Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI MANOJ KUMAR AGGARWAL, HONBLEShri Farookh Irani Shri Sushil Kumar Poddar
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, HON'BLE ACCOUNTANT MEMBER ITA NO.5116/MUM/2016 (A.Y: 2011-12) A.C.I.T. – 3(2)(2) v. The New India Assurance Co. Ltd Room No. 674, 6th Floor New India Building, 87 M.G. Road, Fort Aayakar Bhavan, M.K. Road Mumbai – 400 001 Mumbai – 400 020 PAN: AAACN4165C (Appellant) (Respondent) Assessee by : Shri Farookh Irani Department by : Shri Sushil Kumar Poddar
Date of Hearing : 22.08.2019 Date of Pronouncement : 06.11.2019
O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) – 8 Mumbai [hereinafter in short “Ld.CIT(A)”] dated 20.05.2016 for the A.Y. 2011-12.
Revenue has raised the following grounds in its appeal: - “1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was justified in holding that the profit on sale of investments has taxed as Income from Capital Gain and not Income from Business.
2 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding that income of Rs.9,51,43,61,596/- is exempt u/s.10(38) of the I.T. Act, 1961 3. "Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) has erred in not appreciating the fact that the amount of disallowance u/s 14A of the I.T. Act, 1961 has to be computed as per Rule 8D of I.T. Rules, 1962 when the computation of the assesse was not found to be correct and as held in the order of the Hon'ble High Court in the case of M/s. Godrej & Boyce Manufacturing Co. Ltd. 4. "Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) has erred in holding that the premium paid by the assessee on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that there is no provision for amortization of such premium in the I.T. Act, 1961. 5. "Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) has erred in holding that the premium paid by the assesse on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that such premium paid is capital in nature and hence not allowable u/s 37 of I.T. Act, 1961. 6. "Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) has erred in holding that the provisions of Section 115JB of the I.T. Act, 1961 are not applicable in the case of the assesse”
At the outset Ld. Counsel for the assessee submits that Ground Nos. 1 & 2 of the grounds of appeal relates to the claim for exemption u/s.10(38) of the Act on the profit on sale of investments and this issue is squarely covered by the Tribunal in assessee’s own case for the A.Ys. 2000-01 to 2003-04 in ITA.Nos. 3397 to 3399 & 3401/Mum/2011 dated 29.03.2012. It is further submitted that the Hon'ble Bombay High Court also decided this issue in favour of the assessee in Income Tax Appeal No. 1025 of 2015 dated 05.03.2018 for the A.Y. 2006-07
3 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd dismissing the appeal of the Revenue and upholding the order of the Tribunal in allowing the claim for exemption u/s. 10(38) of the Act.
Ld. DR fairly submitted that this issue has been decided in favour of the assessee. However, he supports the order of the Assessing Officer.
On hearing both the sides and perusing the orders of the Tribunal in assessee’s own case and the decision of the Hon'ble High Court in assessee’s own case, we find that the issue is squarely covered by the decision of the Hon'ble Bombay High Court in Income Tax Appeal No.1025 of 2015 dated 05.03.2018 wherein the question as to whether the Tribunal was justified in law in allowing the exemption to the assessee u/s. 10 of the Act came up before the Hon'ble Bombay High Court and the Hon'ble High Court held as under: - “2 Revenue urges the only following reframed question of law, for our consideration: “Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in allowing exemption to the assessee u/s. 10 of the I.T. Act, 1961?” 3 The impugned order of the Tribunal dismissed the Revenue's Appeal from the order dated 12th November, 2012 of the Commissioner of Income Tax (Appeals) [CIT(A)], who held that Respondent is entitled to the benefit of Section 10 (38) of the Act in respect of the sale of investments being long term capital gains. The proceedings before the Tribunal leading to the impugned order dated 27th October, 2014 emanated from the reopening notice dated 17th March 2011, seeking to reopen the assessment completed under Section 143(3) of the Act on 31st December, 2017. 4 The impugned order of the Tribunal dismissed the Revenue's appeal by following the decision of this Court in General Insurance Corporation v/s. DCIT 342 ITR 27. In the above case, this Court held
4 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd on an identical facts that General Insurance Corporation (supra) is entitled to the benefit of exemption under Section 10(38) of the Act. 5 The grievance of the Revenue before us is that: (a) the impugned order of the Tribunal has ignored the decision of its Co-ordinate Bench in respect of Assessment Year 2004-05 which held that diminution or appreciation of any value of assessment will not be taken into account while computing the total income of the Respondent-Assessee; (b) The impugned order ignores the binding decision of the Apex Court in GIC v/s. CIT 240 ITR 139; and (c) An identical question in case of GIC v/s. CIT (ITXA No.201 of 2011) has been admitted on 25th February, 2013. Thus, this question requires admission. 6 Mr. Suresh Kumar draws our attention to the order dated 29th July, 2011 passed by the Tribunal in respect of the same Respondent for the Assessment Year 2004-05. The above decision arose from a Revision under Section 263 of the Act of an Assessment Order. The aforesaid decision arose out of writing off Investments while determining the income of the Assessee. It did not even remotely deal with the issue of exemption under Section 10(38) of the Act i.e. sale of investment as long term capital gain. Thus, it can have no application to the facts of the present case. Further, the decision of the Apex Court in GIC (supra), relied upon by the Revenue also does not deal with the claim for exemption under Section 10(38) of the Act and would have no application to the present facts. The Revenue was unable to point out the manner in which the above decision of the Apex Court applies to the present facts. 7 Mr. Suresh Kumar, next submits that on an identical issue in GIC v/s. CIT(ITXA No. 201 of 2011). This Court has admitted the following question on 25th February, 2013 as substantial question of law as under: “Whether on the facts and in the circumstance of the case and in law the Tribunal was justified in holding that profit on sale of investments are not liable to be taxed in the hands of the assessee in the year under appeal?” Therefore, he submits that the question as formulated be admitted. 8 The issue raised in the above question in GIC [ITX No.201 of 2011 (supra)] is not with regard to the exemption claimed under Section 10(38) of the Act as in the present proceedings. The question on which the above appeal has been admitted, is whether profits on sale of investments are liable to be (included) taxed in the hands of
5 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd the assessee i.e. profits on sale of investments being liable to be tax. It does not deal with the benefit of exemption under Section 10(38) of the Act. The question as raised herein proceeds on the basis that even if sale of investments is liable to be taxed, yet to the extent it relates to long term capital gain falling under Section 10(38) of the Act, the exemption would be available. Thus, the question arising for our consideration in this appeal is different from the question on which the appeal of the GIC in ITX No. 201 of 2011 (Supra) was admitted. 9 Moreover, we find that this Court in General Insurance Corporation (supra) had also relied upon the communication dated 21st February, 2006 of the CBDT to the Chairman of the Insurance Regulatory and Developing Authority. In the above communication, it has been clarified that exemption available to any other assesee under clause 10(38) relating to long term capital, would also be available to a person carrying on nonlife Insurance business. Mr. Suresh Kumar very fairly states that the CBDT communication dated 21st February, 2006 addressed by the CBDT to the Chairman, IRTA, as well as the decision of this Court in GIC (supra) would be binding upon the Revenue. 10. In view of the above, the question as framed does not give rise to any substantial question of law.”
Respectfully following the said decision, we uphold the order of the Ld.CIT(A) and reject the grounds raised by the Revenue.
Coming to the Ground No.3 of the grounds of appeal the Ld. Counsel for the assessee submits that this issue also decided by the Tribunal in assessee’s own case in the earlier Assessment Years right from A.Y. 2000-01 to 2010-11 wherein it has been held that the provisions of section 14A r.w. Rule 8D have no application to the assessee an insurance company. Referring to the order passed by the Tribunal for the A.Y. 2010-11 in ITA.No. 5013/Mum/2015 dated 28.03.2018, Ld. Counsel for the assessee submits that identical issue came up before the Tribunal
6 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd and the Tribunal dismissed the appeal of the Revenue following the earlier year’s orders of the Tribunal wherein it has been held that no disallowance u/s. 14A of the Act can be made.
Ld. DR fairly submitted that this issue has been decided in assessee’s favour in earlier years. However, he supports the order of the Assessing Officer.
Heard both sides, perused the orders of the Authorities below and the decision of the Tribunal in assessee’s own case. We observe that the Tribunal while disposing of the appeal of the Revenue for the A.Y. 2010-11 in ITA.No. 5013/Mum/2015 dated 28.03.2018, held as under: “15. The issue raised in ground No.3 is against the deletion of disallowance under section 14A read with rule 8D without appreciating the fact that the assessee was given the benefit of exemption under section 10 of the Act. 16. The Ld. A.R., at the outset, submitted that the issue involved in the present ground is covered in favour of the assessee by the decision of the Tribunal in the earlier years. and therefore prayed before the Bench that by following the same, this ground may be decided in favour of the assessee. 17. The Ld. D.R. appeared to be fairly agreed to the contention of the Ld. A.R. 18. We have perused the decisions of the Tribunal in ITA No.3562/M/2007 and ITA No.3180/M/2009 for A.Y. 2006-07 & 2007- 08 wherein the Tribunal has decided the issue in favour of the assessee. The relevant extract is reproduced as under: “11. In Ground no. 3, the assessee has challenged the disallowance of Rs.16 lakhs made u/s 14A on estimated basis. It has been admitted by both the parties that
7 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd provision of section 14A has no applicability in the cases of General Insurance Company, which are governed by specific provision laid down in section 44, as held by various decisions of the Tribunal including that, in assessee's own case for the A.Y. 2000-01 & 2003-04 and in the case of other General Insurance Corporation of India specifically in ITA No. 3554/Mum/2011, for A.Y. 2007-08. In view of the aforesaid submissions and also on the perusal of various decisions of the Tribunal including that of the assessee, we find that it has been consistently held that, provision of section 14A is not applicable in the cases of Insurance company which are governed by section 44, because it is non obstante provision wherein the income is to be computed as per P&L account prepared under the Insurance Act 1938. Section 14A contemplates exception for deduction allowable under the act, whereas section 44 creates special application of provision of computation of profit as per the Insurance Act. Thus, no disallowance u/s 14A can be made and accordingly, ground no. 3 is allowed in favour of the assessee.” 19. We, therefore, following the above decision of the Tribunal, dismiss the ground raised by the Revenue.
Respectfully following the said decision, we uphold the order of the Ld.CIT(A) and reject Ground No.3 of the Revenue’s appeal.
Ground Nos. 4 & 5 are in respect of amortization of premium. The Ld. Counsel for the assessee submits that identical issue has been decided by the Tribunal in all the earlier years and the latest is A.Y.2010-11. Referring to the order of the Tribunal at Para Nos. 20 to 24, it is submitted that issue is decided in favour of the assessee.
Ld. DR fairly accepts this position. However, he supports the order of the Assessing Officer.
8 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd 13. Heard both sides and perused the orders of the Authorities below. On a perusal of the order of the Tribunal we observe that the Tribunal decided this issue in favour of the assessee observing as under: - “20. The issue raised in ground No.4 (4.1 & 4.2) is against the decision of the Ld. CIT(A) holding that the premium paid by the assessee on purchase of government securities was allowable as revenue expenditure on amortization. 21. The Ld. A.R. submitted that the issue raised by the Revenue is covered by the decisions of the Tribunal in the earlier years right from A.Y. 2004-05 to 2007-08 and therefore the present issue should be decided in the light of the ratio laid down by the Tribunal in favour of the assessee. 22. The Ld. D.R. fairly agreed to the argument of the Ld. A.R. 23. After perusing the decision of the Tribunal in ITA No.3562/M/2007 and ITA No.3180/M/2009, we find that the issue is squarely covered in favour of the assessee in assessee’s own case. The operative part thereof is reproduced as under: “16. We have heard the rival submissions and also perused the relevant finding given in the impugned orders. The assessee in the course of carrying of its insurance business, is required to invest its fund in specific debts securities of government or PSU bonds or other securities in accordance with the Insurance Act, 1938 and IRDA regulations. The assessee has purchased securities at a price which was slightly higher than the face value of the security because of accumulated interest on such securities According to the terms of issue of the securities, the assessee was to get only the face value at the time of redemption or maturity. IRDA regulation prescribes, the accounting principle for preparation of financial statement, whereby the assessee is required to prepare the financial statements in the manner provided in the said regulation. The said regulation read with relevant rules given in the schedules therein, provides that debts securities including, Government securities shall be considered as "held to maturity" and shall be measured at historical cost subject to amortization. This IRDA regulation are binding on the
9 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd insurance companies. The Tribunal in the case of Tata AIG General Insurance Company Ltd. has dealt this precise issue in detail after analyzing the relevant provision and the decision of the Hon'ble Supreme Court and observed and held as under:- "7. On a careful consideration of the facts and the rival contentions, we are of the view that the amortization claim cannot be considered as 'an expenditure or allowance within the meaning of rule 5(a) of the First Schedule. As held by the Supreme Court in the case 01 Indian Molasses Co. (Private) Ltd. vs CIT, West Bengal (1959)37 ITR 66:(SC), spending in the sense paying out or away of money is the primary meaning of expenditure. Expenditure is what is paid our or away and is something which is gone irretrievably Expenditure, which is deductible for income tax, is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure. If this meaning is to be given to the word 'expenditure" occurring in rule 5(a) the amortization claim cannot be considered as expenditure and, therefore, cannot be added back to the balance of the profits. In General Insurance corporation of India vs. CIT (1999) 240 ITR 139 (SC) the Supreme Court held that even if an item of debit is considered as an expenditure, it should further be such an expenditure contemplated in sections 30 to 43A and, therefore, unless there was a specific prohibition for such an allowance, the departmental authorities would not be justified in adding back the amount under rule 5(a)., Therefore, even if the debit for amortization is considered as an expenditure, there is no specific prohibition against allowing such an expenditure under the provisions of sections 30 to 43B. The words "expenditure or allowance...Which is not admissible under the provisions of sections 30 to 438" appearing in the sub-rule has been explained by the Supreme Court to mean that
10 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd there should be a specific prohibition against the expenditure or allowance in which case alone the Assessing Officer can add back the same to the balance of profits. It is common ground that there is no such specific prohibition against, the allowance of the expenditure in the above sections of the Act. It may be noted that though rule 5(a) of the First Schedule considered by the Supreme Court in the above judgment was slightly different, but the words "any expenditure or allowance which is not admissible under the provisions of section 30 to 43A" were present and the same words being present in the amended sub-rule, they have to be given the same meaning as was given by the Supreme Court. Therefore, even if the debit for amortization is considered as an expenditure or allowance, there being so specific prohibition against the expenditure or allowance in section 30 to 438, the departmental authorities were not justified in adding back the amount of the balance of the profits. The judgment of the Supreme Court in the case of General Insurance Corporation of India (supra) takes care of all the arguments advanced on behalf of the Revenue. We, therefore, delete the addition of Rs. 1,91,33,945/- and allow the first ground." Since, no contrary decision have been brought to our notice, therefore, respectfully following the same, we hold that such an amortization claimed by the assessee as revenue expenditure is allowable. Accordingly, assessee’s ground no.5 is treated as allowed. 24. Following the decision of the Tribunal, we hold that the premium paid by the assessee on purchase of government securities is liable to be amortized and amortization claimed by the assessee is revenue expenditure and is allowable. The ground raised by the Revenue is dismissed.
Respectfully following the said decision, we uphold the order of the Ld.CIT(A) and reject Ground Nos. 4 & 5 of the Revenue’s appeal.
11 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd 15. The last issue in Ground No. 6 of grounds of appeal is, whether the provisions of section 115JB have application to the assessee an insurance company and we observe that the Tribunal decided this issue in favour of the assessee for A.Y. 2010-11 observing as under: - “29. The issue raised in ground No.6 by the Revenue is against the decision of Ld. CIT(A) upholding that the provision of section 115JB of the Act are not applicable to the assessee. 30. The Ld. A.R., at the outset, submitted that the issue is covered in favour of the assessee by the decision of the coordinate bench of the Tribunal in the own case of the assessee for A.Y. 2004-05 to 2007-08 and therefore following the said decision the issue raised by the Revenue should be dismissed. 31. The Ld. D.R. fairly agreed to the argument of the Ld. A.R. 32. We have perused the material on record and the decisions of the co-ordinate bench of the Tribunal for the earlier years i.e. from A.Y. 2004-05 to 2007-08. On sample basis, we would like to quote the operative part from ITA No.3562/M/2007 and others for A.Y. 2004-05 and others which is as under: “18. Besides this, the assessee has raised additional ground that the provisions of section 115JB has no application to the assessee. 19. Before us, learned counsel submitted that this issue is squarely covered by various decisions of the Co-ordinate Benches in the case of General Insurance Corporation and other decisions. Ld. DR also admitted that this issue is covered by various decisions of the Tribunal as filed by the assessee. 20. After considering the decisions in the case of General Insurance Corporation and other decisions filed by the learned counsel, we find that the issue of non-applicability of MAT u/s 115JB to the General Insurance Company has been upheld. Even otherwise also the provision of MAT will only come into play, only when assessee prepares its P&L account in accordance with part (II) and part (III) of Schedule (VI) of the Companies Act. Since the assessee’s P&L account is prepared in accordance with Insurance Act 1938, as specifically provided in Section 44 read with First schedule, therefore, the provision of section 115JB will not apply in case of assessee. This has been held in the case of General Insurance Corporation in ITA No.3554/Mum/2011 order dated 05.02.2012 and ITA
12 ITA NO.5116/MUM/2016 (A.Y: 2011-12) The New India Assurance Co. Ltd No.8824/Mum/2011 order dated 15.01.2014. Thus the additional ground raised by the assessee is allowed.” 33. Following the decision of the coordinate, we hold that the accounts of the insurance company are prepared in accordance with the Insurance Act, 1938 as has been provided under section 44A read with First Schedule and therefore, the provisions of section 115JB do not apply to the assessee’s case. Accordingly, the ground raised by the Revenue is dismissed.”
Respectfully following the said decision, we uphold the order of the Ld.CIT(A) in holding that the provisions of section 115JB have no application to the assessee. Ground No.6 of the Revenue’s appeal is dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on the 06th November, 2019
Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai / Dated 06/11/2019 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum