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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
PER Bench
Issues in other appeals for assessment year 2015 – 16 to 2018 – 19 are also similar.
Facts emerging for assessment year 2014 – 15 shows that assessee is a company licensed by insurance and regulatory development authority to carry on the business of life insurance. As the assessee is engaged in the business of life insurance the computation of total income is required to be made Under the provisions of Section 44 of the income tax act. The part A of the first schedule of the income tax act 1961 defines the method for computation of profit of life insurance business. The rule 1 and 2 of the first schedule further defines the computation of profit of life insurance business. The assessee filed its original return of income on 27/11/2014 declaring a total loss of ₹ 650,594,236. The case of the assessee was selected for scrutiny. 05. During assessment proceedings a. on the basis of examination the learned AO noted that assessee has claimed exemption of dividend income of ₹ 6,696,593/– as exempt income u/s 10 (34) of the income e. The assessee explained that taxability of life insurance Co is governed by provisions of Section 44 of the act and therefore provisions of Section 14 A does not apply. It was further stated that Section 14 A refers to the deduction allowable Under the act contains u/s 28 to Section 40 3B of the act. h. Assessee explained that as per the provisions of Section 44 of the income tax act, income of life insurance business is to be assessed on the basis of actuarial valuation only and the surplus word out by the actuary cannot be disturbed by the income tax authorities. i. However the learned assessing officer rejected the contention of the assessee
we have carefully considered the rival contention and perused the order of the lower authorities. We find that the learned CIT – A has followed the decision of the coordinate bench in assessee’s own case for assessment year 2012 – 13 in ITA number 6 to 70/M/2018 and for assessment year 2013 – 14 in ITA number 2715/M/2019 wherein all the above issue are covered. We have also carefully perused the decision of the coordinate bench. We find that a. issue of dividend income and disallowance u/s 14 A has been covered in favour of the assessee by the decision of coordinate bench in assessee’s own case and when on appeal by revenue honourable Bombay High Court in case of principal Commissioner of income tax versus ICICI Prudential life insurance Co Ltd 2016] 73 taxmann.com 201 (Bombay) while answering question no 4 admitted the ground raised
by the revenue about the allowability of dividend income exemption u/s 10. (34) of The Act . The question no 4 before Hon. High court was: - (4) Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in holding that provisions of Section 14A of the Act did not apply to Insurance business, even when the assessee has claimed exempted income u/s. 10 of the I.T. Act and has also itself made some disallowance u/s 14A of the Act in the return?
Further identical issue arose in case of PRINCIPAL COMMISSIONER OF INCOME TAX (LTU) vs. THE ORIENTAL INSURANCE CO. LTD. (2020) 107 CCH 0583 Del HC (2020) 273 TAXMAN 0427 (Delhi), honourable Delhi High court held as under:
“9. We have heard learned counsels and are of the view that no substantial question of law arises for our consideration. The Tribunal has interpreted Section 44 read with the first schedule and concluded that applicability of Section 14A is excluded in relation to computation of income of an insurance company. We have examined the relevant provisions. Section 44 begins with a non-obstante clause and overrides the other provisions of the Act as mentioned therein including Section 14A. We are not convinced with the submission of Mr. Ajit Sharma that Section 14A would be applicable in respect of the Respondent. Section 14A does not have independent legs to stand on. Section 14A inter alia begins with the words "for the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of expenditure incurred................". The chapter in question is chapter IV. This chapter also contains the provisions relating to computation of profits and gains of business or profession. Section 44 specifically excludes the provisions of the Act relating to computation of income, inter alia, those contained in "Section 28 to 43B". Thus, the exclusion would take within its sweep Section 14A which is an exemption for deductions as allowable under the Act, as provided under Section 28 to 43B. Further, Section 44 is a special provision applicable in the cases of insurance companies and applies, notwithstanding anything to the contrary contained in the provisions of the Income Tax Act relating to the computation of income chargeable under different heads. For computing the profits and gains of the business of insurance company, the AO had to resort to Section 44 and the prescribed rules, and could not have applied Section 28 to 43B, since the same were excluded from the purview of Section 44. This necessarily includes the exception provision enshrined under Section 14A of the Act. Therefore, in our view, the AO could not have travelled beyond Section 44 in the first schedule of the Act. Besides, the tribunal has also invoked the rule of consistency since the same view of the Tribunal has prevailed in respect of the earlier assessment years i.e., 2000-01, 2001-02 and 2005-06. b. On the issue of adjustment of negative reserve the coordinate bench followed the decision of the Honourable Bombay High Court in case of principal Commissioner of income tax versus ICICI Prudential life insurance Co Ltd 2016] 73 taxmann.com 201 (Bombay) while answering question no 6 i.e. (6) Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in failing to appreciate that negative reserve has an impact of reducing the 'taxable surplus' as per Form- I and therefore corresponding adjustment for "negative reserve" need to be made to arrive at "taxable surplus"? The Honourable High court held as under: -
4. So far as Question No. 6 is concerned, the grievance of the revenue is that the Tribunal after having taken total surplus as arrived by Actuarial valuation ought to have reduced negative reserve amount of Rs. (5) Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in allowing the dividend income of assesee as exempt u/s. 10(34) of the I.T. Act, 1961, ignoring the fact that dividend income is considered as part of income of Life Insurance Business and is included as an 'income' by the actuary? The Honourable High court held as under: - “3. It is agreed between the parties that so far as Question No. 5 is concerned, an appeal by the revenue in respect of Assessment Year 2005-06 being Income Tax Appeal No. 710/2013 raising an identical question in respect of the same respondent was not entertained. Accordingly, following our decision in Income Tax Appeal No. 710/2013 and for reasons indicated therein, Question No. 5 is not entertained.
Thus, Ground no [2] of The Appeal fails
Ground no [1] is general in nature.
As such all the grounds of appeal itself states that issues are covered in favour of the assessee by the order of coordinate bench in assessee’s own case which has been challenged before honourable High court and for the reason that issue is pending before honourable supreme court.
ITA number 2047/M/2022 for assessment year 2015-16 , ITA number 2048/M/2022 for assessment year 2016 – 17, ITA number 2049/M/2022 for assessment year 2017 – 18 and ITA number 2050/M/2022 for AY 2018-19 are filed by the learned assessing officer against the order of the learned CIT – A raising same ground of appeal.
There is no change in the facts and circumstances of the case and the argument of the both the parties also remained the same. For the reason given by us in appeal of the learned assessing officer for assessment year 2016 – 17, we dismiss the appeal of the learned AO for all these years.
Accordingly all 5 appeals filed by the learned assessing officer from assessment year 2014 – 15 to assessment year 2018 – 19 are dismissed.
Order pronounced in the open court on 31.10.2022.