ROYAL SUNDARAM GENERAL INSURANCE COMPANY LTD,CHENNAI vs. DCIT, LTU, CHENNAI

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ITA 91/CHNY/2018Status: DisposedITAT Chennai02 January 2026AY 2012-13Bench: SHRI ABY T. VARKEY (Judicial Member), SHRI JAGADISH (Accountant Member)1 pages
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What did the Tribunal hold?

The Tribunal held that Section 115JB is not applicable to insurance companies, following jurisdictional High Court decisions. For long-term policy premiums, additions for AY 2010-11 and 2011-12 were confirmed, but relief was directed for AY 2012-13 to avoid double taxation.

What were the facts?

The assessee, an insurance company, appealed against the CIT(A) orders for AYs 2010-11 to 2012-13. The appeals were recalled to adjudicate two specific grounds: non-applicability of Section 115JB and disallowance of premium for long-term policies.

What were the issues?

The primary issues were the applicability of Section 115JB to insurance companies and the correct treatment of premium income from long-term policies.

Which sections of the Income-tax Act were involved?

Section 115JB,Section 145

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Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI JAGADISH

Hearing: 20.11.2025Pronounced: 02.01.2026

आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee General Insurance Company against the orders of the Learned Commissioner of Income Tax (Appeals)-17, (hereinafter referred to as “the Ld.CIT(A)”), Chennai, all dated 14.12.2017 for the Assessment Year (hereinafter referred to as "AY”) 2010-11 to 2012-13.

2.

At the outset, the Ld.AR of the assessee, Mr. Vikaram Vijayaraghavan, brought to our notice that there are only two issues to 2012-13) M/s. Royal Sundaram – General Insurance Co. Ltd. which need to be adjudicated, which basically was not adjudicated by the Tribunal while disposing the assessee’s appeals vide common order dated 08.01.2025. Therefore, the assessee preferred MA Nos.70-72/Chny/2025 and the Tribunal vide order dated 06.11.2025 was pleased to recall the order dated 08.01.2025 for the limited purpose to adjudicate the following two grounds:

1.

1. Non-adjudication of Ground relating to non-applicability of Section 115JB of the Act. [Ground No.11 for AY 2011-12 - of 2018 & Ground No.22 for AY 2012-13 – of 2018] 2. Disallowance of premium in respect of long term policy [Ground No.11 for AY 2011-12, of 2018 & Ground No.22 for AY 2012-13-ITA No.91 of 2018]

3.

Pursuant to the recalling of the Tribunal order supra, for adjudicating the aforesaid two grounds, these appeals have come before us for adjudication. The first issue i.e. Ground No.11 for AY 2011-12 & Ground No.22 for AY 2012-13 viz., non-applicability of section 115JB (book profit) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) for the assessee which is an Insurance Company, as rightly pointed out by the Ld.AR, this issue is noted to be no longer res integra. On this issue, in a similar case of an assessee- Insurance Company, the jurisdictional Hon’ble Madras High Court by order dated 28.01.2019 in CIT v. Cholamandalam MS General Insurance Co. Ltd. [in TCA Nos.93-100 of 2019] had held in favor of assessee by holding that provisions of Section 115JB of the Act, which enables the companies to compute book- , 89 & 91/Chny/2018 (AYs 2010-11 to 2012-13) M/s. Royal Sundaram – General Insurance Co. Ltd. profit is not applicable to Insurance Company. In this regard, it would be gainful to refer to the substantive question of law relevant to this issue as under:- ii. Whether the Tribunal was justified and correct in holding that the provisions of 1151B of the Act, which enables the companies to compute book profit may not be applicable to insurance companies ?

4.

And the Hon’ble High Court answered the same in favour of the assessee by holding that provisions of Sec.115JB of the Act are not applicable to the Insurance Company by observing as under:-

6.

So far as the second substantial question of law is concerned, in the very same decision, we decided the question against the Revenue and in favour of the assessee therein, the relevant portion of which reads as follows:

1.

"We have perused the order passed by the Commissioner of Income Tax (Appeals) (CIT(A)] as well as the Tribunal. As rightly pointed out by the Tribunal, the Insurance Companies prepare profit and loss account as per the guidelines issued by the Insurance Regulatory and Development Authority of India and not as per Part II and III of Schedule VI of Companies Act. Furthermore, the applicability of Schedule VI of the Companies Act was specifically excluded in respect of Insurance Companies. The revenue has not been able to dislodge before us by way of an appeal. We find that the conclusion arrived at by the Tribunal in this regard is proper and valid. Accordingly, the appeals filed by the revenue on this ground are dismissed and consequently, the above substantial question of law is answered in favour of the assessee.

7.

Mr.M.Swaminathan, learned Senior Standing Counsel for the appellant has drawn our attention to the assessment order for the year 2007-08 dated 16.12.2010 and by referring to the factual statement made therein, It is submitted that the assessee themselves declared their Income under Section 115JB of the Act and that therefore, it will not lie in the mouth of the assessee now to contend that the said provision is Inapplicable.

8.

At the first blush, the argument of the learned Senior Standing Counsel appears to be impressive. However, on a cursory reading of the assessment order as well as the order passed by both the CIT(A) as well as the Tribunal, It Is evidently clear that the assessee, at no point of time, accepted the applicability of Section 115JB of the Act. In fact, their contention was that the said Section is not applicable to insurance 7 companies. This is evident from paragraph (1) of the assessment order dated 16.12.2010 wherein such a contention was dealt with by the Assessing Officer. In any event, there can be no estoppel against a Statute.

1. , 89 & 91/Chny/2018 (AYs 2010-11 to 2012-13) M/s. Royal Sundaram – General Insurance Co. Ltd. :: 4 ::

9.

We have also perused the order passed by the CIT(A) dated 28.7.2011 relevant to the assessment year 2007-08 wherein also identical contention was raised by the assessee and both before the Assessing Officer as well as before the CTT(A), the assessee was not successful. But, before the Tribunal, the assessee was successful in the sense that the Tribunal considered the submissions and noted that the applicability of the provisions of Schedule VI of the Companies Act was excluded in respect of the insurance companies.

10. In the decision in the case of Oriental Insurance Co. Ltd. Vs. DCIT [reported in (2018) 407 ITR 658], an Identical question was considered by the High Court of Delhi wherein it was held as follows:

1. "54. Turning now to ΙTΑ Να. 447/2015, the question concerns the applicability of Section 115 of the Act to insurance companies The ITAT has permitted the assessee to raise this question since, in a large number of judgments of the ITAT, the question has been answered in favour of the assessee.

55.

It is plain, from a reading of Section 44 read with the First Schedule of the Act that Insurance companies are required to prepare accounts as per the IA and the regulations of the IRDA and not as per Parts II and III of Schedule VI of the Companies Act. The assessee prepares its accounts as per the IRDA principles. The IRDA Regulations govern the preparation of the auditor's report

56.

Consequently, the question framed in ΙΤΑ Νο.447/2015 is answered in the affirmative, i.e. in favour of the assessee and against the Revenue by holding that Section 1153B of the Act does not apply to insurance companies."

11.

In the light of the above discussions, we are of the firm view that the decision taken by us in TCA.No.41 of 2019 etc. cases dated 18.1.2019 does not call for any change and our view is also supported by the decision of the Delhi High Court in the case of Oriental Insurance Co. Ltd. For the above reasons, the second substantial question of law is also decided against the Revenue and in favour of the assessee.

5.

In the light of the aforesaid binding decision of the Hon’ble Madras High Court (supra), it is noted that the Insurance Companies prepare its profit & loss account as per the guidelines issued by the Insurance Regulatory and Development Authority of India and not as per Part II and III of Schedule VI of Companies Act. Moreover, the applicability of Schedule VI of the Companies Act was specifically excluded in respect of Insurance Companies and hence, it was held that provisions of Section 89 & 91/Chny/2018 (AYs 2010-11 to 2012-13) M/s. Royal Sundaram – General Insurance Co. Ltd. :: 5 ::

115JB of the Act, which enables the companies to compute book-profit is not applicable to Insurance Company. Respectfully following the ratio of the Hon’ble High Court supra, we allow this ground of appeal of the assessee for AY 2011-12 & 2012-13.

6. Coming to the second issue disallowance of premium in respect of long term policy [for AY 2010-11, 2011-12 & 2012-13].

On this issue, the Ld.AR brought to our notice that the assessee on 7. this issue for AY 2012-13, had suo-motu offered ₹20,04,00,000/- to tax, which was cumulatively differed for earlier years i.e. AYs 2010-11 & 2011-12 due to change in accounting policy. And the Tribunal vide order dated 08.01.2025 has confirmed the addition made by the lower authorities on this issue to the tune of ₹15,65,00,000/- for AY 2010-11 & ₹4,39,00,000/- for AY 2011-12; and as noted on this issue, the assessee company for AY 2012-13 had suo-motu offered the income of ₹20,04,00,000/- [₹15,65,00,000/- plus ₹4,39,00,000/-] to tax in AY 2012-13, which according to the Ld.AR was cumulatively deferred from AY 2010-11 and AY 2011-12 due to change in accounting policy. Therefore, the Ld AR prayed that suitable directions be given to the AO, so that double taxation on this issue may be avoided in the hands of assessee for AY 2012-13. In this regard, we note that this Tribunal by order dated 08.01.2025 [for AYs 2008-09 to 2014-15], on this issue inter-alia, had 89 & 91/Chny/2018 (AYs 2010-11 to 2012-13) M/s. Royal Sundaram – General Insurance Co. Ltd. confirmed the addition of ₹15,64,68,000/- for AY 2010-11 & ₹4,39,00,000/- for AY 2011-12 by observing as under:

10.0 The next issue raised by the assessee for & 90 for AY-2010- 11 & 2011-12 pertains to addition of insurance premium received in respect of long term policy. Facts of the case for AY-201011 & 2011-12 are common except of variations in figures. The Ld. AO has while making an addition of Rs.15,64,68,000/-, discussed the issue in para 10(2)(i) of his order for AY- 2010-11. The Ld. First Appellate Authority endorsed the decision of the Ld. AO. As per brief factual matrix of the case the assessee company had changed its policies of accounting in respect of long term health and personal accident policies. Thus the premium received which was hitherto accounted for in the year of receipt was deferred over duration of policy. The Ld. AO rejected the arguments of the assessee and while relying upon the decision of Hon’ble Madras High Court in the case of GSR Krishnamoorthy 262 ITR 293 and of Hon’ble Apex Court in the case of British Paints India Limited 54 Taxman 499 brought the deferred premium to tax in year of receipts. The Ld. First Appellate Authority concurred with the Ld. AO’s finding by relying upon the decision of Hon’ble Apex Court in the case of British Paints India Limited holding that the Ld.AO has right to ensure that book results disclose true state of accounts and the correct income and that section 145 of the act confers upon the Ld. AO exclusive powers or rather duty to make computation of income in a manner he deems appropriate for determination of correct profit and gains.

10.1 We have heard rival submissions in the light of material available on records. The Ld. Counsel of the assessee argued that it is offering the income on receipt basis in subsequent years and that the addition tantamount to double taxation. The Ld. Counsel for the revenue argued that the decision of lower authorities is based upon correct understanding and appreciation of the facts case and does not require any interference at this stage. It was argued that the assessee cannot have two different accounting for different products offered to its customers. We have considered the order of Ld. CIT(A) and are of the view that no interference is required in the same at this stage. Accordingly, in respectful compliance to the decision of Hon’ble Apex Court in the case of British Paints India Limited at 188 ITR 44 we hold the view that the Ld.AO is fully empowered to determine the correct taxable income by making correct interpretation of books results. Accordingly the order of the Ld. First Appellate Authority in making the impugned addition is sustained and the grounds of appeal raised by the assessee vide & 90 for AY- 2010-11 & 2011-12 pertaining to addition of insurance premium received in respect of long term policy is dismissed.

8. Further, it is brought to our notice that the assessee had suo-motu offered income for AY 2012-13 on this issue ₹20,04,00,000/- [₹15,65,00,000/- + ₹4,39,00,000/-] to tax, meaning assessee had offered the income confirmed on this issue to the tune of 89 & 91/Chny/2018 (AYs 2010-11 to 2012-13) M/s. Royal Sundaram – General Insurance Co. Ltd. :: 7 ::

₹15,64,68,000/- for AY 2010-11 & ₹4,39,00,000/- for AY 2011-12, albeit for AY 2012-13 by offering ₹20,04,00,000/-. In the aforesaid background, the plea of the assessee is only that suitable directions may be given to the AO so that the said amount [which has been confirmed in earlier years (supra)] may be reduced in AY 2012-13 or else it will amount to double taxation. The Ld. DR wants us to direct the AO to verify this claim of the assessee that it has on this issue remitted ₹20,04,00,000/-, and then only give appropriate relief if any as prayed.

9. In the light of the aforesaid discussion, we find that this Tribunal for AYs 2010-11 & 2011-12 has confirmed the additions made by the AO/Ld.CIT(A) on this issue and thus has confirmed the addition of ₹15,64,68,000/- & ₹4,39,00,000/- (supra) respectively. Further, it is noted that on this issue assessee had suo-motu offered the income of ₹20,04,00,000/- to tax in AY 2012-13 which has been claimed to have been deferred from AYs 2010-11 & 2011-12 due to change in accounting policy. In view of us, confirming the addition on this issue for AYs 2010- 11 & 2011-12 to the tune of ₹20,04,00,000/- [₹15,65,00,000/- plus ₹4,39,00,000/-] and the assessee having offered ₹20,04,00,000/- in AY 2012-13, in order to avoid double taxation, consequential relief has to be granted to the assessee for AY 2012-13; and therefore, we direct the AO to verify as to whether the assessee had offered ₹20,04,00,000/- on this 89 & 91/Chny/2018 (AYs 2010-11 to 2012-13) M/s. Royal Sundaram – General Insurance Co. Ltd. issue for AY 2012-13; and if it is found to be correct, then the same may be reduced from total income offered by the assessee for AY 2012-13 because we confirmed the addition on this issue of ₹20,04,00,000/- for AYs 2010-11 & 2011-12 as noted supra. Hence, the AO is directed to verify and pass consequential order/relief be given to the assessee in accordance to law after hearing the assessee.

10.

In the result, appeals filed by the assessee are allowed.

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