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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI G. MANJUNATHA (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against the order dated 01.03.2018 passed by the Commissioner of Income Tax (Appeals)-20 (for short ‘the CIT(A), Mumbai, for the assessment year 2013-14, whereby the Ld. CIT(A) has partly allowed the appeal filed by the assessee against the assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short the ‘Act’).
2. Brief facts of the case are that the assessee company filed its return of income for the assessment year under consideration declaring loss of Rs. 1,34,09,91,304/-. Since, the case was selected for scrutiny, the AO issued notice u/s 143 (2) and 142 (1) of the Act. In response to the said notice, the authorized representative (AR) of the assessee company attended the proceedings and furnished the details. The AO completed the assessment u/s 143 (3) of the Act after making disallowance of Rs. 2,39,84,301/- u/s 14A, Assessment Year: 2013-14 addition on account of increment in negative reserves amounting to Rs. 10,11,93,000/- and addition of Rs. 3,63,70,719/- rejecting the claim incurred by the assessee in non participating linked pension business segment. The assessee challenged the assessment order passed by the AO before the Ld. CIT (A). The Ld. CIT (A) after hearing the assessee partly allowed the appeal of the assessee and deleted the aforesaid additions made by the AO. The revenue is in appeal against the impugned order passed by the Ld. CIT (A). 3. The revenue has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:- “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) was justified in stating that sec. 14A is not applicable to insurance business without appreciating the fact that assessee had claimed exemption u/s 10(34) of the Income Tax Act, 1961 on dividend income and hence provisions of sec 14A rwr 8D are applicable to assessee.
Whether on the facts and circumstances of the case in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 10,11,93,000/- made by the Assessing Officer on account of negative reserves without appreciating the fact that the 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.
Whether on the facts and circumstances of the case in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 3,63,70,719/- made by Assessing Officer on account of non- granting of deduction taken u/s 10(23AAB) from pension fund does not form part of the total income of the assessee u/s 10(23AAB) of the Income Tax Act.”
Vide ground No. 1 the revenue has challenged the action of the Ld. CIT
(A) in holding that section 14A is not applicable to insurance business. The Ld. Departmental Representative (DR) submitted that the Ld.CIT (A) has set aside the findings of the AO without appreciating the fact that the assessee had Assessment Year: 2013-14 claimed exemption u/s 10(34) of the Act on dividend income. The Ld. DR further submitted that during the previous year the assessee earned dividend income of Rs. 7,60,11,572/- which was claimed as exempt u/s 10(34) of the Act. Since, the assessee is entitled to claim exemption u/s 10(34) of the Act in respect of the dividend income, the AO has rightly disallowed the expenses incurred for earning the dividend income. The Ld. DR contended that since the AO has computed the disallowance in accordance with the provisions of law, the Ld. CIT (A) ought to have confirmed the same.
On the other hand, the Ld. counsel for the assessee submitted that this issue is covered in favour of the assessee in assessee’s own case for the A.Y. 2010-11 in which the Tribunal has held that the applicant being insurance company and his total income is computed as per the provisions of section 44 of the Act, the provisions of section 14A read with rule 8D do not apply. The Ld. counsel further submitted that since the Ld. CIT (A) has decided this issue by following the decision of the ITAT, Mumbai rendered in the assessee’s own case aforesaid, there is no infirmity in the order of the Ld. CIT (A), which warrants interference.
We have perused the relevant material on the record in the light of the rival submissions of the parties including the decision of the coordinate Bench rendered in the assessee’s own case for the AY 2010-11. As pointed out by the Ld. counsel for the assessee, the coordinate Bench has decided the identical issue in favour of the assessee in the assessee’s own case for the AY 2010-11. The relevant portion of the order passed by the coordinate Bench of the Tribunal reads as under:- “ In regard to ground no.1 of assessee‟s appeal, the ld. counsel for the assessee argued that this issue is squarely covered in favour of the assessee by the decision of the co- ordinate bench of this tribunal ITAT, Mumbai in the case of ICICI Prudential Insurance Co. Ltd. Vs. ACIT [2012] 28 Taxmann.com 257(Mum), dated 14/09/2012, has decided the issue by following the Pune Bench decision in the case of Bajaj Allianz General Insurance Co. Ltd. Vs. Addl. CIT in ITA No. 1447/PN/2007 for AY 2003-04 dated 31/08/2009 wherein it Assessment Year: 2013-14 has been held that in view of non obstante clause of Section 44 of the Act read with Rule 5 of Schedule 1 of the Act, provisions of Section 14A of the Act, as no application to the profit and gains of insurance business. The tribunal held as under: 46. This issue is already decided by the Coordinate Benches in various cases. For the sake of record, the order in the case of General Insurance Corporation of India in vide Para 9 is as under: 9. "Issue No.6 Non applicability of provisions of section 14A. (Modified Ground of Appeal
No.3.1 to 3.4 - Original Ground of Appeal No.3.1 to 3.5) . The issue is with reference to the applicability of section 14A and disallowance of expenditure in respect of sale of investment which are not taxed. We have heard the rival contentions. We also note that this issue is also considered ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench by the Coordinate Bench in assessee's own case for 2006- 07 vide Para 7 to 9:
7. Grounds of appeal no.4 regarding the expenditure under section 14A.
8. We have heard the rival contentions and perused the relevant record. We note that this issue has been considered and decided by the Pune Bench of this Tribunal in the case of Bajaj Allianz General Insurance Company limited V/s Add. CIT in ITA No.1447/PN/2007 for the assessment year 2003- 04 order dated 31.08.2009. This Tribunal in the case of JCITV/s M/s Reliance General Insurance co. in ITA No.3085/Mum/2008 for the assessment year 2005-06 vide order dated 26.2.2010 has considered this issue and decided in favour of the assessee. This order was followed by this Tribunal while deciding the issue in ITA No.781/Mum/2007 vide order dated 30.4.2010. Thus, this issue has been consistently decided in favour of the assessee and against the revenue by this Tribunal. The Pune Bench of this Tribunal in the case of Bajaj Allianz General Insurance Company limited V/s Add. CIT (supra) has decided this issue in paragraphs 17 to 20 as under: "
17. Finally the quest ion to be answered is about the applicability of s. 14A in respect of sale of investment which is not taxed under the special circumstances of deletion of a sub- rule from the statute. It is not questioned that the impugned Assessment Year: 2013-14 profit was non-taxable per se rather the accepted legal position is that the impugned profit was very much taxable in the past .Now it has been informed that this controversy in respect of insurance company set at rest by a decision of Tribunal , Delhi Bench verdict in the case of Oriental Insurance Co. Ltd. (ITA Nos. 5462 & 5463/Del /2003) asst. yrs. 2000-01 and 2001-02 order dt. 27th Feb. 2009 [reported as Oriental Insurance Co. Ltd. v. Asstt . CIT [2010] 130 TTJ (Delhi)388 : [2010] 38 DTR (Delhi ) 225--Ed. ] . Therefore considering the vehement reliance of learned Authorized Representative it is worth to mention at the outset itself that the issue now stood resolved by this latest decision of Delhi, Tribunal in the case of Oriental Insurance Co. Ltd. (supra), the relevant portion reproduced below: "17. We have heard rival submissions of the parties and have gone through the material available on record. Identical issue arose in assessee's own case for asst. yr. 1985-86. The Tribunal accepted the plea of the assessee and in fact the issue went up to to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench the Hon'ble Delhi High Court in asst . yrs. 1986-87 to 1988-89, which is reported as CIT v. Oriental Insurance Co. Ltd. [2003] 179 CTR (Delhi ) 85 : [2002] 125 Taxman 1094 (Delhi ), decided the issue in favour of the assessee by holding that s. 44 of the Act is a special provision dealing with the computation of profits and gifts of business of insurance. It being a non obstinate provision has to prevail over other provisions in the Act. It clearly provides that income from insurance business has to be computed in accordance with the rule contained in the First Schedule. It is not the case of the Revenue that the assessee has not computed the profits and gains of its insurance business in accordance with the said rules. Reliance was placed on the scope of s. 144, as held in the case of General Insurance Corporation of India v. CIT [1999] 156 CTR (SC) 425 : [1999] 240 ITR 139 (SC), wherein their Lordships of the apex Court have categorically held that the provisions of s. 44 being a special provision govern computation of taxable income earned from business of insurance. It mandates the tax authorities to compute the taxable income in respect of insurance business in accordance with the provisions of the First Schedule to the Act. In the light of these, their Lordships of Delhi High Court have held that no quest ion of Assessment Year: 2013-14 law, much less a substantial quest ion of law survives for their consideration. In other words, order of the Tribunal has been affirmed. Following the same reasoning, addition made by the AO is deleted.
We have considered the rival contentions and gone through the records. The provisions of s. 44 read as under: "44. Insurance business.--Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head ' Interest on securities' . 'Income from house property’, 'Capital gains' or ' Income from other sources’, or in s. 199 or in ss. 28 to 43B, the profits and gains of any business to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench of insurance, including any such business carried on by a mutual insurance company or by a co operative society, shall be computed in accordance with the rules contained in the First Schedule"'.
The above provision makes it very clear that s. 44 applies notwithstanding anything to the contrary contained within the provisions of the IT Act relating to computation of income chargeable under different heads. We agree with the learned counsel that there is no requirement of head-wise bifurcation called for while computing the income under s. 44 of the Act in the case of an insurance company. The income of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished in the Controller of Insurance. The actual computation of profits and gains of insurance business will have to be computed in accordance with r. 5 of the First Schedule. In the light of these special provisions coupled with non obstante clause the AO is not permitted to t ravel beyond these provisions.
Sec. 14A contemplates an exception for deductions as allowable under the Act are those contained under ss. 28 to 43B of the Act. Sec. 44 creates special application of these provisions in the cases of insurance companies. We therefore, agree with the assessee and delete the act as according to us, it is not permissible to the AO to travel beyond s. 44 and First Schedule of the IT Act." Assessment Year: 2013-14
18. It may not be out of place to mention that the respected Co-ordinate Bench has duly taken the note of an earlier decision of that very Bench decided in the case of that very assessee vide order dt . 29th Sept. 2004 bearing 3607 to 3609/Del /1990; 5035/Del / 1998 and 3910/Del /2000 named as Dy. CIT v. Oriental General Insurance Co. Ltd. [2005] 92 TTJ (Delhi ) 300. As seen from the Paras reproduced above on due consideration of the relevant provisions as applicable to resolve this issue a conclusion was drawn that since the Courts have held, s. 44 creates a special provision in the cases of assessment of insurance companies therefore it was not permissible to the AO to ITA Nos.6854 to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench travel beyond s. 44 of First Schedule of IT Act. 18. The next common dispute relates to the order of the CIT (A) in sustaining the act ion of AO in al lowing only 50 per cent of the management expenses by invoking the provisions of s. 14A of the Act. The addition is made by the AO on the plea that the provisions of s.14A was inserted by Finance Act, 2001 w.e.f. 1st April, 1962. It is stated that the investments made by the assessee are both taxable as well as tax free. An estimated disallowance of 50 per cent out of the management expenses incurred and as claimed in the P&L a/c is treated as expenses incur red in connect ion with the looking after tax-free investment.
The learned counsel for the assessee vehemently argued that the income of the assessee is to be computed under s. 44 r/w r. 5 of Sch. 1 of the IT Act. Sec. 44 is a non obstinate clause and applies notwithstanding anything to the contrary contained within the provisions of the IT Act relating to computation of income chargeable under different heads, other than the income to be computed under the head 'Profit and gains of business or profession' . For computation of profits and gains of business or profession the mandate to the AO is to compute the said income in accordance with the provisions of ss. 28 to 43B of the Act. In the case of the computation of profits and gains of any business of insurance, the same shall be done in accordance with the rules prescribed in First Schedule of the Act, meaning thereby ss. 28 to 43B shall not apply. No other provision pertaining to computation of income will become Assessment Year: 2013-14 relevant. According to the learned counsel, two presumptions that follow on a combined reading of ss. 14, 14A, 44 and r. 5 of the First Schedule are: (a) That no head-wise bifurcation is called for. The income, inter alia, of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished to the to 6856 6509 7765 to 7767 and 7213 ICICI PRULIFE Mumbai F Bench Controller of Insurance under the Insurance Act, 1938. The said balance of profits is subject only to adjustments there under. The adjustments do not refer to disallowance under s. 14A of the Act. (b) Profits and gains of business as refer red to in (a) above have only to be computed in accordance with r. 5 of the First Schedule.
22. Sec. 44 creates a specific except ion to the applicability of ss. 28 to 43B. Therefore, the purpose, object and purview of s. 14A has no applicability to the profits and gains of an insurance business.
The learned Departmental Representative strongly justified the act ion of the AO and that of the CIT(A) in the light of the clear provisions of s. 14A of the Act. Since the view has already been expressed by respected Co-ordinate Bench therefore, we have no reason to take any other view except to follow the same. With the result we hereby accept the argument of learned Authorized Representative to the extent that in the present situation the provisions of s. 14A need not to apply while granting exempt ion to an income earned on sale of investment primarily because of the reason of the withdrawal or deletion of sub- r. 5(b) to First Schedule of s. 44 of IT Act. Once we have taken this view therefore the enhancement as proposed by learned CIT(A) is reversed and the directions in this regard are set aside. Resultantly ground No. 1 is allowed automatically goes in favour of the assessee. Accordingly, by following the orders of this Tribunal, we decide this issue in favour of the assessee. Therefore, the ground is allowed". Respectfully following the same, we modify the order of the CIT (A) and delete the addition made by AO. The ground and additional grounds are considered as allowed.” Assessment Year: 2013-14
4. Ld. Senior DR could not point out any adverse precedent and accordingly we are of the view that this issue is squarely covered in favour of assessee but Hon‟ble High Court in dated 20/07/2015 admitted substantial question of law on the issue, “ whether on the facts and in the circumstances of the case and in law, the Tribunal was justify 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?” We find that Hon’ble High Court has admitted this as substantial question of law but still it is pending as stated by Ld. Counsel for the assessee. Once the Tribunal is consistently taking this view, according to us, this is a covered issue in favour of assessee. We hold accordingly. This issue is decided in favour of the assessee. 7. The coordinate Bench of the Tribunal has dealt with the identical issue in favour of the assessee in assessee’s own case ITA No. 4110/Mum/2014 for the AY 2010-11 discussed above. We further notice that the coordinate Bench has further decided the identical issue in favour of the assessee in assessee’s appeals for the AY 2011-12 and 2012-13 in ITA No. 6336/Mum/2016 and 3726/Mum/2017 respectively by following the decision of the coordinate Bench rendered in assessee’s own case for the AY 2010-11. Since, the revenue did not point out any material change in the facts of the present case, we respectfully following the decision of the coordinate Benches, dismiss this ground of appeal of the revenue and direct the AO to delete the addition.
8. Ground No. 2 pertains to addition made on account of increment in negative reserves amounting to Rs. 10,11,93,000/-. During the assessment proceedings, it was observed that as on 31.03.2012, the company had negative reserve of Rs. 1,91,20,29,000/- and the corresponding figure stood at Rs. 2,01,32,22,000/- on 31.03.2013. Since, there was an increment of Rs. 10,11,93,000/- the AO added the said amount to the taxable surplus of the company and further held that negative reserves as zero results Assessment Year: 2013-14 understatement of profits. The Ld. DR supporting the assessment order submitted that the Ld. CIT(A) has erred in deleting the addition made by the Assessing Officer on account of negative reserves without appreciating the fact that negative reserve has an impact of reducing the taxable surplus because surplus is worked out by reducing reserve from balance of available funds.
On the other hand, the Ld. counsel for the assessee submitted that since the findings of the Ld. CIT (A) are based on the decisions of the ITAT, Mumbai in the assessee’s own case for the AY 2010-11, there is no infirmity in the order of the Ld. CIT (A). The Ld. counsel further pointed out that this issue has been decided in favour of the assessee in assessee’s own case for the AY 2010-11.
We have heard the rival submissions and also carefully gone through the relevant material on the record including the decision of the coordinate Bench rendered in the assessee’s own case for the AY 2010-11. The Ld. CIT (A) has decided this issue in favour of the assesse by following the decision of the coordinate Bench rendered in the assessee’s own case for the AY 2010-11. The coordinate Bench has decided the identical issue in favour of the assessee holding as under:- 9. At the outset Ld. Counsel for the assessee stated that the similar issue was raised before Hon‟ble Jurisdictional High Court in the case of CIT Vs. ICICI Prudential Insurance Co. Ltd. in ITA No. 711 & 688/2014 dated 20/07/2015 and Hon‟ble High Court has adjudicated the following question no. 6: “ 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? ” Ld. Counsel stated that Hon‟ble High Court has answered this question in its judgment vide para 4 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 Assessment Year: 2013-14 arrived by Actuarial valuation ought to have reduced negative reserve amount of Rs. 27.27 crores while determining respondent assessee‟s income under Section 44 of the Act. The impugned order records that the mathematical reserves is a part of the Actuarial valuation and the surplus takes into account the mathematical reserve also Besides the impugned order follows the decision of the Apex Court in LIC Vs. CIT 51 ITR 773, wherein the Apex court has held that the Assessing Officer has no power to modify the account after Actuarial valuation is done. It is also pertinent to note that for the Assessment Year 2007-08, the Assessing Officer had raised an identical issue during the assessment proceedings and thereafter by the assessment order dated 30 December 2009 held that no adjustment of the Actuarial valuation is to be done by following the decision of the Apex Court in LIC(supra). Therefore we find no substantial question of law arising for our consideration. In view of the fact that the impugned order has merely followed the decision of the Apex Court, we see no substantial question of law for our consideration. Accordingly, Question No. 6 is not entertained.”
10. We find that the assessee followed the IRDA Recommendations and accordingly prepared the actuarial valuation report including the surplus or deficit. The Rule 2 prescribes only actual valuation in accordance with Insurance Act 1938. Looking at the issue, we noticed that the computation made by the assessee is in accordance with Rule 2 of the Insurance Act 1938, according to which only AO can base his computation. The Revenue has not contested that the working of actuarial surplus / deficit is not in accordance with Rule 2 of 1st Schedule. Accordingly we are of the view that the CIT(A) has rightly deleted the addition and we confirmed the same. This issue of Revenue‟s appeal is dismissed.
Since, the coordinate Bench has decided the identical issue in favour of the assessee by upholding the findings of the Ld. CIT (A) in assessee’s own case for the AY 2010-11 and since there is no change of facts in the present case, we do not find any reason to take a different view. Hence, respectfully following Assessment Year: 2013-14 the decision of the coordinate Bench, we dismiss this ground of appeal
of the revenue and direct the AO to delete the addition.
12. Vide Ground No. 3, the revenue has challenged the action of the Ld. CIT (A) in deleting the addition of Rs. 3,63,70,719/- made by the AO on account of non granting of deduction taken u/s 23AAB without appreciating the fact that the income includes loss and the income from pension fund does not form part to the total income of the assessee u/s 10(23AAB) of the Act. The AO held that since income from such pension business is exempt u/s 10(23AAB), the losses incurred has to be treated as exempt and further held that such losses cannot be carried forward. The Ld. DR submitted that the AO has rightly rejected the contention of the assessee that pension scheme is the integral part of the business of the assessee and section 10(23AAB) being incentive, loss from pension scheme is not to be excluded from its income. Therefore, the findings of the Ld. CIT (A) are liable to be set aside.
13. On the other hand, the Ld. counsel for the assessee submitted that this issue is also covered by the order of the ITAT rendered in the assessee’s own case for the AY 2010-11. The Ld. counsel further submitted that since the Ld. CIT (A) has decided this issue in favour of the assessee by following the decision of the ITAT, Mumbai, there is no merit in the appeal of the revenue.
14. We have carefully gone through the relevant material on record in the light of the rival submission of the parties. We notice that the coordinate Bench has decided the identical issue in favour of the assessee by upholding the findings of the Ld. CIT (A) in the assessee’s case for the AY 2010-11. The operative part of the order passed by the coordinate Bench reads as under:-
11. Next issue of assessee‟s appeal is with regard to disallowance of Rs. 28,87,15,685 towards claim of assessee in non-participating linked pension business segment. For this, assessee has raised following Ground No. 2:
2. Ground No.2 Rejection of claim of Rs. 28,87,15,685/- being deficit incurred by the Appellant in Non- Assessment Year: 2013-14 participating Linked Pension business segment. The CIT(A) erred in upholding the order of the AO rejecting the Appellant‟s claim of rs.28,87,15,685 being deficit incurred in Non- participating Linked Pension business segment. While rejecting the Appellant‟s claim, the learned CIT(A) erred on the following grounds: 2.1 The learned CIT(A) erred in disregarding the decision of jurisdictional High Court in the case of Life Insurance Corporation of India, relied upon by the Appellant, wherein it has been held that the fact that income from pension fund has been exempted under section 10(23AAB) of the Act, does not mean that pension fund ceases to be insurance business, so as to fall outside the purview of insurance business and the losses incurred from such pension fund had to be excluded while calculating taxable surplus from insurance business under section 44 of the Act. 2.2 The learned CIT(A) erred in ignoring the order of jurisdictional CIT(A) in the Appellant‟s own case for Asst. Year 2009-10, wherein the CIT(A) allowed the Appellant‟s claim for deficit from Pension business. At the outset, the ld. counsel for the assessee stated that this issue is squarely covered in favour of the assessee by the order of the co-ordinate bench of this Tribunal ITAT Mumbai in the case of ICICI Prudential Insurance Co. Ltd Vs. ACIT (2012) 28 taxmann.com 257 (Mum.), wherein the tribunal followed the order in the case of General Insurance Corporation of India vs. Addl. CIT in dated 15/02/2012. The ld. counsel for the assessee also stated that the decision of the tribunal was affirmed by the Hon‟ble Jurisdictional Bombay High Court in the case of CIT Vs. LIC Of India ltd. [2011] 12 taxmann.com 388 (Bom), wherein following question was answered by the Hon‟ble High Court:- “C. Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the addition made by the Assessing officer on account of loss from Jeevan Suraksha Fund ignoring the settled position of law that income includes loss and that the income from Jeevan Suraksha fund does not form part of the total income of the Assessee Corporation under section 10(23AAB) of the Income- tax Act, 1961. Assessment Year: 2013-14 Ld. Counsel referred to para 15 to 18 vide which Hon‟ble High Court has answered the issue in favour of the assessee by observing as under: 15. As regard questions(c) and (d) are concerned, the dispute is whether the loss incurred by the assessee from Jeevan Suraksha Fund is liable to be excluded in computing the actuarial valuation surplus in view of the fact that the income from Jeevan Suraksha Fund is exempt under section 10(23AAB) of the Income-tax Act, 1961.
The argument of the revenue is that with the insertion of section 10(23AAB) by Finance (No. 2) Act, 1996 with effect from 1-4-1997, the profits as well as loss arising from Jeevan Suiraksha Fund would not be includible in the total income of the assessee and, therefore, while determining the distributable profits of the assessee, the loss from Jeevan Suraksha Fund ought not to be allowed to be adjusted against the taxable income.
It is not in dispute that the Jeevan Suraksha Fund is a pension fund approved by the Controller of Insurance appointed by the Central Government to perform the duties of the Controller of Insurance under the Insurance Act, 1938. The loss incurred in the Jeevan Suraksha fund has been considered by the actuary as a business loss, as per the valuation report as on the last day of the financial year, allowable under section 44 read with the First Schedule to the Income-tax Act, 1961. The fact that the income from such fund has been exempted under section 10(23AAB) with effect from 1st April 1997, does not mean that the pension fund ceases to be insurance business, so as to fall outside the purview of the insurance business covered under section 44 of the Income-tax Act, 1961. In other words, the pension fund like Jeevan Suraksha Fund would continue to be governed by the provisions of section 44 of the Income-tax Act 1961 irrespective of the fact that the income from such fund are exempted, or not. Therefore, while determining the surplus from the insurance business, the actuary was justified in taking into consideration the loss incurred under Jeevan Suraksha Fund.
The object of inserting section 10(23AAB) as per the Board Circular No. 762, dated 18/02/1998 was to enable the assessee to offer attractive terms to the contributors. Thus, the object of inserting section 10(23AAB) was not with a view to Assessment Year: 2013-14 treat the pension fund like jeevan Suraksha Fund outside the purview of insurance business but to promote insurance business by exempting the income from such fund. Therefore, in the facts of the present case, the decision of the Income-tax Appellate Tribunal in holding that even after insertion of section 10(23AAB), the loss incurred from the insurance business under section 44 of the Income-tax Act, 1961 cannot be faulted. Accordingly, questions(c) and (d) are answered in the affirmative, that is, in favour of the assessee and against the revenue. In the case of General Insurance Corporation of India vs. Addl. CIT in dated 15/02/2012 the WP No. 25/11 dated 1-12-2011 this issue is also in favour of the assessee. Respectfully following the Honble Bombay High Court, we allow the issue in favour of assessee and dismissed the ground of revenue’s appeal.”