ACIT 1(2)(1), MUMBAI vs. KOTAK MAHINDRA OLD MUTUAL LIFE INSURNCE LTD, MUMBAI

O R D E R

Per Mahavir Singh, JM:

(A.Y. 2012-13) ACIT vs. M/s. Kotak Mahindra Old Mutual Life Insurance Ltd. "1. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) is correct in holding that the income from share holders account of Rs. 32.23 crores has to be treated on par with the income from the insurance business under the policy holders account taxable u/s 44 of the IT. Act.”

3. AO noted that the assessee was required to prepare two separate accounts as per IRDA Regulations, 2002 - Revenue Account of the Policy Holders (Technical Account) and Profit & Loss Account of the Shareholders (non technical account). The Shareholders account showed a surplus of Rs.21.79 crores whereas Policyholders account reflected surplus of Rs.79.62 Crores. AO concluded that the surplus in Shareholders' 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 hence brought forward deficit (loss) in Policy holder account could not be set-off against this income. The stand of AO was assailed before CIT(A) by assessee on the ground that shareholders' funds constituted an ^indivisible part of the assessee's Life Insurance Business and the assessee's sole business purpose was to carry on 'Life Insurance' business as per extant regulations two accounts formed part and parcel of assessee's business. CIT(A) 'the decisions of Tribunal as well as its predecessors in earlier years concluded two accounts could not be taxed separately and allowed the appeal of the assessee, which has been assailed by revenue before us by raising Ground No. 1. The Ld. AR, at the outset drew our attention to the fact that CIT(A) correctly relied upon the decision in assessee's own case for earlier years and the issue was fairly settled in assessee's favor since past many years, by Mumbai Tribunal in order dated 22/03/2013 for AY

(A.Y. 2012-13) ACIT vs. M/s. Kotak Mahindra Old Mutual Life Insurance Ltd. 2007-08 & & 2233/M/2012 order 4ated 09/04/2015 for AY 2008-09. The Ld. DR fairly conceded the position. A perusal of the cited orders of the Tribunal vouch for the averments made by the Ld. AR and accordingly, we dismiss this ground of appeal by holding that both accounts constitute part of Life Insurance Business against which brought forward deficit could be set off.

4. Respectfully following the Tribunal’s decision in the assessee’s own case, we dismiss this ground of Revenue.

5. The next issue in this appeal of Revenue is against the order of CIT(A) allowing exemption u/s. 10(34) of the Act of dividend income. For this, the Revenue has raised following ground nos. 2(a), (b) and (c): 2.(a) "Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred m directing to reduce dividend income (claim by the assessee exempt u/s.10(34) of the Act) from income computed in accordance with Schedule 1 r.w.s. 44 of the Act, despite the fact that income in schedule J is determined by actuary using mathematical formulae and principles and dividend income is not particularly included in these calculations? (b) "Whether on the facts and in the circumstance of the case and in Law, the Ld. CIT(A) erred in directing to reduce dividend income (claim by the assessee exempt u/s. 10(34) of the Act) from income computed in accordance with Schedule 1 r.w.s. 44 of the Act, despite the fact that income in schedule determined under non-obstante clause of Section 44 of the Act." (c) "Whether the Ld. CIT(A) is correct in holding that the provisions of chapter III of the LT, Act pertaining to exempt income as per section 10 was available to the assessee despite the fact that the computation of taxable income of the assessee (life insurance company) was governed by non-obstante provision of section 44 of the IT. Act which included even dividend income under the head income from other source to be dealt as per rules contained in the First Schedule of the I.T. Act?

(A.Y. 2012-13) ACIT vs. M/s. Kotak Mahindra Old Mutual Life Insurance Ltd.

(A.Y. 2012-13) ACIT vs. M/s. Kotak Mahindra Old Mutual Life Insurance Ltd. 9. The next issue in this appeal of the Revenue is against the order of CIT(A) deleting the disallowance u/s. 14A r/w Rule 8D of the Rules. For this, the Revenue has raised following ground no. 3:

3. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) is correct in deleting the disallowance u/s. 14A of the Act made by the Assessing Officer in accordance with the Rule 3D?"

10. At the outset, the ld. Counsel for the assessee stated that this issue is covered in assessee’s own case in for A.Y. 2011-12 vide order dated 20.12.2013. The ld. Counsel for the assessee finally drew our attention to para 5, wherein the Tribunal following the earlier orders stated that no disallowance is to be made in insurance companies which are covered by special provisions of section 44 of the Act. The Tribunal in para 5 held as under:

5. As assessee earned exempt dividend income, it suffered Section 14A disallowance for an amount of Rs.14.94 crores but CIT(A) following earlier orders of various authorities in assessee's own case for past several years, deleted the same. Our attention is drawn to; Tribunal's order in assessee's own case in ITA No. 2901/M/10 order dated 30/09/2011 for AY 2007-08 & ITA Nos. 2004 & 2233/M/12 order dated 09/04/2015 wherein it has been settled that Section 14A disallowance do not apply to insurance companies which are covered by special provisions of Section 44 and hence, by taking same view, we dismiss ground no. 5 of revenue's appeal.

11. Taking a consistent view, we dismiss this appeal of the Revenue.