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Facts
The Revenue appealed against the CIT(A)'s order concerning assessment year 2011-12. The assessee had claimed a loss from pension policies/funds under section 10(23AAB) of the Income-tax Act, which the Assessing Officer disallowed by treating it as income from other sources. The CIT(A) admitted the claim, following Bombay High Court decisions.
Held
The Tribunal held that the CIT(A) correctly followed the binding precedent of the Hon'ble Bombay High Court and the Co-ordinate Bench of the Tribunal in the assessee's own case. The issue regarding the allowance of the claim of loss from the pension fund was decided in favor of the assessee.
Key Issues
Whether the loss from pension policies/funds under section 10(23AAB) is allowable as a deduction against the taxable income of a life insurance company?
Sections Cited
Section 44 of the Income Tax Act, 1961, Rule 2 of the First Schedule, Insurance Act, 1938, Insurance Regulatory and Development Authority Act, 1999, section 10(23AAB) of the Income-tax Act, 1961, section 143(3) of the Income-tax Act, 1961, section 147 of the Income-tax Act, 1961, section 148 of the Income-tax Act, 1961
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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
This appeal by the Revenue and cross This appeal by the Revenue and cross-objection by the objection by the assessee are directed against order dated 08.05.2024 passed by the assessee are directed against order dated 08.05.2024 passed by the assessee are directed against order dated 08.05.2024 passed by the Ld. Commissioner of Income Ld. Commissioner of Income-tax (Appeals) – 54, Mumbai [in short 54, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2011 ‘the Ld. CIT(A)’] for assessment year 2011-12.
The grounds raised The grounds raised by the Revenue in its appeal are by the Revenue in its appeal are reproduced as under: reproduced as under:
"Whether on the facts & circumstances of the case and in "Whether on the facts & circumstances of the case and in "Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) erred in interpreting the provisions of law, the Ld. CIT(A) erred in interpreting the provisions of law, the Ld. CIT(A) erred in interpreting the provisions of Section 44 of the Income Tax Act, 1961 ["the Act"] read with Section 44 of the Income Tax Act, 1961 ["the Act"] read with Section 44 of the Income Tax Act, 1961 ["the Act"] read with Rule 2 of the First Sche Rule 2 of the First Schedule along with provisions of dule along with provisions of Insurance Insurance Insurance Act, Act, Act, 1938, 1938, 1938, insurance insurance insurance Regulatory Regulatory Regulatory and and and Development Authority Act, 1999 and regulations made Development Authority Act, 1999 and regulations made Development Authority Act, 1999 and regulations made there under and accordingly allowing adjustment from the there under and accordingly allowing adjustment from the there under and accordingly allowing adjustment from the 'surplus' worked out as per 'actuarial valuation'"? 'surplus' worked out as per 'actuarial valuation'"? 2. "Whether on the fa "Whether on the facts & circumstances of the case and in cts & circumstances of the case and in law, the Ld.CIT(A) erred in interpreting that * on account of law, the Ld.CIT(A) erred in interpreting that * on account of law, the Ld.CIT(A) erred in interpreting that * on account of "legislation by incorporation" 'only' the "un "legislation by incorporation" 'only' the "un-amended' amended' Insurance Act 1938 and the Regulations there under Insurance Act 1938 and the Regulations there under Insurance Act 1938 and the Regulations there under became part of section 44 r.w.r. rule 2 of the Fi became part of section 44 r.w.r. rule 2 of the First Schedule rst Schedule of the I.T Rules?" of the I.T Rules?" 3. "Whether on the facts & circumstances of the case and in "Whether on the facts & circumstances of the case and in "Whether on the facts & circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the facts that law, the Ld.CIT(A) erred in not appreciating the facts that law, the Ld.CIT(A) erred in not appreciating the facts that the valuation of the insurance companies is done under the the valuation of the insurance companies is done under the the valuation of the insurance companies is done under the Insurance Act, therefore, what can be reduced is Insurance Act, therefore, what can be reduced is only what only what is specifically provided in schedule 1 Rule 2 and nothing is specifically provided in schedule 1 Rule 2 and nothing is specifically provided in schedule 1 Rule 2 and nothing else. Therefore, exemption under section 10(23AAB) cannot else. Therefore, exemption under section 10(23AAB) cannot else. Therefore, exemption under section 10(23AAB) cannot be granted to an assessee engaged in business of life be granted to an assessee engaged in business of life be granted to an assessee engaged in business of life insurance where income is computed u/s 44 of the I.T Act"? insurance where income is computed u/s 44 of the I.T Act"? insurance where income is computed u/s 44 of the I.T Act"? 4. "Whether on the "Whether on the facts & circumstances of the case and in facts & circumstances of the case and in law, the Ld.CIT(A) erred in ignoring the fact that even the law, the Ld.CIT(A) erred in ignoring the fact that even the law, the Ld.CIT(A) erred in ignoring the fact that even the assessee insurance company uses the nomenclature assessee insurance company uses the nomenclature assessee insurance company uses the nomenclature expenses "other than those directly related to insurance expenses "other than those directly related to insurance expenses "other than those directly related to insurance business" while computing th business" while computing the surplus in the share holders e holders account and treating it as part of Insurance Business.? account and treating it as part of Insurance Business.? account and treating it as part of Insurance Business.?
Indiafirst Life Insurance Company Ltd Indiafirst Life Insurance Company Ltd 3 & CO No. 206/MUM/2024 2.1 The grounds raised by the assessee in its cross The grounds raised by the assessee in its cross The grounds raised by the assessee in its cross-objection are reproduced as under: reproduced as under:
On the facts and circumstances of the case and in law, IndiaFirst On the facts and circumstances of the case and in law, IndiaFirst On the facts and circumstances of the case and in law, IndiaFirst Life Insurance Company Limited ('IFLI Life Insurance Company Limited ('IFLIC' or 'Respondent' or C' or 'Respondent' or 'Company') respectfully submits that the Learned Commissioner of 'Company') respectfully submits that the Learned Commissioner of 'Company') respectfully submits that the Learned Commissioner of Appeals -54, Mumbai {CIT(A)} ought to have held that Reassessment 54, Mumbai {CIT(A)} ought to have held that Reassessment 54, Mumbai {CIT(A)} ought to have held that Reassessment Order dated December 20, 2016 passed by Deputy Commissioner of Order dated December 20, 2016 passed by Deputy Commissioner of Order dated December 20, 2016 passed by Deputy Commissioner of Income-tax, Circle 14(2)(1), Mumbai {'Le tax, Circle 14(2)(1), Mumbai {'Learned AO'} under section arned AO'} under section 143(3) read with section 147 of Income 143(3) read with section 147 of Income-tax Act, 1961 ('Act') was tax Act, 1961 ('Act') was invalid, without jurisdiction, void and bad in law. invalid, without jurisdiction, void and bad in law.
The cross-objection objection has been filed by the assessee with a delay filed by the assessee with a delay of 24 days. Before us, the Ld. counsel for the of 24 days. Before us, the Ld. counsel for the assessee referred to assessee referred to the application of the assessee for condoning the delay in filing the the application of the assessee for condoning the delay in filing the the application of the assessee for condoning the delay in filing the cross-objection and submitted that during the relevant period, the objection and submitted that during the relevant period, the objection and submitted that during the relevant period, the company had undergone personnel changes in tax team resulting company had undergone personnel changes in tax team resulting company had undergone personnel changes in tax team resulting into inadvertently non non meeting compliance deadlines and when iance deadlines and when issue was brought to the notice of the respondent by the Senior issue was brought to the notice of the respondent by the Senior issue was brought to the notice of the respondent by the Senior Counsel, immediately the cross immediately the cross-objection had been filed by the objection had been filed by the assessee. Looking to the sufficient cause for delay in filing cross- assessee. Looking to the sufficient cause for delay in filing cross assessee. Looking to the sufficient cause for delay in filing cross objection, we admit it the cross-objection of the assessee for objection of the assessee for adjudication.
Briefly stated facts of the case are that the assessee filed its Briefly stated facts of the case are that the assessee filed its Briefly stated facts of the case are that the assessee filed its return of income on 24.09.2011 declaring total income at Rs.(-) return of income on 24.09.2011 declaring total income at Rs.( return of income on 24.09.2011 declaring total income at Rs.( 52,02,02,239/- which which which was was was subsequently subsequently subsequently revised revised revised to Rs.(-) 66,59,72,891/- on 29.09.2012 on 29.09.2012 after claiming exemption u/s fter claiming exemption u/s 10(23AAB) of the Income of the Income-tax Act, 1961 (in short ‘the Act’) tax Act, 1961 (in short ‘the Act’) for an amount of Rs.14,56,69,652/ amount of Rs.14,56,69,652/-. The return of income filed by the . The return of income filed by the assessee was selected for scrutiny and assessment u/s 143(3) of the assessee was selected for scrutiny and assessment u/s 143(3) assessee was selected for scrutiny and assessment u/s 143(3)
Indiafirst Life Insurance Company Ltd Indiafirst Life Insurance Company Ltd 4 & CO No. 206/MUM/2024 Act was completed on 31.03.2014 determining loss at Rs.( eted on 31.03.2014 determining loss at Rs.(-) eted on 31.03.2014 determining loss at Rs.( 64,75,24,751/- after after after disallowance disallowance disallowance of of of dividend dividend dividend income income income of of of Rs.1,84,48,140/- by treating the same as by treating the same as ‘income from other income from other sources’ for life insurance company. for life insurance company.
The assessment was reopened by way of issue of notice dated 4.1 The assessment was reopened by way of issue of notic The assessment was reopened by way of issue of notic 31.03.2016 u/s 148 of the Act. In the reassessment proceedings, 31.03.2016 u/s 148 of the Act. In the reassessment proceedings, 31.03.2016 u/s 148 of the Act. In the reassessment proceedings, the Assessing Officer observed that assessee had claimed loss of the Assessing Officer observed that assessee had claimed loss of the Assessing Officer observed that assessee had claimed loss of Rs.14,56,69,652/- from pension policies/funds u/s 10(23AAB) of from pension policies/funds u/s 10(23AAB) of from pension policies/funds u/s 10(23AAB) of the Act. According to the Assessing Officer loss or deficit from the Act. According to the Assessing Officer loss or the Act. According to the Assessing Officer loss or pension scheme should not be adjusted against the taxable profit or pension scheme should not be adjusted against the taxable profit or pension scheme should not be adjusted against the taxable profit or other scheme. The Assessing Officer stated in the assessment order other scheme. The Assessing Officer stated in the assessment order other scheme. The Assessing Officer stated in the assessment order that assessee had claimed the said income by filing revising that assessee had claimed the said income by filing revising that assessee had claimed the said income by filing revising computation of income without revising return of income therefore, computation of income without revising return of in computation of income without revising return of in the Assessing Officer the Assessing Officer followed the decision of the Hon’ble Supreme the decision of the Hon’ble Supreme Court in the case of Goetze India Ltd. (2006) 157 Taxman 1 (SC) Goetze India Ltd. (2006) 157 Taxman 1 (SC), Goetze India Ltd. (2006) 157 Taxman 1 (SC) and disallowed the claim of the loss from pension fund and added disallowed the claim of the loss from pension fund and added disallowed the claim of the loss from pension fund and added Rs.14,56,69,652/- to the total income of th to the total income of the assessee. e assessee.
On further appeal, the Ld. CIT(A) following the decision of the On further appeal, the Ld. CIT(A) following the decision of the On further appeal, the Ld. CIT(A) following the decision of the Hon’ble Bombay High Court in the case of Hon’ble Bombay High Court in the case of CIT v. Pruthvi Brokers CIT v. Pruthvi Brokers and Shareholders Pvt. Ltd. 349 ITR 336 (Bom.) and other and Shareholders Pvt. Ltd. 349 ITR 336 (Bom.) and Shareholders Pvt. Ltd. 349 ITR 336 (Bom.) decisions cited in the order decisions cited in the order, admitted the claim of the a admitted the claim of the assessee. The admission of the claim by the Ld. CIT(A) has on of the claim by the Ld. CIT(A) has not been disputed by not been disputed by the Revenue before us. the Revenue before us. The Revenue has only dispu Revenue has only disputed the finding of the Ld. CIT(A) on the merit. ) on the merit.
Indiafirst Life Insurance Company Ltd Indiafirst Life Insurance Company Ltd 5 & CO No. 206/MUM/2024
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. In the case, the Ld. CIT(A) has followed ial on record. In the case, the Ld. CIT(A) has followed ial on record. In the case, the Ld. CIT(A) has followed binding decision of the Hon’ble Bombay High Court and decision of binding decision of the Hon’ble Bombay High Court and decision of binding decision of the Hon’ble Bombay High Court and decision of the Co-ordinate Bench of the Tribunal in the case of the assessee in ordinate Bench of the Tribunal in the case of the assessee in ordinate Bench of the Tribunal in the case of the assessee in for assessment year 2010-11. The for assessment year 2010 ITA No. 7276/Mum/2014 for assessment year 2010 relevant finding of the Ld. CIT(A) is reproduced as under: inding of the Ld. CIT(A) is reproduced as under: inding of the Ld. CIT(A) is reproduced as under:
“6.4 As regards the merits of the case, it is seen that the issue has 6.4 As regards the merits of the case, it is seen that the issue has 6.4 As regards the merits of the case, it is seen that the issue has been decided in favour of the appellant by my Ld predecessor CIT(A) been decided in favour of the appellant by my Ld predecessor CIT(A) been decided in favour of the appellant by my Ld predecessor CIT(A) in his order dated 01.09.2014 relying on the decision of the Hon'ble in his order dated 01.09.2014 relying on the decision of the Hon'ble in his order dated 01.09.2014 relying on the decision of the Hon'ble Bombay High Court in the case of CIT v Life Insurance Corporation of Bombay High Court in the case of CIT v Life Insurance Corporation of Bombay High Court in the case of CIT v Life Insurance Corporation of India Ltd [2011] 12 taxmann.com 388 (Bom). The relevant extracts of India Ltd [2011] 12 taxmann.com 388 (Bom). The relevant extracts of India Ltd [2011] 12 taxmann.com 388 (Bom). The relevant extracts of the Hon'ble High Court decision are as under: the Hon'ble High Court decision are as under: "17.............. The fact that the income from such fund has been "17.............. The fact that the income from such fund has been "17.............. The fact that the income from such fund has been exempted under section 10(23AAB) with effect from 1st April, exempted under section 10(23AAB) with effect from 1st April, exempted under section 10(23AAB) with effect from 1st April, 1997, does not mean that 1997, does not mean that the pension fund ceases to be the pension fund ceases to be insurance business, so as to fall outside the purview of the insurance business, so as to fall outside the purview of the insurance business, so as to fall outside the purview of the insurance business covered under section 44 of the Income insurance business covered under section 44 of the Income insurance business covered under section 44 of the Income-tax Act, 1961.. Act, 1961.. "18. The object of inserting section 10(23AAB) as per the Board The object of inserting section 10(23AAB) as per the Board The object of inserting section 10(23AAB) as per the Board Circular No.762 dated 18th February 1998 was to enable the Circular No.762 dated 18th February 1998 was to enable the Circular No.762 dated 18th February 1998 was to enable the assessee to attractive terms to the contributors. Thus, the assessee to attractive terms to the contributors. Thus, the assessee to attractive terms to the contributors. Thus, the object of inserting section 10(23AAB) was not with a view to object of inserting section 10(23AAB) was not with a view to object of inserting section 10(23AAB) was not with a view to treat the pension treat the pension fund like Jeevan Suraksha Fund outside the fund like Jeevan Suraksha Fund outside the purview of insurance business but to promote insurance purview of insurance business but to promote insurance purview of insurance business but to promote insurance business by exempting the income from such fund..." business by exempting the income from such fund..." business by exempting the income from such fund..." 6.4.1 The order dated 01.09.2014 of the Ld CIT(A) was upheld by the 6.4.1 The order dated 01.09.2014 of the Ld CIT(A) was upheld by the 6.4.1 The order dated 01.09.2014 of the Ld CIT(A) was upheld by the Hon'ble Mumbai ITAT in the appellant' Hon'ble Mumbai ITAT in the appellant's own case in own case in order dated 11.01.2017, where the Hon'ble ITAT 7276/M/2014 order dated 11.01.2017, where the Hon'ble ITAT 7276/M/2014 order dated 11.01.2017, where the Hon'ble ITAT dismissed the revenue's appeal regarding disallowance of claim of dismissed the revenue's appeal regarding disallowance of claim of dismissed the revenue's appeal regarding disallowance of claim of loss from pension fund business. The relevant extracts are as under: loss from pension fund business. The relevant extracts are as under: loss from pension fund business. The relevant extracts are as under: .......we find that the finding of the C .......we find that the finding of the CITA) on the first issue is ITA) on the first issue is fair and reasonable. As such, the judgment of the Hon'ble High fair and reasonable. As such, the judgment of the Hon'ble High fair and reasonable. As such, the judgment of the Hon'ble High Court of Bombay in the case of LIC of India Court of Bombay in the case of LIC of India (338 TR 212) is (338 TR 212) is directly on the issue. Accordingly, the claim of loss of Pension directly on the issue. Accordingly, the claim of loss of Pension directly on the issue. Accordingly, the claim of loss of Pension Fund is an allowable claim. We approve th Fund is an allowable claim. We approve the conclusions drawn e conclusions drawn by the CIT(A) vide para 4.3 of his order on this issue. Thus, by the CIT(A) vide para 4.3 of his order on this issue. Thus, by the CIT(A) vide para 4.3 of his order on this issue. Thus, Ground no. 1 raised by the Revenue is dismissed." Ground no. 1 raised by the Revenue is dismissed." 6.5 In view of above, respecily rolying the thon be jurisdictional High 6.5 In view of above, respecily rolying the thon be jurisdictional High 6.5 In view of above, respecily rolying the thon be jurisdictional High Court an also the Hon'ble jurisdictional IT AT in Court an also the Hon'ble jurisdictional IT AT in-the-appellants own appellants own
Indiafirst Life Insurance Company Ltd Indiafirst Life Insurance Company Ltd 6 & CO No. 206/MUM/2024 case, the issue is decid case, the issue is decided in favor of the appellant and the addition the addition made by the AO is deleted. This ground of appeal is accordingly made by the AO is deleted. This ground of appeal is accordingly made by the AO is deleted. This ground of appeal is accordingly allowed.” 6.1 Since, the Ld. CIT(A) has followed the binding precedent on the Since, the Ld. CIT(A) has followed the binding precedent on the Since, the Ld. CIT(A) has followed the binding precedent on the issue in dispute, therefore, we do not find any infirmity in the order therefore, we do not find any infirmity in the order therefore, we do not find any infirmity in the order of the Ld. CIT(A) and accordingly of the Ld. CIT(A) and accordingly, we uphold the same. The grounds uphold the same. The grounds raised by the Revenue are accordingly dismissed. raised by the Revenue are accordingly dismissed.
6.2 In the cross-objection, the assessee has raised the ground objection, the assessee has raised the ground objection, the assessee has raised the ground challenging the validi challenging the validity of the reassessment. Since, we have already ty of the reassessment. Since, we have already dismissed the appeal of the Revenue challenging the merit of the dismissed the appeal of the Revenue challenging the merit of the dismissed the appeal of the Revenue challenging the merit of the addition and therefore, the grounds raised by addition and therefore, the grounds raised by the assessee are the assessee are rendered merely academic and rendered merely academic and hence, we are not adjudicating upon , we are not adjudicating upon and same are left open t open to be adjudicated at appropriate stage to be adjudicated at appropriate stage if so required.
In the result, both the appeal of the Revenue as well as cross In the result, both the appeal of the Revenue as well as cross In the result, both the appeal of the Revenue as well as cross- objection of the assessee are dismissed. objection of the assessee are dismissed.