurance Business and is
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. taxable as per section 44 of the Act r.w. taxable as per section 44 of the Act r.w. Rule 2 of First Schedule 2 of First Schedule and income from shareholders account is not in th from shareholders account is not in the nature of the e nature of the income from life insurance business. He further observed that as income from life insurance business. He further observed that income from life insurance business. He further observed that per provision of section 115B per provision of section 115B life insurance income is taxed life insurance income is taxed at a concessional rate of 12.5% whereas income from ‘other business concessional rate of 12.5% whereas income from ‘other business concessional rate of 12.5% whereas income from ‘other business activity’ is to be charged at the normal rate activity’ is to be charged at the normal rate of tax. Accordingly, he of tax. Accordingly, he held that surplus of ₹ ₹125,28,23,000/- from shareholders accounts from shareholders accounts as income from other business activity liable to be taxed under as income from other business activity liable to be taxed under as income from other business activity liable to be taxed under normal provisions of the Act. The Ld. CIT(A) following the finding of normal provisions of the Act. The Ld. CIT(A) following the finding of normal provisions of the Act. The Ld. CIT(A) following the finding of his predecessor rejected the cont his predecessor rejected the contention of the Assessing Officer. ention of the Assessing Officer. The relevant finding of the Ld. CIT(A) is reproduced as under: The relevant finding of the Ld. CIT(A) is reproduced as under: The relevant finding of the Ld. CIT(A) is reproduced as under:
“I have considered the facts of the case and the submissions made by “I have considered the facts of the case and the submissions made by “I have considered the facts of the case and the submissions made by the appellant. It is seen from the records that these grounds are the appellant. It is seen from the records that these grounds are the appellant. It is seen from the records that these grounds are covered by the decision of the CIT(A)'s order in appellant's own case for covered by the decision o f the CIT(A)'s order in appellant's own case for AY 2013-14 AY 2012 14 AY 2012-13 and earlier years as stated by the appellant 13 and earlier years as stated by the appellant in the submission included above within this order In the order for the in the submission included above within this order In the order for the in the submission included above within this order In the order for the A.Y 2012-13 vide No CIT(A) 13 vide No CIT(A)-2/IT-235/2014-15 dated 01.09.2015, the 15 dated 01.09.2015, the
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. CIT(A) decided the issue in favour of the appellant. Relevant portions of T(A) decided the issue in favour of the appellant. Relevant portions of T(A) decided the issue in favour of the appellant. Relevant portions of the order are reproduced hereunder: the order are reproduced hereunder:
3.3. I have examined the facts of the case, the stand taken by the A.O. 3. I have examined the facts of the case, the stand taken by the A.O. 3. I have examined the facts of the case, the stand taken by the A.O. in the assessment order and the contentions of the appellant. Since the in the assessment order and the contentions of the appellant. Since the in the assessment order and the contentions of the appellant. Since the facts are identical, the decision of the Hon'ble Mumbai Tribunal in the s are identical, the decision of the Hon'ble Mumbai Tribunal in the s are identical, the decision of the Hon'ble Mumbai Tribunal in the Appellants own case in A Y 2007-08 well as the decision of my Appellants own case in A Y 2007 08 well as the decision of my predecessor CIT(A)s on this issue in the AY 2008-09, 2009 predecessor CIT(A)s on this issue in the AY 2008 09, 2009-10 and 2010-11, wherein it was held that the surplus in the Sharehol 11, wherein it was held that the surplus in the Shareholders 11, wherein it was held that the surplus in the Sharehol Account cannot be considered as "income from other business activity Account cannot be considered as "income from other business activity Account cannot be considered as "income from other business activity and cannot be taxed separately, are squarely applicable to this issue. and cannot be taxed separately, are squarely applicable to this issue. and cannot be taxed separately, are squarely applicable to this issue.
3.4 Further, as relied upon by the Appellant, the Hon'ble Mumbai 4 Further, as relied upon by the Appellant, the Hon'ble Mumbai 4 Further, as relied upon by the Appellant, the Hon'ble Mumbai Tribunal in the case of ICICI Prudential Insurance Co. Ltd vs. ACIT 140 Tribunal in the case of ICICI Prudential Insur ance Co. Ltd vs. ACIT 140 ITD 41 (Mum) and HDFC Standard Life insurance Company Limited ITD 41 (Mum) and HDFC Standard Life insurance Company Limited ITD 41 (Mum) and HDFC Standard Life insurance Company Limited ITA No.2203/M/2012 to 5506/M/2012 also held that surplus in ITA No.2203/M/2012 to 5506/M/2012 also held that surplus in ITA No.2203/M/2012 to 5506/M/2012 also held that surplus in Shareholders Account forms integral part of Life Insurance business. Shareholders Account forms integral part of Life Insurance business. Shareholders Account forms integral part of Life Insurance business.
3.5. Further in assessee's own case for A. Y 2008-09 vide ITA no. 3.5. Further in assessee's own case for 09 vide ITA no. 2004/Mum/2012 and ITA no 2233/Mum/2012 dated 09.04 2015 the 2004/Mum/2012 and ITA no 2233/Mum/2012 dated 09.04 2015 the 2004/Mum/2012 and ITA no 2233/Mum/2012 dated 09.04 2015 the Hon'ble ITAT treated that Hon'ble ITAT treated that
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. "Therefore, income in Shareholder's account are to be considered as "Therefore, income in Shareholder's account are to be considered as "Therefore, income in Shareholder's account are to be considered as arising out of Life Insurance business only. Moreover Sec. 44 arising out of Life Insurance business only. Moreover Sec. 44 arising out of Life Insurance business only. Moreover Sec. 44 mandates that only First Schedule will apply for computing incomes only First Schedule will apply for computing incomes only First Schedule will apply for computing incomes and excludes other heads of income like, Interest on Securities, income and excludes other heads of income like, Interest on Securities, income and excludes other heads of income like, Interest on Securities, income from House property, Capital gains or Income from other sources. from House property, Capital gains or Income from other sources. from House property, Capital gains or Income from other sources. Being non-obstante clause) sec. 44 mandates that the profits and obstante clause) sec. 44 mandates that the profits and obstante clause) sec. 44 mandates that the profits and gains of insurance business shall be computed in accordance with the gains of insurance business shall be computed in accordance with the gains of insurance business shall be computed in accordance with the rules rules rules contained contained contained in in in First First First Schedule. Schedule. Schedule. Therefore, Therefore, Therefore, the the the income income income in in in Shareholder's account are to be taxed as part of life insurance ratio of Shareholder's account are to be taxed as part of life insurance ratio of Shareholder's account are to be taxed as part of life insurance ratio of same business. The grounds are allowed. AO is directed same business. The grounds are allowed. AO is directed to treat them same business. The grounds are allowed. AO is directed as part of Life Insurance Business and tax them u/s 1158." as part of Life Insurance Business and tax them u/s 1158." as part of Life Insurance Business and tax them u/s 1158."
3.6. Therefore, the surplus/deficit in Shareholder Account have to be 3.6. Therefore, the surplus/deficit in Shareholder Account have to be 3.6. Therefore, the surplus/deficit in Shareholder Account have to be taxed as part of life insurance business only. Accordingly, the A.O. is taxed as part of life insurance business only. Accordingly, the A.O. is taxed as part of life insurance business only. Accordingly, the A.O. is directed to treat surplus of Rs. 32,23,91,000 in Shareholders account directed to treat surplus of Rs. 32,23,9 1,000 in Shareholders account as part of life insurance business only. as part of life insurance business only
Consequently, Surplus of Rs 32.23,91,000 for the under consideration Consequently, Surplus of Rs 32.23,91,000 for the under consideration Consequently, Surplus of Rs 32.23,91,000 for the under consideration computed on the basis of the Valuation Balance Sheets as on computed on the basis of the Valuation Balance Sheets as on computed on the basis of the Valuation Balance Sheets as on 31.03.2012 & 31.03.2011 and in accordance with provision 31.03.2012 & 31.03.2011 and in accordance with provisions of 31.03.2012 & 31.03.2011 and in accordance with provision Section 44 read with the rules contained in the schedule is upheld and Section 44 read with the rules contained in the schedule is upheld and Section 44 read with the rules contained in the schedule is upheld and the same is taxable u/s 1158 of the Act." the same is taxable u/s 1158 of the Act."
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. The Revenue appealed against this decision of the CIT(A) to ITAT The Revenue appealed against this decision of the CIT(A) to ITAT The Revenue appealed against this decision of the CIT(A) to ITAT However the Hon'ble ITAT in its order LT.A. No.5655/Mum/2015 However the Hon'ble ITAT in its order LT.A. No.5655/Mum/2015 However the Hon'ble ITAT in its order LT.A. No.5655/Mum/2015 Dated 26.09.2017 dismissed the ground of Revenue following the 2017 dismissed the ground of Revenue following the 2017 dismissed the ground of Revenue following the Tribunal's decision in the assessee's own case. Tribunal's decision in the assessee's own case.
Furthermore, in the appellant's own case for A.Y 2013 Furthermore, in the appellant's own case for A.Y 2013-14, the CIT(A) 14, the CIT(A) has passed an order dated 28.02.2019 in Appeal No.CIT (A) has passed an order dated 28.02.2019 in Appeal No.CIT (A)-22/TO has passed an order dated 28.02.2019 in Appeal No.CIT (A) 14(2)(4) /IT-10188/2016 10188/2016-17. allowing the appeal of the appellant after 17. allowing the appeal of the appellant after drawing reference to the above orders of CIT(A) and Hon'ble ITAT in drawing reference to the above orders of CIT(A) and Hon'ble ITAT in drawing reference to the above orders of CIT(A) and Hon'ble ITAT in appellant's own case. appellant's own case.
Respectfully following the decisions of Hon'ble ITAT and CIT(A), these Respectfully following the decisions of Hon'ble ITAT and CIT(A), these Respectfully following the decisions of Hon'ble ITAT and CIT(A), these grounds ofappeal are allowed. grounds ofappeal are allowed.
7.1 Further, we find that the Tribunal in ITA No. 1352, 1353 & find that the Tribunal in ITA No. 1352, 1353 & find that the Tribunal in ITA No. 1352, 1353 & 1413/M/2022 for assessment years 2014 1413/M/2022 for assessment years 2014-15, 2016- -17 & 2017-18 i.e. the immediately proceedings assessment yearin para 5 has i.e. the immediately proceedings assessment yearin para 5 has i.e. the immediately proceedings assessment yearin para 5 has upheld the order of the Ld. CIT(A). The relevant finding of the upheld the order of the Ld. CIT(A). The relevant finding of the upheld the order of the Ld. CIT(A). The relevant finding of the Tribunal (Supra) is rep is reproduced as under:
“5.We have heard rival submission of the parties on the issue in dispute and “5.We have heard rival submission of the parties on the issue in dispute and “5.We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. Before us the Ld. Counsel of the perused the relevant material on record. Before us the Ld. Counsel of the perused the relevant material on record. Before us the Ld. Counsel of the
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. assesee assesee assesee referred referred referred to to to relevant relevant relevant order order order of of of the the the Tribunal Tribunal Tribunal in in in (ITA (ITA (ITA No. No. No. 5666/Mum/2015), which is reproduced as under: 5666/Mum/2015), which is
At the outset, the Id Counsel for the assessee stated that this At the outset, the Id Counsel for the assessee stated that this At the outset, the Id Counsel for the assessee stated that this issue is squarely covered in assessee's own case by the issue is squarely covered in assessee's own case by the issue is squarely covered in assessee's own case by the Tribunal's decisions in ITA No. 2551/Mum/2010 for AY 2007- Tribunal's decisions in ITA No. 2551/Mum/2010 for AY 2007 Tribunal's decisions in ITA No. 2551/Mum/2010 for AY 2007 08, in ITA No. 2004 & 2233/Mum/2012 for AY 2008-09 and I 08, in ITA No. 2004 & 2233/Mum/2012 for AY 2008 09 and ITA No. 6223/Mum/2014 for AY 2011-12. The Id. Counsel for the No. 6223/Mum/2014 for AY 2011 12. The Id. Counsel for the assessee drew our attention to ITA No. 6223/Mum/2014 for AY assessee drew our attention to ITA No. 6223/Mum/2014 for AY assessee drew our attention to ITA No. 6223/Mum/2014 for AY 2011-12, vide order dated 20.12.2013 and relevant para 3, 12, vide order dated 20.12.2013 and relevant para 3, 12, vide order dated 20.12.2013 and relevant para 3, wherein the tribunal has considered that the shareholders funds wherein the tribunal has considered that the shareholders funds wherein the tribunal has considered that the shareholders funds constituted an integral and indivisible part of assessee's Life n integral and indivisible part of assessee's Life n integral and indivisible part of assessee's Life Insurance Business and assessee's sole business purpose was Insurance Business and assessee's sole business purpose was Insurance Business and assessee's sole business purpose was to carry on Life Insurance Business as per extant regulations to carry on Life Insurance Business as per extant regulations to carry on Life Insurance Business as per extant regulations and, hence, these two accounts formed part and parcel of the and, hence, these two accounts formed part and parcel of the and, hence, these two accounts formed part and parcel of the assessee's business. The Tribunal in para no. 3 followed earlier assessee's business. T he Tribunal in para no. 3 followed earlier orders and observed as under: orders and observed as under
7.2 Respectfully following the finding of the Tribunal (supra), the Respectfully following the finding of the Tribunal (supra), the Respectfully following the finding of the Tribunal (supra), the finding of the Ld. CIT(A) in the year under consideration on the finding of the Ld. CIT(A) in the year under consideration on the finding of the Ld. CIT(A) in the year under consideration on the
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. issue-in-dispute is also upheld also upheld. The ground of app he ground of appeal of the Revenue is accordingly dismissed. Revenue is accordingly dismissed.
The ground No. 2 of the appeal The ground No. 2 of the appeal relate to disallowance u/s disallowance u/s 14A of the Act. According to the Assessing Officer, the assessee 14A of the Act. According to the Assessing Officer, the assessee 14A of the Act. According to the Assessing Officer, the assessee has incurred no expenses expenses for making investment making investment in liquid fund and therefore, he was and therefore, he was satisfied that the disallowance u/s 14A of the disallowance u/s 14A of the Act was called for and invoking Rule 8D(2)(iii) the Act was called for and invoking Rule 8D(2)(iii), he , he computed disallowance of ₹75,50,69,723/ 75,50,69,723/-. The Ld. CIT(A) following the . The Ld. CIT(A) following the finding of his predecessor deleted the disallowance. The relevant finding of his predecessor deleted the disallowance. The relevant finding of his predecessor deleted the disallowance. The relevant finding of the Ld. CIT(A) is reproduced as under: IT(A) is reproduced as under:
“I have considered the facts of the case and the submissions made by I have considered the facts of the case and the submissions made by I have considered the facts of the case and the submissions made by the appellant. This ground is covered by the decision of the CIT(A) order the appellant. This ground is covered by the decision of the CIT(A) order the appellant. This ground is covered by the decision of the CIT(A) order No. CIT(A)2/IT-235/2014 235/2014-15 Dated 01.09.2015 in the appellant's own 15 Dated 01.09.2015 in the appellant's own case for A.Y 2012-13, In this order CIT(A) decided in the favour of the 13, In this order CIT(A) decided in the favour of the 13, In this order CIT(A) decided in the favour of the appellant. Relevant portion of the order is reproduced hereunder appellant. Relevant portion of the order is reproduced hereunder: appellant. Relevant portion of the order is reproduced hereunder
5.4 I have examined the facts of the case, the stand taken by the A.O. in 4 I have examined the facts of the case, the stand taken by the A.O. in 4 I have examined the facts of the case, the stand taken by the A.O. in the assessment order and the contentions of the appellant. I the assessment order and the contentions of the appellant. It is seen the assessment order and the contentions of the appellant. I that this issue is already covered by the decision of Hon'ble Mumbai that this issue is already covered by the decision of Hon'ble Mumbai that this issue is already covered by the decision of Hon'ble Mumbai
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. Tribunal in appeal no. 2901/M/2010 dated 30.09.2011 in the Tribunal in appeal no. 2901/M/2010 dated 30.09.2011 in the Tribunal in appeal no. 2901/M/2010 dated 30.09.2011 in the Appellant's own case for the AY's 2007-08 to 2011-12 wherein the issue Appellant's own case for the AY's 2007 12 wherein the issue has been decided in the favour of the Appellant Company and Hon'ble has been decided in the favour of the Appellant Company and Hon'ble Tribunal has held that provisions of section 14A are not applicable to Tribunal has held that provisions of section 14A are not applicable to Tribunal has held that provisions of section 14A are not applicable to the Appellant company being Life Insurance company and had deleted the Appellant company being Life Insurance company and had deleted the Appellant company being Life Insurance company and had deleted the disallowance of expenses made the Assessing Officer under section the disallowance of expenses made the Assessing Officer under section the disallowance of expenses made the Assessing Officer under section 14A of the Income-tax Act. tax Act.
5.5 Further, the Appellant argued that this issue was taken up before 5 Further, the Appellant argued that this issue was taken up before 5 Further, the Appellant argued that this issue was taken up before my predecessor CIT(A)s for AY 2008-09, 2009-10 2010-11 and 2011 my predecessor CIT(A)s for AY 2008 11 and 2011-12 wherein it was held provisions of section 14A are not applicable to the wherein it was held provisions of section 14A are not applicable to the wherein it was held provisions of section 14A are not applicable to the Appellant Company being Life Insurance company. It is submitted that Appellant Company being Life Insurance company. It is submitted that similar view was taken by the Hon'ble Mumbai Tribunal in the case of similar view was taken by the Hon'ble Mumbai Tribunal in the case of similar view was taken by the Hon'ble Mumbai Tribunal in the case of ICIC1 Prudential Insurance Co. Ltd." ICIC1 Prudential Insurance Co. Ltd."
Furthermore, in the appellant's own case for A.Y 2013- Furthermore, in the appellant's own case for A.Y 2013 -14, the CIT(A) has passed an order dated 28.02.2019 in Appeal No.CIT (A) has passed an order dated 28.02.2019 in Appeal No.CIT (A)-22/тO has passed an order dated 28.02.2019 in Appeal No.CIT (A) 14(2)(4) /IT-10188/2016 10188/2016-17 allowing the appeal of the appellant after 17 allowing the appeal of the appellant after drawing reference to the above orders of CIT(A) and Hon'ble ITAT, in drawing reference to the above orders of CIT(A) and Hon'ble ITAT, in drawing reference to the above orders of CIT(A) and Hon'ble ITAT, in appellant's own case. appellant's own case.
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. Revenue has gone in appeal before the Hon'ble ITAT against orders of Revenue has gone in appeal before the Hon'ble ITAT against orders of Revenue has gone in appeal before the Hon'ble ITAT against orders of CIT(A) for successive A.YS since A.Y 2007-08. Revenue's appeals have CIT(A) for successive 08. Revenue's appeals have been dismissed by the Hon'ble ITAT since A.Y 2007-08. The operative been dismissed by the Hon'ble ITAT since A.Y 2007 08. The operative part of Hon'ble ITAT's order in ITA No.2901/M/2010 for AY 2007 part of Hon'ble ITAT's order in ITA No.2901/M/2010 for AY 2007-08 is part of Hon'ble ITAT's order in ITA No.2901/M/2010 for AY 2007 as under:
“11. Ground no 2 is with regard to disallowance of sum of Rs. 11. Ground no 2 is with regard to disallowance of sum of Rs.2.77 11. Ground no 2 is with regard to disallowance of sum of Rs. 69,215/- in accordance with Rule 8D 2 Sec. 14A is expenditure incurred in accordance with Rule 8D 2 Sec. 14A is expenditure incurred in accordance with Rule 8D 2 Sec. 14A is expenditure incurred for eaming end dividend income. The CIT(A) held as follows: for eaming end dividend income. The CIT(A) held as follows: for eaming end dividend income. The CIT(A) held as follows:
"At the outset it is clarified that the activity of annuity business is the outset it is clarified that the activity of annuity business is the outset it is clarified that the activity of annuity business is permitted business activity which can be undertaken separately and permitted business activity which can be undert aken separately and independently of insurance business and the disallowance being independently of insurance business and the disallowance being independently of insurance business and the disallowance being considered is only in respect of exempt income of this annuity business. considered is only in respect of exempt income of this annuity business. considered is only in respect of exempt income of this annuity business. The only objection takon against the disallowance made by Assessing The only objection takon against the disallowance made by Assessing The only objection takon against the disallowance made by Assessing Officer is that Rule 8D goes beyond the authority given to CSDT by Officer is that Rule 8D goes bey ond the authority given to CSDT by Section 14 A of the Income-tax Act. It is contended that the rule only Section 14 A of the Income tax Act. It is contended that the rule only delet772ines the notional cost of holding investments which may or may delet772ines the notional cost of holding investments which may or may delet772ines the notional cost of holding investments which may or may not yield any exempt income and such notional cost for holding not yield any exempt income and such notional cost for holding not yield any exempt income and such notional cost for holding investment has no relationship with the actual expenditure incurred by o relationship with the actual expenditure incurred by o relationship with the actual expenditure incurred by
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. appellant. It has been accordingly contended that the disallowance appellant. It has been accordingly contended that the disallowance appellant. It has been accordingly contended that the disallowance made by Assessing Officer needs to be deleted I have perused die facts made by Assessing Officer needs to be deleted I have perused die facts made by Assessing Officer needs to be deleted I have perused die facts of the case. I find that the issue of disallowance u15.14 A has of the case. I find that the issue of disallowance u15.14 A has been of the case. I find that the issue of disallowance u15.14 A has considered by Honourable Mumbai PAT in several cases and it has been considered by Honourable Mumbai PAT in several cases and it has been considered by Honourable Mumbai PAT in several cases and it has been held that Rule SD is perfectly justified and is required to be invoked in held that Rule SD is perfectly justified and is required to be invoked in held that Rule SD is perfectly justified and is required to be invoked in all cases of disallowance u1s 14A It is accordingly held that Assessing all cases of disallowance u1s 14A It is accordingly held that Assessing all cases of disallowance u1s 14A It is accordingly held that Assessing Officer has rightly invoked Rule 80 for making the disallowance. The Officer has rightly invoked Rule 80 for making the disallowance. The dallowance made by Assessing Officer is consequently confirmed and dallowance made by Assessing Officer is consequently confirmed and dallowance made by Assessing Officer is consequently confirmed and the ground of appeal is rejected." the ground of appeal is rejected."
Aggrieved the assessee is on appeal before us. In the case of Bajaj Aggrieved the assessee is on appeal before us. In the case of Bajaj Aggrieved the assessee is on appeal before us. In the case of Bajaj Alliance General Insurance Company Ltd vs Additional Commissioner of Alliance General Insurance Company Ltd vs Addit ional Commissioner of Income Tax 38 DTR 282 Pune, it has been held that Sec 14A is not Income Tax 38 DTR 282 Pune, it has been held that Sec 14A is not Income Tax 38 DTR 282 Pune, it has been held that Sec 14A is not applicable in the case of Insurance business, which is governed by applicable in the case of Insurance business, which is governed by applicable in the case of Insurance business, which is governed by specific provisions of 44 and Schedule 1. In the case of Reliance General specific provisions of 44 and Schedule 1. In the case of Reliance General specific provisions of 44 and Schedule 1. In the case of Reliance General Insurance Co Lid vs Deputy Commissioner of Income Tax, Mumbai Insurance Co Lid vs Deputy C ommissioner of Income Tax, Mumbai Bench, similar view has been taken. Similarly in the case of Birla Bench, similar view has been taken. Similarly in the case of Birla Bench, similar view has been taken. Similarly in the case of Birla Sunlife Insurance Co Ltd vs Additional Commissioner of Income Tax 1TA Sunlife Insurance Co Ltd vs Additional Commissioner of Income Tax 1TA Sunlife Insurance Co Ltd vs Additional Commissioner of Income Tax 1TA 2253/M/2006 has held as follows: 2253/M/2006 has held as follows
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. "We have carefully considered the submissions of the nval parties and "We have carefully considered the submissions of the nval parties and perused the material available on record. We find ment in the plea of the perused the material available on record. We find ment in the plea of the perused the material available on record. We find ment in the plea of the Ld. Counsel for the assessee that the Assessing Officer after examining Ld. Counsel for the assessee that the Assessing Officer after examining Ld. Counsel for the assessee that the Assessing Officer after examining the relevant details as discussed in para 5.16 and 5.17 of the the relevant details as discussed in para 5.16 and 5.17 of the the relevant details as discussed in para 5.16 and 5.17 of the assessment order has disallowed the expenses of Rs.30, 18,496/ assessment order has disallow ed the expenses of Rs.30, 18,496/- for earning dividend income, therefore, the plea taken by the Ld, DR that earning dividend income, therefore, the plea taken by the Ld, DR that 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 is devoid the issue may be set aside to the file of the Assessing Officer is devoid the issue may be set aside to the file of the Assessing Officer is devoid of any morit. This being so, and keeping in view that the Tribunal in of any morit. This being so, and keeping in view that the Tribunal in of any morit. This being so, and keeping in view that the Tribunal in Oriental Insurance Co Ltd vs. ACIT (2009) TIOL ental Insurance Co Ltd vs. ACIT (2009) TIOL- 172 ITAT DEL after 172 ITAT DEL after discussing the identical issue at length has held that Sec. 44 provides discussing the identical issue at length has held that Sec. 44 provides discussing the identical issue at length has held that Sec. 44 provides for application of special provisions for computation of profits and gains for application of special provisions for computation of profits and gains for application of special provisions for computation of profits and gains of insurance business in accordance with Rule 5 of Schedule 1 and, of insurance business in accordance with Rule 5 of Schedule 1 and, therefore, it is not permissible to the Assessing Officer to travel beyond therefore, it is not permissible to the Assessing Officer to travel beyond 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 Sec.44 and Schedule 1 and make disallowance by applying Sec. 14A of the Act. The above order has consistently boon followed by the Tribunal the Act. The above order has consistently boon followed by the Tribunal the Act. The above order has consistently boon followed by the Tribunal in the above three cases relied on by the Ld Counsel for the assessee. In cases relied on by the Ld Counsel for the assessee. In cases relied on by the Ld Counsel for the assessee. In the absence of any distinguishing feature brought on record by the Ld. the absence of any distinguishing feature brought on record by the Ld. the absence of any distinguishing feature brought on record by the Ld. DR we respectfully, following the consistent view of the Tribunal hold DR we respectfully, following the consistent view of the Tribunal hold 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 that it is not permissible to the Assessing Officer to trav el beyond Sec 44 and Schedule- 1 and make disallowance by applying Sec. 14A of the 1 and make disallowance by applying Sec. 14A of the 1 and make disallowance by applying Sec. 14A of the Act and accordingly the disallowance of Rs 30,18,496 made by the Act and accordingly the disallowance of Rs 30,18,496 made by the Act and accordingly the disallowance of Rs 30,18,496 made by the
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. Assessing Officer and sustained by the Ld CIT(A) is deleted. The ground Assessing Officer and sustained by the Ld CIT(A) is deleted. The ground Assessing Officer and sustained by the Ld CIT(A) is deleted. The ground taken by the assessee is therefore, allowed. taken by the assessee is therefore,
Respectfully following the above decisions of the co Respectfully following the above decisions of the co-ordinate Benches, ordinate Benches, we delete the entire disallowance made under 14A amounting to we delete the entire disallowance made under 14A amounting to we delete the entire disallowance made under 14A amounting to Rs.2.77,69,215 is no expenditure is incurred for eaming exemption Rs.2.77,69,215 is no expenditure is incurred for eaming exemption Rs.2.77,69,215 is no expenditure is incurred for eaming exemption dividend income."
Respectfully following the decisions of the Hon'ble ITAT and CIT(A), this Respectfully following the dec isions of the Hon'ble ITAT and CIT(A), this ground of appeal is allowed. ground of appeal is allowed.
We find that issue We find that issue-in-dispute is covered in favour of the dispute is covered in favour of the assessee by the order of the Tribunal in ITA No. ITA No. 1352, assessee by the order of the Tribunal in ITA No. ITA No. 1352, assessee by the order of the Tribunal in ITA No. ITA No. 1352, 1353 & 1413/M/2022 for assessment years 2014 1353 & 1413/M/2022 for assessment years 2014-15, 2016 15, 2016-17 & 2017-18. The Tribunal in para 11 of the order has deleted finding 18. The Tribunal in para 11 of the order has deleted finding 18. The Tribunal in para 11 of the order has deleted finding of the Tribunal in earlier years. The relevant para of the Tribunal of the Tribunal in earlier years. The relevant para of the Tribunal of the Tribunal in earlier years. The relevant para of the Tribunal (Supra) is reproduced as under: is reproduced as under:
“10. On further appeal, the Ld. FFA following the decision of the Tribunal 10. On further appeal, the Ld. FFA following the decision of the Tribunal 10. On further appeal, the Ld. FFA following the decision of the Tribunal in earlier years deleted the disallowance made by the Ld. AO. Relevant years deleted the disallowance made by the Ld. AO. Relevant years deleted the disallowance made by the Ld. AO. Relevant part of the order Ld. FFA is reproduced as under: part of the order Ld. FFA is reproduced as under:
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. I have considered the facts of the case and the submissions made I have considered the facts of the case and the submissions made I have considered the facts of the case and the submissions made by the appellant. This ground is covered by the decision of the Ld by the appellant. This ground is covered by the decision of the Ld by the appellant. This ground is covered by the decision of the Ld CIT(A) order No. CIT(A)2/TT o. CIT(A)2/TT- 235/2014-15 Dated 01.09.2015 of 15 Dated 01.09.2015 of the appellant's own case for A.Y 2012-13. In this order Ld. CIT(A) the appellant's own case for A.Y 2012 13. In this order Ld. CIT(A) decided the issue in the favour of the appellant. Relevant portion decided the issue in the favour of the appellant. Relevant portion decided the issue in the favour of the appellant. Relevant portion of the order is reproduced. of the order is reproduced.
I have examined the facts of the case, the stand taken by the Ld. I have examined the facts of the case, the stan d taken by the Ld. A.O. in the assessment order and the contentions of the appellant. A.O. in the assessment order and the contentions of the appellant. A.O. in the assessment order and the contentions of the appellant. It is seen that this issue is already covered by the decision of It is seen that this issue is already covered by the decision of It is seen that this issue is already covered by the decision of Hon'ble Mumbal Tribunal in appeal no.2901/M/2010 dated 30.09 Hon'ble Mumbal Tribunal in appeal no.2901/M/2010 dated 30.09 Hon'ble Mumbal Tribunal in appeal no.2901/M/2010 dated 30.09 2011 in the Appellant's own case for the A.Y's 2007-08 to 2011 2011 in the Appellant's own case for the A.Y 08 to 2011-12 wherein the issue has been decided in the favour of the Appellant wherein the issue has been decided in the favour of the Appellant wherein the issue has been decided in the favour of the Appellant Company and Hon'ble Tribunal has held that provisions of section Company and Hon'ble Tribunal has held that provisions of section Company and Hon'ble Tribunal has held that provisions of section 144 are not applicable to the Appellant company being Life 144 are not applicable to the Appellant company being Life 144 are not applicable to the Appellant company being Life Insurance company and had deleted the disallowance of Insurance company and had deleted the disall Insurance company and had deleted the disall expenses made the Ld. A.O. under section 14A of the Income Tax expenses made the Ld. A.O. under section 14A of the Income Tax expenses made the Ld. A.O. under section 14A of the Income Tax Act.
Further, the Appellant argued that this issue was taken up before Further, the Appellant argued that this issue was taken up before Further, the Appellant argued that this issue was taken up before my predecessor CIT(A)s for AY 2008-09, 2009-10, 2010 my predecessor CIT(A)s for AY 2008 10, 2010-11 and 2011-12 wherein it was held provisions of section 14 12 wherein it was held provisions of section 144 are not 12 wherein it was held provisions of section 14
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. applicable to the Appellant Company being Life Insurance applicable to the Appellant Company being Life Insurance applicable to the Appellant Company being Life Insurance company. It is submitted that similar view was taken by the company. It is submitted that similar view was taken by the company. It is submitted that similar view was taken by the Hon'ble Mumbai Tribunal in the case of ICICI Prudential Insurance Hon'ble Mumbai Tribunal in the case of ICICI Prudential Insurance Hon'ble Mumbai Tribunal in the case of ICICI Prudential Insurance Co. Ltd"
Furthermore, in the appellant's own case for AY 2013-14, the Furthermore, in the appellant's own case for AY 2013 Furthermore, in the appellant's own case for AY 2013 CIT(A) has passed an order dated 28.02.2019 in Appeal CIT(A) has passed an order dated 28.02.2019 in Appeal CIT(A) has passed an order dated 28.02.2019 in Appeal No.CIT(A)22/1TO142) (4) IT-10188/2016-17. allowing the appeal No.CIT(A)22/1TO142) (4) IT 17. allowing the appeal of the appellant after drawing reference to the above orders of of the appellant after drawing reference to the above orders of of the appellant after drawing reference to the above orders of CIT(A) and Hon'ble ITAT in appellant's own case CIT(A) and Hon'ble ITAT in appellant's own case
Revenue has gone in appeal before the Hon'ble TAT against orders Revenue has gone in appeal before the Hon'ble TAT against orders of CIT(A) for successive A.Y 's since A.Y 2007-08 Revenue's of CIT(A) for successive A.Y 's since A.Y 2007 08 Revenue's appeals have been dismissed by the Hon'ble ITAT since A.Y 2007- appeals have been dismissed by the Hon'ble ITAT since A.Y 2007 appeals have been dismissed by the Hon'ble ITAT since A.Y 2007 08. The operative part of 08. The 08. The operative part operative part of Hon'ble of Hon'ble Hon'ble ITAT's order ITAT's order in ITAT's order in in ITA ITA ITA No.2901/M/2010 for 2007-08 is as under: No.2901/M/2010 for 2007
11 Ground no.2 is with regard to disallowance of sum of 11 Ground no.2 is with regard to disallowance of sum of 11 Ground no.2 is with regard to disallowance of sum of Rs.2.77,69,215/- in accordance with Rule 8D 2 Sec. 14A is in accordance with Rule 8D 2 Sec. 14A is expenditure incurred for earning end dividend income. The CIT(A) expenditure incurred for earning end dividend income. The CIT(A) expenditure incurred for earning end dividend income. The CIT(A) held as follows:
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. "At the outset it is clarified that the activity of annuity business is "At the outset it is clarified that the activity of an nuity business is permitted business activity which can be undertaken separately permitted business activity which can be undertaken separately permitted business activity which can be undertaken separately and independently of insurance business and the disallowance and independently of insurance business and the disallowance and independently of insurance business and the disallowance being considered is only in respect of exempt income of this being considered is only in respect of exempt income of this being considered is only in respect of exempt income of this annuity annuity annuity business. business. business. The The The only only only objection objection objection taken taken taken against against against the th th disallowance made by Ld. A.O. is that Rule goes beyond the disallowance made by Ld. A.O. is that Rule goes beyond the disallowance made by Ld. A.O. is that Rule goes beyond the authority given to CSDT by Section 14 A of the Income-tax Act. It is authority given to CSDT by Section 14 A of the Income tax Act. It is contended that the rule only detet772ines the notional cost of contended that the rule only detet772ines the notional cost of contended that the rule only detet772ines the notional cost of holding investments which may or may not yield any exempt holding investments which may or may not yield any exempt holding investments which may or may not yield any exempt income and such notional cost for holding investment has no e and such notional cost for holding investment has no e and such notional cost for holding investment has no relationship with the actual expenditure incurred by appellant. It relationship with the actual expenditure incurred by appellant. It relationship with the actual expenditure incurred by appellant. It has been accordingly contended that the disallowance made by has been accordingly contended that the disallowance made by has been accordingly contended that the disallowance made by Ld. A.O. needs to be deleted I have perused die facts of the case. I Ld. A.O. needs to be deleted I have perused die facts of the case. I Ld. A.O. needs to be deleted I have perused die facts of the case. I find that the issue of disallowance u15.14 A has been conside that the issue of disallowance u15.14 A has been conside that the issue of disallowance u15.14 A has been considered by Hon’ble Mumbai PAT in several cases and it has been held that ble Mumbai PAT in several cases and it has been held that ble Mumbai PAT in several cases and it has been held that Rule SD Is perfectly justified and is required to be invoked in all Rule SD Is perfectly justified and is required to be invoked in all Rule SD Is perfectly justified and is required to be invoked in all cases of disallowance w's 144. It is accordingly hold that Ld. A.O. cases of disallowance w's 144. It is accordingly hold that Ld. cases of disallowance w's 144. It is accordingly hold that Ld. has rightly invoked Rule 80 for making the disallowance. The has rightly invoked Rule 80 for making the disallowance. The has rightly invoked Rule 80 for making the disallowance. The disallowance made by Ld. A.O. is consequently confirmed and the disallowance made by Ld. A.O. is consequently confirmed and the disallowance made by Ld. A.O. is consequently confirmed and the ground of appeal is rejected." ground of appeal is rejected."
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. 12. Aggrieved the assessee is on appeal before us. In the case of 12. Aggrieved the assessee is on appeal before us. In the case of 12. Aggrieved the assessee is on appeal before us. In the case of Bajaj Alliance General Insurance Company Ltd v/s Additional Bajaj Alliance General Insur ance Company Ltd v/s Additional Commissioner of Income Tax 38 DTR 282 Pune, it has been held Commissioner of Income Tax 38 DTR 282 Pune, it has been held Commissioner of Income Tax 38 DTR 282 Pune, it has been held that Sec. 14A is not applicable inthe case of Insurance business, that Sec. 14A is not applicable inthe case of Insurance business, that Sec. 14A is not applicable inthe case of Insurance business, which is governed by specific provisions of 44 and Schedule 1 In which is governed by specific provisions of 44 and Schedule 1 In which is governed by specific provisions of 44 and Schedule 1 In the case of Reliance General Insurance Co Ltd vis Deputy the case of Reliance General Ins urance Co Ltd vis Deputy Commissioner of Income Tax, Mumbai Bench, similar view has Commissioner of Income Tax, Mumbai Bench, similar view has Commissioner of Income Tax, Mumbai Bench, similar view has been taken. Similarly in the case of Birla Sunlife Insurance Co Ltd been taken. Similarly in the case of Birla Sunlife Insurance Co Ltd been taken. Similarly in the case of Birla Sunlife Insurance Co Ltd v/s Additional Commissioner of Income Tax ITA 2253/M/2006 v/s Additional Commissioner of Income Tax ITA 2253/M/2006 v/s Additional Commissioner of Income Tax ITA 2253/M/2006 has held as follows: has held as follows:
"We have carefully considered the submissions of the rival parties "We have carefully consid ered the submissions of the rival parties and perused the material available on record. We find merit in the and perused the material available on record. We find merit in the and perused the material available on record. We find merit in the plea of the Ld. Counsel for the assessee that the Ld. A.O. after plea of the Ld. Counsel for the assessee that the Ld. A.O. after plea of the Ld. Counsel for the assessee that the Ld. A.O. after examining the relevant details as discussed in para 16 and 5.17 examining the relevant details as discussed in para 16 and 5.17 examining the relevant details as discussed in para 16 and 5.17 of the assessment order has disallowed the expenses of of the assessment order has disallowed the expenses of Rs.30,18,496 for earning dividend income, therefore, the plea Rs.30,18,496 for earning dividend income, therefore, the plea Rs.30,18,496 for earning dividend income, therefore, the plea taken by the Ld.DR that the issue may be set aside to the file of taken by the Ld.DR that the issue may be set aside to the file of taken by the Ld.DR that the issue may be set aside to the file of the Ld AO is devoid of any merit This being so, and keeping in the Ld AO is devoid of any merit This being so, and keeping in the Ld AO is devoid of any merit This being so, and keeping in view that the Tribunal in Oriental Insurance co Ltd v/s Ad (2009) view that the Tribunal in Or iental Insurance co Ltd v/s Ad (2009) TIOL 172 ITAT DEL after discussing the identical issue at length TIOL 172 ITAT DEL after discussing the identical issue at length TIOL 172 ITAT DEL after discussing the identical issue at length
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. has held that Sec. 44 provides for application of special provisions has held that Sec. 44 provides for application of special provisions has held that Sec. 44 provides for application of special provisions for computation of profits and gains of insurance business in for computation of profits and gains of insurance business in for computation of profits and gains of insurance business in accordance with Rule 5 of Schedule I and, therefore it is not accordance with Rule 5 of Schedule I and, therefore it is not permissible to the Ld AO to travel beyond Sec 44 and Schedule I permissible to the Ld AO to travel beyond Sec 44 and Schedule I permissible to the Ld AO to travel beyond Sec 44 and Schedule I and make disallowance by applying Sec. 144 of the Act. The and make disallowance by applying Sec. 144 of the Act. The and make disallowance by applying Sec. 144 of the Act. The above order has consistently been followed by the Tribunal in the above order has consistently been followed by the Tribunal in 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 above three cases relied on by the Ld Counsel for the assessee in the absence of any distinguishing feature brought on record by the the absence of any distinguishing feature brought on record by the the absence of any distinguishing feature brought on record by the Ld DR we respectfully following the consistent view of the Ld DR we respectfully following the consistent view of the Ld DR we respectfully following the consistent view of the Tribunal hold that it is not permissible to the Ld. A.O to travel Tribunal hold that it is not permissible to the Ld. A.O to travel Tribunal hold that it is not permissible to the Ld. A.O to travel beyond Sec 44 and Schedule-1 and make disallowance by beyond Sec 44 and Schedul 1 and make disallowance by applying Soc 144 of the Act and accordingly the disallowance of applying Soc 144 of the Act and accordingly the disallowance of applying Soc 144 of the Act and accordingly the disallowance of Rs 30,18,496 made by the Ld. AO and sustained by the Ld. CIT(A) Rs 30,18,496 made by the Ld. AO and sustained by the Ld. CIT(A) Rs 30,18,496 made by the Ld. AO and sustained by the Ld. CIT(A) isdeleted. The ground taken by the assessee is therefore, isdeleted. The ground taken by the assessee is therefore, isdeleted. The ground taken by the assessee is therefore, allowed."
Respectfully following the above decisions of the co Respectfully following the abov e decisions of the co-ordinate Benches, we delete the entire disallowance made under sec. 14A Benches, we delete the entire disallowance made under sec. 14A Benches, we delete the entire disallowance made under sec. 14A mounting to Rs.2.77.215 is no expenditure is incurred for earning mounting to Rs.2.77.215 is no expenditure is incurred for earning mounting to Rs.2.77.215 is no expenditure is incurred for earning exemption dividend income." exemption dividend income."
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. Respectfully following the decisions of the Hon'ble ITAT and Ld. Respectfully following the decisions of the Hon'ble ITAT and Ld. Respectfully following the decisions of the Hon'ble ITAT and Ld. CIT(A), this ground of appeal is allowed (A), this ground of appeal is allowed.
We have heard rival submission of the parties on issue 11. We have heard rival submission of the parties on issue-in-dispute 11. We have heard rival submission of the parties on issue & perused the relevant material on the record. We find that Ld. FFA & perused the relevant material on the record. We find that Ld. FFA & perused the relevant material on the record. We find that Ld. FFA has followed binding precedent in the case of the assessee itself and has followed binding precedent in the case of the assessee itself and has followed binding precedent in the case of the assessee itself and therefore, we do not find any error in the order of the Ld. FFA , we do not find any error in the order of the Ld. FFA , we do not find any error in the order of the Ld. FFA Accordingly, we uphold same. The ground No.2 raised by the revenue Accordingly, we uphold same. The ground No.2 raised by the revenue Accordingly, we uphold same. The ground No.2 raised by the revenue the A.Y 2014-15 is accordingly dismissed. Since issue in dispute and 15 is accordingly dismissed. Since issue in dispute and 15 is accordingly dismissed. Since issue in dispute and Ground No.2 raised in other appeals are identical, therefore to h Ground No.2 raised in other appeals are identical, therefore to have Ground No.2 raised in other appeals are identical, therefore to h consistency in our decision the Ground No.2 for A.Y. 2016 consistency in our decision the Ground No.2 for A.Y. 2016-17 and consistency in our decision the Ground No.2 for A.Y. 2016 2017-18 is also dismissed. 18 is also dismissed.”
9.1 Respectfully following the finding of the Tribunal, we uphold Respectfully following the finding of the Tribunal, we uphold Respectfully following the finding of the Tribunal, we uphold the disallowance deleted deleted by the learned CIT(A). The ground of learned CIT(A). The ground of appeal is accordingly dismissed appeal is accordingly dismissed.
The ground No. 3 of the appeal relates to disallowance of The ground No. 3 of the appeal relates to disallowance of The ground No. 3 of the appeal relates to disallowance of addition made by the AO on account of addition made by the AO on account of negative negative reserve. The Assessing Officer rejected the contention of the assessee that Assessing Officer rejected the contention of the assessee that Assessing Officer rejected the contention of the assessee that income from insurance business is to be assessed on the basis of income from insurance business is to be assessed on the basis of income from insurance business is to be assessed on the basis of
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. actuarial valuation and the surplus worked out by the actuary valuation and the surplus worked out by the actuary valuation and the surplus worked out by the actuary cannot be disturbed by the Income by the Income-tax Authority. It was submitted tax Authority. It was submitted that negative reserve was that negative reserve was a temporary phenomenon and generally a temporary phenomenon and generally, negative reserve is observed in initial years of a policy, which is is observed in initial years of a policy, which is is observed in initial years of a policy, which is automatically wiped out in due course automatically wiped out in due course. According . According, the Ld. Assessing Officer held that held that taking reserve at zero are not tenable are not tenable and therefore, he added the and therefore, he added the incrementalnegative reserve as negative reserve as reported by the actuary to the surplus o the additional valuation of actuary to the surplus o the additional valuation of actuary to the surplus o the additional valuation of life insurance business of the assessee insurance business of the assessee-company, which amounted company, which amounted to ₹2,03,23,09,790/- -. The Ld. CIT(A) following the finding of his . The Ld. CIT(A) following the finding of his predecessor in assessment year 2013 predecessor in assessment year 2013-14 deleted the addition 14 deleted the addition observing a under:
“As stated by the Appellant in its submission, this issue has been “As stated by the Appellant in its submission, this issue has been “As stated by the Appellant in its submission, this issue has been decided by the predecessor CSIT (A) in appellant's favour in the appeals decided by the predecessor CSIT (A) in appellant's favour in the appeals decided by the predecessor CSIT (A) in appellant's favour in the appeals filed for the earlier AYS including AY 2013-14 in Appeal No.CIT (A) filed for the earlier AYS including AY 2013 14 in Appeal No.CIT (A)- 221TO 14(2)(4) AT-10188/2016 10188/2016-17 wherein the CIT (A) has stated as the CIT (A) has stated as follows:
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. "I have considered the facts of the case and the submissions made by "I have considered the facts of the case and the submissions made by "I have considered the facts of the case and the submissions made by the appellant. This issue in this ground of appeal has been considered the appellant. This issue in this ground of appeal has been considered the appellant. This issue in this ground of appeal has been considered by the CIT(A) in the appellant's own case for AY 2011 by the CIT(A) in the appellant's own case for AY 2011-12 The CIT(A) by the CIT(A) in the appellant's own case for AY 2011 deleted the addition in his order and allowed the appellant's ground of ddition in his order and allowed the appellant's ground of ddition in his order and allowed the appellant's ground of appeal. The relevant portion of the CIT(A) order is as under appeal. The relevant portion of the CIT(A) order is as under appeal. The relevant portion of the CIT(A) order is as under
7.3 I have examined the facts of the case, the stand taken by the AO in 7.3 I have examined the facts of the case, the stand taken by the AO in 7.3 I have examined the facts of the case, the stand taken by the AO in the assessment order and the contentions of the appellant. This the assessment order and the contentions of the appellant. This issue is the assessment order and the contentions of the appellant. This covered by the decisions of the Hon'ble Jurisdictional Mumbai Tribunal covered by the decisions of the Hon'ble Jurisdictional Mumbai Tribunal covered by the decisions of the Hon'ble Jurisdictional Mumbai Tribunal in the case of ICICI Prudential Insurance Co Ltd vs ACIT reported in 140 in the case of ICICI Prudential Insurance Co Ltd vs ACIT reported in 140 in the case of ICICI Prudential Insurance Co Ltd vs ACIT reported in 140 ITD 41. The issue has been discussed at length by the Hon'ble Tribunal ITD 41. The issue has been discussed at length by the Hon'ble Tribunal ITD 41. The issue has been discussed at length by the Hon'ble Tribunal and the relevant finding at para 59 of the said order is reproduced as and the relevant finding at para 59 of the said order is reproduced as under
After considering the rival submissions and examining the method of 59. After considering the rival submissions and examining the method of 59. After considering the rival submissions and examining the method of accounting and the mandate given by regulations to appoint Actuarial accounting and the mandate given by regulations to appoint Actuarial accounting and the mandate given by regulations to appoint Actuarial on the concept of mathematical reserves, we do not see any reason to on the concept of mathematical reserves, we do not see any reason to on the concept of mathematical reserves, we do not see any reason to interfere with the order of the CIT(A) The mathematical reserve is part of nterfere with the order of the CIT(A) The mathematical reserve is part of nterfere with the order of the CIT(A) The mathematical reserve is part of Actuarial valuation and the surplus as discussed in Form Actuarial valuation and the surplus as discussed in Form- under Actuarial valuation and the surplus as discussed in Form Regulation 4 takes into consideration this mathematical reserve also. Regulation 4 takes into consideration this mathematical reserve also. Regulation 4 takes into consideration this mathematical reserve also. Therefore the order of the CIT(A) is approve. Moreover the Assessing Therefore the order of the CIT(A) is approve. Mo reover the Assessing Officer has no power to modify the amount after actuarial valuation was Officer has no power to modify the amount after actuarial valuation was Officer has no power to modify the amount after actuarial valuation was
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. done, which was the basis for assessment under Rule 2 of 1st Schedule done, which was the basis for assessment under Rule 2 of 1st Schedule done, which was the basis for assessment under Rule 2 of 1st Schedule was 44 of the IT Act. The principles laid down by the Hon'ble Supreme was 44 of the IT Act. The principles laid down by the Hon'ble Supreme was 44 of the IT Act. The principles laid down by the Hon'ble Supreme Court in LIC vs. VIT 512 ITR 773 about the powers of Assessing Officer Court in LIC vs. VIT 51 2 ITR 773 about the powers of Assessing Officer also restrict the scope and adjustments by the AQ. In view of this we also restrict the scope and adjustments by the AQ. In view of this we also restrict the scope and adjustments by the AQ. In view of this we uphold the order of the CIT(A) and dismiss the Revenue ground.” uphold the order of the CIT(A) and dismiss the Revenue ground.” uphold the order of the CIT(A) and dismiss the Revenue ground.”
7.4 Further, the Appellant argued that this issue was taken up before 7.4 Further, the Appellant argued that this issue was taken up before 7.4 Further, the Appellant argued that this issue was taken up before me for AY 2010-11 wherein it was held that Negative Reserve cannot be 11 wherein it was held that Negative Reserve cannot be 11 wherein it was held that Negative Reserve cannot be brought to tax.
7.5 Since the facts in the Appellant's case are identical to that of ICICI 7.5 Since the facts in the Appellant's case are identical to that of ICICI 7.5 Since the facts in the Appellant's case are identical to that of ICICI Prudential's (supra) case and also those in the Appellant's own case for Prudential's (supra) case and also those in the Appellant's own case for Prudential's (supra) case and also those in the Appellant's own case for AY 2010-11, respectfully f 11, respectfully following the order of the Hon'ble Mumbai ollowing the order of the Hon'ble Mumbai Tribunal, the Assessing Officer is directed to exclude the Negative Tribunal, the Assessing Officer is directed to exclude the Negative Tribunal, the Assessing Officer is directed to exclude the Negative Reserve of Rs.399,05,98,960/- from the taxable surplus while Reserve of Rs.399,05,98,960/ from the taxable surplus while computing the total income of the Appellant company computing the total income of the Appellant company
7.6 Accordingly, this ground of appeal is decided in favour of the 7.6 Accordingly, this ground of a ppeal is decided in favour of the Appellant Company" Appellant Company"
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD.
10.1 We find that the Tribunal in ITA No. ITA No. 1352, 1353 & We find that the Tribunal in ITA No. ITA No. 1352, 1353 & We find that the Tribunal in ITA No. ITA No. 1352, 1353 & 1413/M/2022 for assessment years 2014 1413/M/2022 for assessment years 2014-15, 2016 15, 2016-17 & 2017- 18has deleted the addition observing as under : has deleted the addition observing as under :
We have heard rival submission of the parties and perusal of the We have heard rival submission o f the parties and perusal of the relevant material on record. We find that Ld. FFA has followed the relevant material on record. We find that Ld. FFA has followed the relevant material on record. We find that Ld. FFA has followed the decision of the Tribunal in the case ICICI prudential Insurance Co ICICI prudential Insurance Co decision of the Tribunal in the case Ltd vis ACIT reported in 140 ITD41 Before us Ld. DR could not be Ltd vis ACIT reported in 140 ITD41 Before us Ld. DR could not be produce any contrary decision, in favor of the Revenue. Therefore, produce any contrary dec ision, in favor of the Revenue. Therefore, since Ld FFA has followed binding precedent on the issue in dispute, since Ld FFA has followed binding precedent on the issue in dispute, since Ld FFA has followed binding precedent on the issue in dispute, we do not find any error in the finding of Ld. FFA Accordingly, Ground we do not find any error in the finding of Ld. FFA Accordingly, Ground we do not find any error in the finding of Ld. FFA Accordingly, Ground no. 4 of the appeal of Revenue for AY 2017-18 is dismissed. no. 4 of the appeal of Revenue for AY 2017 18 is dismissed.
10.2 Therefore, respectfully following the finding of the Tribunal re, respectfully following the finding of the Tribunal re, respectfully following the finding of the Tribunal (supra), the finding of the Ld. CIT(A) on the , the finding of the Ld. CIT(A) on the issue- -in-dispute are
ITA NO.2449/MUM/2022 (AY 2018-19) ITA NO.2449/MUM/2022 (AY 2018 M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. M/S KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD. upheld. The ground No. 3 of the appeal of the Revenue is upheld. The ground No. 3 of the appeal of the Revenue is upheld. The ground No. 3 of the appeal of the Revenue is accordingly dismissed. accordingly dismissed.
In the result, the appeal of the Revenue is dismis In the result, the appeal of the Revenue is dismis In the result, the appeal of the Revenue is dismissed.
The order is pronounc The order is pronounced on 30-11-2022 under Rule 34 (4) 2022 under Rule 34 (4) of the ITAT Rules, 1963. of the ITAT Rules, 1963.
Sd/- Sd/- - (SANDEEP SINGH KARHAIL SANDEEP SINGH KARHAIL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/11/2022 Mahesh sonavane Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Sr. Private Secretary) (Sr. Private Secretary) ITAT, Mumbai ITAT, Mumbai