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Income Tax Appellate Tribunal, “F” Bench, Mumbai
Before: Shri B.R. Baskaran (AM) & Shri Ravish Sood(JM)
O R D E R Per B.R. Baskaran (AM) :-
The appeal filed by the Revenue is directed against the order dated 27.1.2016 passed by the learned CIT(A)-18, Mumbai and it relates to A.Y. 2012-13. Solitary issue urged in this appeal is whether the learned CIT(A) was justified in holding that the provisions of section 14A would not be applicable to the assessee.
We heard the parties and perused the record. The assessee company is in life insurance business. During the year under consideration, the assessee had made investment of ` 10246.11 crores and earned dividend income of ` 160.00 crores. The assessee claimed dividend income as exempt u/s. 10(38) of the Act. The Assessing Officer noticed that the auditors have quantified the disallowance to be made u/s. 14A read with Rule 8D at ` 51.84 crores. However, the assessee did not disallow the same while computing its total income on the plea that its income is being computed under section 44 of the Income Tax Act, 1961 read with Part-A of the First Schedule. The assessee placed reliance on the decisions rendered by Mumbai ITAT in the case of ICICI Prudential Life Insurance Co. Ltd. Vs. ACIT and Birla Sun Life Insurance
2 M/s. Reliance Life Insurance Co. Limited Company Ltd, in support of its contentions. The Assessing Officer did not accept the contentions of the assessee and accordingly disallowed the amount of ` 51.84 crores, being the amount worked out by the auditors u/s. 14A of the Act. The learned CIT(A), however, deleted the addition by following various decisions rendered by Mumbai Bench of the ITAT on identical issue. Aggrieved, the Revenue has filed this appeal before us.
3. At the time of hearing, it was pointed out that an identical issue was considered in assessee’s own case in relating to A.Y. 2011-12 and the Tribunal has confirmed the order of the learned CIT(A) in deleting identical disallowance made in that year. We have gone through the order passed by the Coordinate Bench in assessee’s own case referred above. For the sake of convenience, we extract below the decision rendered by the Coordinate Bench:-
Brief facts are, the assessee company is engaged in the business of life insurance. For the assessment year under consideration, the assessee had originally filed its return of income on 23rd September 2011, declaring loss of ` 6,56,03,28,402. In the computation of income, accompanying the said return of income, the assessee had voluntarily disallowed an amount of ` 5,58,49,551 under section 14A. However, subsequently, on the basis of decisions of the Tribunal holding that section 14A is not applicable to insurance companies, the assessee filed revised return of income on 29th March 2013, withdrawing the disallowance made under section 14A thereby claiming loss of ` 711,88,77,953. The Assessing Officer, however, while completing the assessment did not accept the claim of the assessee on the reasoning that the Department has not accepted the decision of the Tribunal and filed appeal before the High Court. Being aggrieved of the disallowance made under section 14A r/w rule 8D, assessee preferred appeal before the first appellate authority.
The learned Commissioner (Appeals), after considering the submissions of the assessee in the light of the decisions of the Tribunal placed before him found that the issue is squarely covered in favour of the assessee by the ratio laid down in the cited decision and accordingly, deleted the addition made on account of disallowance under section 14A r/w rule 8D
3 M/s. Reliance Life Insurance Co. Limited
5. The learned Departmental Representative, though, agreed that the issue is covered in favour of the assessee by the decision of the Tribunal, however, submitted, the Assessing Officer made the disallowance under section 14A to keep the issue alive.
The learned Authorised Representative on the other hand, placing strong reliance on the order of the learned Commissioner (Appeals) submitted, the issue is squarely covered in favour of the assessee. In support, he relied upon the following decisions:-
i) ICICI Prudential Life Insurance Co. Ltd. v/s DCIT, & 1616/Mum./2013, dated 26.12.2014; ii) SBI Life Insurance Co. Ltd. v/s JCIT, ITA no.3800, 3801 & 1501/Mum/2008, order dated 23.5.2014; iii) ACIT v/s HDFC Standard Life Insurance Co. Ltd., ITA no.3004/Mum/2012, dated 20.9.2013; iv) ICICI Prudential Life Insurance Co. Ltd. v/s ACIT, 140 ITD 41; v) Birla Sun Life Insurance Co. Ltd. v/s DCIT, ITA no.602/Mum/2009, dated 9.9.2010; vi) M/s. Agriculture Insurance Co. of India Ltd. v/s DCIT, ITA no.3115/Del./2013, dated 1.3.2016; vii) General Insurance Corp. of India v/s ACIT, ITA no.3554/Mum/ 2011, order dated 15.2.2010; viii) JCIT v/s Reliance General Insurance Co. Ltd., ITA no.3085/ Mum./2008, order dated 26.2.2010; ix) Bajaj Alliance General Insurance Co. Ltd. v/s ACIT, 130 TTJ 398, order dated 31.8.2009; and x) Oriental Insurance Co. Ltd. v/s ACIT, 40 SOT 19, order dated 27.2.2009.
We have considered the submissions of the parties and perused the material available on record in the light of the decisions cited before us. Undisputedly, the assessee is engaged in the business of life insurance. The Assessing Officer himself in the assessment order has observed that profits of the assessee has to be computed in terms of section 44 r/w rule 2 of the First Schedule to the Income Tax Act, 1961. We have noted, the Tribunal in a series of decisions, as referred to above, has clearly and categorically held that as the profits of insurance companies is to be computed under section 44, which has an overriding effect on all other provisions of the Act, no disallowance under section 14A r/w rule 8D can be made. In other words, section 14A would not be applicable in respect of an insurance company. In fact, the Department is not disputing the fact that the Tribunal has decided the issue in favour of the assessee. However, as observed by the Assessing Officer, since in respect of other companies, the Department has preferred appeal in the High Court, to keep the issue alive, the Assessing Officer has made the disallowance. Be that as it may, as per the ratio laid down in the decisions of the 4 M/s. Reliance Life Insurance Co. Limited Tribunal referred to above, which still holds the field, provisions contained in section 14A are not applicable to insurance companies by virtue of specific provisions of section 44. That being the case, the disallowance made by the Assessing Officer under section 14A r/w rule 8D has been rightly deleted by the learned Commissioner (Appeals) following the consistent view of the Tribunal in similar nature of cases. Accordingly, we uphold the order of the learned Commissioner (Appeals) by dismissing the grounds raised by the Department.
In the result, appeal is dismissed”.
4. Since the learned CIT(A) has followed the decision rendered by the Coordinate Bench on identical issue and further the Coordinate Bench has confirmed the order of the learned CIT(A) passed in A.Y. 2011-12 in assessee’s own case on identical issue, we do not find any reason to interfere with the order passed by the learned CIT(A) on this issue in this year also.
In the result, appeal filed by the Revenue is dismissed. Order has been pronounced in the Court on 24.10.2017.