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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI JOGINDER SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year [AY] 2011-12 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-3 [CIT(A)], Mumbai, Appeal No. CIT(A)-3/IT-112/Addl.CIT-1(3)/14-15 dated 31/01/2017 by raising the following grounds of appeal:-
1. Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) was correct in concluding that transfer from Shareholder’s account to Policy Account And Shown As part of ‘surplus’ in the actuarial valuation was only transfer of capital asset and not taxable u/s 44 of the Act read with Rule 2 of the First Schedule?”
SBI Life Insurance Company Limited Assessment Year-2011-12 2. Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) was correct in allowing relief to the assessee by holding that 'surplus' available both in Policy Holders Account and Share Holder's account is to be consolidated and only 'net surplus' is to be taxed as income from Insurance Business? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that taking the value of negative reserve at zero 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.
4. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in upholding the claim of the assessee that its dividend Income Is exempt under section 10(34) of the I.T.Act 1961.
5. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the claim of the assessee that its dividend Income is exempt under section 10(34) of the I.T. Act 1961 made by the assessee, Ignoring the fact that dividend income is considered as part of income of the Life Insurance Business and is included as an income by the actuary.
Whether, on the facts and in the circumstances of the case and in law. the Ld.CIT(A) was Justified in deleting the addition made by the AO on the exemption of income from pension fund u/s 10(23AAB) and that the Income from Pension Fund does not form part of the total income of the Assessee u/s 10(23AAB) of the I.T.Act 1961.
Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was Justified in ignoring the fact that the non obstante clause in section 44 is not extended to section 10(23AAB) of the Act 1961.
Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding that Section 14A is not applicable to income of insurance business computed u/s 44 of the Act when the ITAT itself has held that the provisions of Section 10 are applicable to income of insurance business computed u/s 44 of the Act.
The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax Range-1(3) u/s 143(3) of the Income Tax Act, 1961 on 24/03/2014 wherein the income of the assessee has been assessed at Rs.387.08 crores after certain adjustments / disallowances as against returned income of Rs.150.47 crores e-filed by the assessee on 17/11/2011. During impugned AY, the assessee being resident corporate assessee was engaged in the business of Life Insurance.
SBI Life Insurance Company Limited Assessment Year-2011-12 2.1 The material on record reveals that in terms of Insurance Regulatory & Development Authority [IRDA] regulations, the assessee maintains two separate Profit & Loss Account i.e. Policy Holders Account (Technical Account) in form A-RA [in short ‘PHA’] and Shareholders Account (Non-Technical Account) Form A-PL [in short ‘SHA’]. The assessee reflected profit / surplus of Rs.370.45 Crores in SHA account which included transfer of surplus from PHA for Rs.335.52 Crores and Contribution to PHA from SHA at Rs.35.41 Crores. Thus the net income in the account was Rs.70.35 Crores. The Ld. AO opined that income from PHA is the income from LIC Business being taxable at special rate of 12.5% as per Section 44 of the Income Tax Act, 1961 read with Rule 2 of Schedule-1. However, the income from SHA account was on account of carrying on ‘business activity, other than Life insurance’ and therefore, the same did not form part of insurance business and separately taxable @30%. Accordingly, the net surplus / income in SHA account amounting to Rs.70.35 Crores was assessed as Business Income being taxable at normal rate of 30%. 2.2 Another issue is related with taxability of dividend income of Rs.158.30 Crores as claimed exempt by the assessee u/s 10(34). The same has been denied by Ld. AO on the premise that the benefit of provisions of Section-10 was not applicable to an assessee engaged in insurance business who is governed by special computational provisions of Section 44. On the similar reasoning, the exemption of income of Rs.80.50 Crores, earned from pension segment and claimed exempt u/s 10(23AAB) by the assessee, was denied to the assessee.
SBI Life Insurance Company Limited Assessment Year-2011-12 2.3 The third issue is related with addition of incremental negative reserves of Rs.1.03 Crores as per actuarial report which has been made by following the decision in earlier years.
Aggrieved, the assessee contested all the additions with success before Ld. CIT(A) vide impugned order dated 31/01/2017 wherein the additions have been deleted by following the orders of this Tribunal in assessee’s own case for AYs 2002-03, 2007-08 to 2010-11. The orders of Ld. first appellate authority also places reliance on catena of other judgments rendered by this Tribunal or various higher judicial authorities in the case of other assessees engaged in similar line of business.
The Ld. Senior Counsel for Assessee [AR], Shri Farrokh V.Irani submitted that the issues under appeal stood squarely covered in assessee’s favor by the order of this Tribunal for earlier years as relied upon by Ld. first appellate authority. The Ld. CIT-DR fairly admitted the aforesaid submissions but contended that the issue has not attained finality yet.
Upon perusal of the orders of lower authorities and the common order of this Tribunal for AYs. 2002-03, 2007-08 to 2010-11, & others dated 23/12/2016 in assessee’s own case, we concur with the submissions of Ld. Sr. Counsel and find that all the issues have already been delved upon by this Tribunal in those years wherein the matter has been adjudicated in assessee’s favor. The relevant extract of the same has already been reproduced in the impugned order. No contrary judgment has been placed on record by the revenue. Therefore, respectfully following the same, we dismiss the revenue’s appeal.
SBI Life Insurance Company Limited Assessment Year-2011-12 6. Resultantly, the appeal stands dismissed.