UNITED INDIA INSURANCE CO.LIMITED,CHENNAI vs. PCIT-3, CHENNAI

ITA 183/CHNY/2021Status: DisposedITAT Chennai05 January 2026AY 2016-1738 pages
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What did the Tribunal hold?

The Tribunal held that the assessee's appeals for AY 2014-15, 2016-17, and 2017-18 were partly allowed, and appeals for AY 2015-16 and AY 2017-18 (ITA No. 683/Chny/2023) were allowed. Regarding the denial of deduction under Section 10(38) for AY 2014-15, the Tribunal noted the assessee's consistent claim and allowance in its own case for earlier years, including post-amendment of Rule 5(b), and relied on coordinate bench decisions. The Tribunal found the assessee's argument that differential tax treatment for different asset classes is not a bifurcation of a single source of income to be valid. For the corrigendum issue in AY 2017-18, the Tribunal found that the corrigendum was issued beyond the two-year limitation period prescribed under Section 263(2) of the Act. Furthermore, the Tribunal held that the corrigendum introduced a new issue (prior period expenditure) which was not part of the original Section 263 order, and thus could not be considered a rectification of a minor error. Therefore, the corrigendum was quashed, and the grounds raised by the assessee were allowed. The operative direction was to quash the corrigendum and allow the assessee's grounds related to it.

What were the facts?

The assessee, United India Insurance Co. Ltd., filed appeals against orders passed by the Principal Commissioner of Income Tax (PCIT)-3, Chennai, for assessment years (AY) 2014-15, 2015-16, 2016-17, and 2017-18. The appeals challenged revision orders under Section 263 of the Income Tax Act, 1961. For AY 2014-15, the PCIT held that the assessee was not entitled to claim deduction under Section 10(38) for profit on sale of investments amounting to ₹377,22,70,740/-. The PCIT found the assessment order erroneous and prejudicial to the revenue. For AY 2017-18, the PCIT issued a corrigendum to his revision order, adding an issue regarding prior period expenditure. The assessee contended that the corrigendum was issued beyond the limitation period prescribed under Section 263(2) and that it introduced a new issue without a hearing.

What were the issues?

1. Whether the Principal Commissioner of Income Tax erred in invoking revisionary powers under Section 263 of the Income Tax Act, 1961, to deny the assessee deduction under Section 10(38) of the Act for profits on sale of investments, considering the assessee's past allowance of such claims and the amendments to Rule 5 of the First Schedule to the IT Rules? (Question of law and mixed fact and law, turning on Section 10(38) and Rule 5 of the First Schedule). 2. Whether the Principal Commissioner of Income Tax erred in issuing a corrigendum to his order under Section 263 of the Act beyond the limitation period prescribed under Section 263(2) of the Act, and by introducing a new issue (prior period expenditure) without providing an opportunity of being heard? (Question of law, turning on Section 263(2)). Assessee's contentions: - There is no prohibition for insurance companies to claim deduction under Section 10(38). - Rule 5(b) of the First Schedule was amended to tax debt instruments and short-term capital gains, not equity-based investments. - Similar deductions have been allowed in the assessee's own case for earlier AYs and by coordinate benches. - The revisionary proceedings cannot be initiated if similar claims were allowed in earlier years (relied on Kohinoor Foods and Escorts). - The differential tax treatment for different asset classes is not a bifurcation of a single source of income. - The corrigendum was issued beyond the limitation period and introduced a new issue without a hearing. Revenue's contentions: - The profit on sale of investments should not be excluded for computing profits and gains of business as per Rule 5(b)(i) of the First Schedule. - The assessee offered an amount for taxation on account of profit on sale of investments, indicating a bifurcation of a single source of income, which is not permissible. - The Assessing Officer failed to make additions pertaining to prior period expenditure, which was not allowable and lacked evidence. The corrigendum was issued to rectify an oversight and was not a fresh issue.

Which sections of the Income-tax Act were involved?

Section 10(38),Section 263,Section 44,Section 143(3),Section 10(34),Section 10(15),Section 263(2)

AI-generated summary — verify with the full judgment below

Before: Shri S.S. Viswanethra Ravi&

For Respondent: Ms. V. Pushpa, Sr. Standing Counsel
Hearing: 07.10.2025Pronounced: 05.01.2026

PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:

The appeal in ITA No. 1759/Chny/2019 filed by the assessee is directed against the order dated 29.03.2019 passed by the Id. Principal Commissioner of Income Tax-3, Chennai for the assessment year 2014-

15.

The appeals in ITA No. 182 & 183/Chny/2021 a

The order continues below.

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