LIFE INSURANCE CORPORATION OF INDIA,MUMBAI vs. ADDL CIT 3(2)(1), MUMBAI

आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue as well as the assessee is in cross appeal against the impugned order dated 11/05/2015 of the Ld. First Appellate Authority, Mumbai. First, we shall take up appeal of the Revenue in wherein, the first and second ground raised pertains to deleting the addition made on account of loss from Jeevan Suraksha Fund ignoring the settled position of law that income includes loss thus the loss form Jeevan Suraksha Fund can be set off against taxable income of the assessee corporation despite the fact that Jeevan Suraksha is covered u/s 10(23AAB) of the Income Tax Act, 1961 (hereinafter the Act) and further ignoring the fact that non-obstante clause in section 44 of the Act is not extended to section 10(23)AAB of the Act.

“18. The object of inserting Section 10(23AAB) as per the Board Circular No.762 dated 18th February 1998 was to enable the assessee to offer attractive terms to the contributors. Thus, the object of inserting Section 10(23AAB) was not with a view to treat the pension fund like Jeevan Suraksha Fund outside the purview of insurance business but to promote insurance business by exempting the income from such fund. Therefore, in the facts of the present case, the decision of the Income Tax Appellate Tribunal in holding that even after insertion of Section 10(23AAB), the loss incurred from the pension fund like Jeevan Suraksha Fund had to be excluded while determining the actuarial valuation surplus from the insurance business under Section 44 of the Income Tax Act, 1961 cannot be faulted. Accordingly, questions (c) and (d) are answered in the affirmative, that is, in favour of the assessee and against the Revenue.” 2.2. It is also noted that the Tribunal vide aforesaid order dated 24/02/2016 observed/held as under:-

“6. It was a common point between the parties that the judgement of the Hon'ble Bombay High Court in the case of the assessee for Assessment Years 2002-03 to 2006-07, which has been relied upon by the CIT(A), continues to hold the field, and therefore, we find no reason to interfere with the impugned decision of the CIT(A). As a consequence, Ground nos. 1 & 1.1 of appeal are dismissed.” We find that in the aforesaid order, the Hon'ble High Court vide order dated 02/08/2011 clearly held that the object of insert in section 10(23AAB), as per Board Circular No.762 dated 18/02/1998, was to enable the assessee to offer attractive terms to the contributors. The order of the Tribunal with respect to section 10(23AAB) that the loss incurred from the pension fund like Jeevan Suraksha Fund has to be excluded while determining the accrual surplus from the insurance business u/s 44 of the Act cannot be faulted, resultantly, the issue was decided in favour of the assessee. Respectfully following the decision from Hon'ble jurisdictional High Court and considering the decision of the Coordinate Bench, we don’t find any infirmity in the conclusion of the First Appellate Authority. Thus, the impugned grounds are dismissed.

3.1. In view of the above, we are reproducing the relevant paras of the order of the Tribunal for ready reference and analysis:-

3.4. We find that the issue of admissibility of provisions of Section 10(34) has been considered by the ‘F’ Bench of Mumbai Tribunal while deciding the appeals filed by the AO in the cases of ICICI Prudential Insurance (ITA No. 7765/Mum/2010 AY. 2005-06 dt. 14- 09-2012). Ground No.3 filed by the AO reads as under: “On the facts and in the circumstances of the case and in law, the learned CIT(A)erred in allowing the dividend income of the assessee of Rs.1,56,09,222/-as exempted under section 10(34)of the Income-tax Act,1961 ignoring the facts that dividend income is considered as part of Income of Life Insurance Business and is included as an income by the actuary.” While dealing with the issue, whether exemption u/s. 10 can be allowed to an Insurance company when income is computed u/s. 44 of the Act, Tribunal held that issue was covered in favour of the assessee and against the AO by the orders of the General Insurance Company of India in where in the issue of deduction u/s. 10 of the Act was considered and allowed following the Hon’ble Bombay High Court Judgment in writ petition No. 2560 of 2011 dt. 01-12-2011. After referring to the order of the GIC of India, which in turn had relied upon the cases of LIC vs. CIT-III Bombay, CIT Vs. New India Assurance Co. Ltd., GIC of India vs. CIT(Supreme Court) Tribunal further held that assessee was entitled to exemption u/s. 10 including the dividend income i.e., exemption available u/s. 10(34) of the Act. We find that facts of the case under consideration are similar to the facts of ICICI Prudential Insurance (supra), decided by the coordinating Bench. Here, we would also like to mention that Hon’ble Jurisdictional High Court in case of GIC of India has discussed and decided the issue as under: ““11. Section 44 of the Income Tax Act, 1961 stipulates as follows: “44:Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head “interest on securities”, “Income from house property”, “Capital gains” or “Income from other sources”, or in section 199 or in sections 28 to (43B), the profits and gains of any business of insurance, including any such business curried on by a mutual insurance company or by a cooperative society, shall be computed in accordance with the rules contained in the First Schedule”. Section 44 provides that the profits and gains of any business of insurance of a mutual insurance company shall be computed in accordance with the rules in the First Schedule. Part ‘A’ of the First Schedule containing Rules I to 4 deals with profits of life insurance business while Part B consisting of Rule 5 deals with computation of profits and gains of Other insurance business. Rule 5 provides as follows: “5. The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the Insurance Act, 1938 (4 of 1938), to be furnished to the Controller of Insurance subject to the following adjustments: (a)Subject to the other provisions of this rule, any expenditure or allowance (including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed) which is not admissible under the provisions of section 30 to (43B) in computing the profits and gains of a business shall be added back; (b)(………) (c)Such amount carried over to a reserve for unexpired risks as may be prescribed in this behalf shall be allowed as a deduction”. The Assessing Officer has in the reasons for reopening the assessment proceeded on the premise that in computing the profits and gains of business for an assessee who carries on general insurance business no other section of the Act would apply and that the computation could be carried out only in accordance with section 44 read with Rule 5 of the First Schedule. In Life Insurance Corporation of India, v. Commissioner of Income Tax Bombay City-III a Division Bench of this Court construed the provisions of section 44 and of the First Schedule. The assessee in that case which carried on life insurance business had made a claim to exemption under section 10(15) and section 19(1). In a reference before the Court, the questions referred included whether in computing the profits and gains of the business of insurance under section 44 read with the First Schedule certain items-which were ordinarily not includible in the total income were rightly included in- the taxable surplus. The Division Bench of this Court held as follows: - - “The question which essentially falls to be - determined in this reference is whether, in view of the provisions in section 44 or rule 2 of the first Schedule, - the Life Insurance Corporation will not be entitled to claim the deductions which a-i-c otherwise admissible in- the- case of an assessee, computation of whose income is go vented by the other provisions of the Act. The argument of Mr. Kolah for the Life Insurance Corporation is that unless there are express provisions which disable the Corporation from claiming the deductions referred to above; the Corporation cannot be deprived of the benefit -of the provisions referred to in the questions Nos. 1 to 6. Section 44, which deals with computation of profits and gains of business of insurance, begins with a non obstante clause, the effect of which is that the provisions of the Act relating to the computation of income chargeable under the head “Interest on securities”, “Income from house property” “Capital gains” Or “Income from other sources”, do not apply in the case of computation of income from insurance business. The effect of the non-obstante clause so far as the earlier part of section 44 is concerned, therefore, is that the provisions of section 44 will prevail notwithstanding the fact that there are contrary provisions in the Act relating to computation of income chargeable under the four heads mentioned in section 44. The only other overriding effect of section 44 is that its provisions operate notwithstanding the provisions of section 191 and of section 28 to 43A. Thus, the only effect of section 44 is that the operation of the provisions referred to therein is excluded in the case of an assessee who carried on insurance business and in -whose case the provisions of rule 2 of the First Schedule are attracted. If the deductions which are claimed by the assessee do not fall within the provisions which are referred to in section 44, it will have to be held that the applicability of those provisions in the case of an assessee whose assessment is governed by section 44 read with rule 2 in the First Schedule- is not excluded”. This judgment is sought to be distinguished by the Assessing Officer while disposing of the objections on the ground that the decision was rendered in the context of an assessee which- carried on life insurance business to whom Rules 1 to 4 of the First Schedule applied whereas in the case of the assessee in this case which carries on general insurance business Rule 5 could apply. According to the Assessing Officer, Rule 5 would not permit any adjustment to the balance of profit as per annual accounts prepared under the Insurance Act, and hence the judgment would not be applicable. The Assessing Officer has clearly not noticed that the decision in Life Insurance Corporation (supra) though rendered in the context of an assessee which carries on life insurance business, followed an earlier decision of a Division Bench of this Court in Commissioner of Income-Tax v. New India Assurance Co Ltd. That was a case of an assessee which carried on non life insurance business. In New India Assurance Co. Ltd. the Division Bench dealt inter alia with the provisions - of section 1 9(7) of the Income Tax Act, 1922. The questions referred to this Court included whether the assessee was entitled to claim an exemption from tax under section 15B and 15C (4) and in respect of interest on a government loan under a notification issued under section 60. Section 10(7) of the Income Tax Act, 1922 provided that notwithstanding anything to the contrary contained in section 8,9,10,12 or 18, the profits and gains of any business of insurance and the tax payable thereon shall be computed in accordance with the rules contained in the Schedule to the Act. The Division Bench held that upon the language of sub-section (7) of section 10 read along with rule 6 it was impossible to hold that the provisions relating to exemptions stood excluded from operation. In that context the Division Bench held as follows: “It is only after the profits and gains of a business are computed that any question of granting exemptions arises and if the latter stage were intended to be excluded by the law we should have thought that a clearer provision than is made in sub-section (7) of section 10 and in rule 6 would have been made”. In the subsequent judgment of the Division Bench in CIT v. Insurance Corporation (supra), the Division Bench noted that there was a difference in the language of section 10(7) of the Act of 1922 when compared with section 44 of the Act of 1961 since section 44 does not refer to the computation of tax but merely to the computation of profits and gains in the business of insurance The Division Bench held that this would however riot make any difference to- the principle laid - - - - --down by the Court in the earlier decision in the case of New India Assurance Co. Ltd. Accordingly, the decision of Life Insurance Corporation (Supra)could not have- been ignored by the Assessing- Officer on the supposition that the decision was rendered in the context of an assessee who carried on life insurance business and was, therefore, not available to an assessee which carries on general insurance business. 12.In General Insurance Corporation of India v. Commissioner of Income- Tax, the Supreme Court considered in an appeal arising out of a judgment of the High Court the issue as to whether a sum of Rs.3 crores, being a provision, for redemption of preference shares, was not liable to be added back in the total income of the assessee for AY 1977-78?. The Supreme Court held that a plain reading of rule 5(a) of the First Schedule made it clear that in order to attract the applicability of the provision the amount should firstly be an expenditure or allowance and secondly it should be one not admissible under the provisions of section 30 to 43A.The Supreme Court held that the sum of Rs.3 crores in that case which was set apart as a provision for redemption of preference shares could not have been treated as an expenditure and hence could not have been added back under rule 5(a). In that context- the Supreme Court held as follows “There is another approach to the same issue. Section 44 of the Income-tax Act read with the rules contained in the First Schedule to the Act lays down an artificial mode of computing the profits and gains of insurance business. For the purpose of income-tax, the figures in the accounts of the assessee drawn up in accordance with the provisions of the First Schedule to the Income-tax Act and satisfying the requirements of the Insurance Act are binding on the Assessing Officer under the Income-tax Act and he has no general power to correct the errors in the accounts of an insurance business and under the entries made. The question whether an assessee who carries on general insurance business would be entitled to avail of an exemption under section 10 did not arise. The issue as to whether the assessee which carries on the business of general insurance would be entitled to the benefit of an. exemption under clauses (10), (23G,) and (33) of section 10 is directly governed by the decision rendered by the Division Bench in. Life Insurance Corporation vs. Commissioner of Income-tax (Supra) following the earlier decision in Commissioner of Income-tax vs. New India Assurance Co. Ltd (supra). The Assessing Officer could not have ignored the binding precedent contained in the two Division Bench decisions of this Court. Moreover, the Assessing Officer in allowing the benefit of the exemption in the order of assessment under section 143(3) specifically relied upon the view taken by the CBDT in its communication dated 21 February 2006 to the Chairman of IRDA. The communication clarifies that th-e exemption available to any other assessee under any clauses of section 10 is also available to a person carrying on non-life insurance business subject to the fulfillment of the conditions, if any, under a particular clause of section 10 under which exemption is sought. It needs to be emphasized that it is not the case of the Assessing Officer that the assessee had failed to fulfill the condition which attached to the provisions of the relevant clauses of section 10 in respect of which the exemption was allowed. This of course is apart- from clause (38) of section 10 where the Assessing Officer had rejected the claim for exemption in the original order of assessment under section 143(3). The Assessing Officer above all was bound by the communication of the CBDT. Having followed that in the order under section 143(3) he could not have taken a different view while purporting to reopen the assessment. Having applied his mind specifically to the issue and having taken a view on the basis of the communication noted earlier, the act of reopening the assessment would have to be regarded as a mere change of opinion which has also not been based on any tangible material. Consequently, we hold that the reopening of the assessment is contrary to law. The Petition would have, therefore, to be allowed”. Respectfully following the above, we hold that the assessee is entitled for exemption under section 10..”

Respectfully following the order of the Hon’ble jurisdictional High Court and taking note of the decision of the coordinating bench (F Bench in the case of ICICI Prudentail Insurance Co.), we reverse the order of the FAA and decide Ground No.1 in favour of the assessee. 3.2. It is also noted that the Hon'ble High Court dismissed the appeal of the Revenue by observing/holding as under:-

“5. Mr.Suresh Kumar learned counsel for the revenue very fairly states that the revenue's appeal on this issue from the order of ITAT in ICICI Prudential Insurance Co.Ltd (supra) to this Court being Income Tax Appeal Nos.710 of 2013 relating to Assessment year 2005-06 was dismissed on 20th July 2015 in view of the above, question (A) does not raise any substantial question of law and accordingly dismissed.”

We find that before the Hon'ble High Court, the ld. counsel for the Revenue fairly agreed that identical issued is covered by the decision in the case of ICICI Prudential Insurance Co. Ltd. as discussed in the para above, therefore, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), resultantly, this ground of the Revenue is also fails.

4. The next ground raised by the Revenue pertains to not appreciating that negative reserves has an impact of reducing the taxable surplus, as per form-1 therefore, corresponding adjustment for negative reserves need to be made to arrive a taxable surplus.

4.1. During hearing, the Ld. CIT-DR, defended the addition made by the Assessing Officer by advancing arguments, which are identical to the ground raised. On the other hand, the Ld. counsel for the assessee contended that this issue is covered in favour of the assessee itself for Assessment Year 2007-08 to 2009-10 order dated 03/04/2013 and the Hon'ble High Court dismissed the appeal of the Revenue vide order dated 15/09/2015 and also the Tribunal dismissed the appeal of the Revenue for Assessment Year 2010-11, vide order dated 24/02/2016.

4.2. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the order of the Tribunal dated 03/04/2013 for ready reference and analysis:-

“4.3.2. We find that in the case of ICICI Prudential Insurance Co.(supra) AO had disallowed negative reserve related to Life Insurance business of the assessee. In appellate proceedings FAA allowed the appeal of the assessee.AO challenged the order of the FAA before the Tribunal, as stated earlier. Disposing his appeal, Tribunal held as under: “After considering the rival submissions and examining the method of accounting and the mandate given by regulations to appoint Actuarial on the concept of mathematical reserves we do not see any reason to interfere with the order of the CIT(A).The mathematical reserve is a part of Actuarial valuation and the surplus as discussed in Form-I under Regualtion 4 takes in to consideration this mathematical reserve also. Therefore the order of the order of the CIT(A) is approved. Moreover the Assessing Officer has no power to modify the amount after actuarial valuation was done, which was the basis for assessment under Rule 2 of 1st Schedule r.w.s.44 of the I.T. Act. The principle laid down by the Hon’ble Supreme Court in LIC vs.CIT 51ITR773 about the power of the Assessing Officer also restricted the scope and adjustment by the AO. In view of this uphold the order of the CIT(A) and dismiss the Revenue’s ground.” Respectfully following the above order of the Coordinating Bench we decide Ground No.2 in favour of the assessee.”

4.3. Similarly, the Hon'ble High Court vide order dated 15/09/2015 dismissed the appeal of the Revenue. The relevant portion from the order is reproduced hereunder:-

“6. In so far as question (B) is concerned, we find that the order of the ITAT has allowed the respondent-assessee's appeal by following its decision in ICICI Prudential Insurance Co. Ltd rendered in respect of Assessment year 2006-07. Mr.Suresh Kumar learned counsel appearing for the revenue very fairly states that the revenue's appeal on this issue from the order of the Tribunal in ICICI Prudential Insurance Co. Ltd being Income Tax Appeal No.711 of 2013 for Assessment year 2006-07 was dismissed on 20th July 2015 by this Court. This inter alia on the ground that the issue stands covered in favour of the respondent-assessee by the decision of the Apex Court in LIC of India vs CIT 51 ITR 773 wherein it has inter alia been held that the Assessing Officer had no power to modify its accounts after Actuarial valuation is done. Accordingly, question (B) also does not give rise to any substantial question of law. Hence, dismissed.”

4.3. It is also noted that the Tribunal vide order dated 24/02/2016 for Assessment Year 2010-11, based upon the above orders, dismissed the appeal of the Revenue.

“9. Before us, it was a common point between the parties that the decision of the Tribunal dt. 3.4.2013 (supra) pertaining to Assessment Year 2009-10 on an identical issue continues to hold the field as it has not been altered by any higher authority. As a consequence, we find no error on the part of the CIT(A) in deleting the impugned addition. Thus, Ground of appeal no. 1.2 raised by the Revenue is also dismissed.”

Respectfully following the aforesaid decisions of the Coordinate Bench of the Tribunal and also from Hon'ble jurisdictional High Court, we affirm the stand taken by the First Appellate Authority, resultantly, the ground taken by the Revenue is having no merit, consequently, dismissed.

5. The next ground raised by the Revenue pertains to deleting the addition made on account of interim bonus paid, ignoring the fact that no deduction on account of interim bonus is required to be made from the total surplus as per the regulation of IDRA, the provisions of Act are not applicable in the case of the assessee.

5.1. During hearing the ld. counsel for the assessee contended that the bonus 95% has to be distributed to the policy holders and remaining 5% goes to the government.

Our attention was invited to section 28 of the LIC Act and para 7.3 (page-18 of the impugned order). The Ld. CIT-DR defended the addition made by the Assessing Officer.

5.2. We have considered the rival submissions and perused the material available on record. Before adverting further, we are reproducing here under section 28 of the Life Insurance Corporation Act, 1956 for ready reference:-

“28. Surplus from life insurance business how to be utilized.-- If as a result of any investigation undertaken by the Corporation under section 26 any surplus emerges, ninety-five per cent of such surplus or such higher percentage thereof as the Central Government may approve shall be allocated to or reserved for the life insurance policy-holders of the Corporation and after meeting the liabilities of the Corporation, if any, which may arise under section 9, the remainder shall be paid to the Central Government or, if that Government so directs, be utilised for such purposes and in such manner as that Government may determine.]

[28A. Profits from any business (other than life insurance business) how to be utilized.-- If for any financial year profits accrue from any business (other than life insurance business) carried on by the Corporation, then, after making provision for reserves and other matters for which provision is necessary or expedient, the balance of such profits shall be paid to the Central Government.] If section 28 is analyzed, with respect to surplus from life insurance business and its utilization, it is clear that 95% of such surplus or such higher percentage thereof, as the central government may approve shall be allocated to or reserve for life insurance policy holders of the corporation and after meeting the liability of corporation, if any, which may arise u/s 9, the reminder shall be paid to the Central Government or if the Central Government so direct, shall be utilized for such purposes and in such manner as the government may determine. Considering the clear language of the section, we direct the Assessing Officer to examine the factual matrix/utilization of the surplus and decide in accordance with law. The assessee be given opportunity to substantiate its claim. Thus, this ground is allowed for statistical purposes.

6.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the order of the Tribunal dated 23/04/2009 (ITA No.4993/Mum/2007) for Assessment Year 2006-07 for ready reference and analysis:-

“The appeal filed by the Revenue is directed against the order of CIT(A)-1 Mumbai passed on 09.05.2007 for the assessment year 2006-07. 2. The grounds raised by the assessee read as under:-

1. On the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the provisions of sec. 115-O were not applicable to the assessee when the amount paid from the profit of the life insurance business to the Central Government under statutory obligation is in the nature of dividend.

2. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.

3. Briefly the facts of the case are that the Assessing Officer passed the order u/s 115-Q read with section 115-O of the Income Tax Act, 1961 determining the distributed dividend at Rs.621,77,05,609/- thereby raising the liability u/s 115-O at Rs.69,76,26,569/- by holding the corporation as deemed to be in default to discharge its liability u/s 115-O on distributed dividend for the income earned from life insurance business. The assessee filed appeal before the CIT(A), who held as under:-

“ 4. I have gone through the order u/s 115Q r.w.s 115-O as well as the ITAT Order dt. 18.12.2006. The facts of the case under reference are similar to those of A.Y. 1998-99 and 2004-05. While deciding the appeal for AY. 2004-05 vide my order in appeal No. CIT(A)-I/IT/170/2004-05 dt. 14.3.2007, the appeal for AY 2004-05 has been allowed, following the order of Hon’ble ITAT, Mumbai holding that the capital of the company is not divided into shares and therefore Central Government cannot be said to be a share holder. The position of Central Government is akin to the sole proprietor of business concern. The finding of the CIT(A) that the Central Government cannot be called a shareholder has also been upheld by the ITAT. The payment made by the assessee to the Central Government could not be treated as dividend within the ambit of definition clause (22) of Sec.2 of I.T. Act.

For the reasons as given above and the detailed reasons given in my order for A.Y. 2004-05 (supra), the appellant was not liable for payment of dividend distributed tax u/s 115-O. Accordingly, it was not deemed to be in default u/s 115Q as well as u/s 115P of I.T. Act, 1961.

6.2. Identically, the Tribunal for Assessment Year 2007-08 and 2008-09, vide order dated 10/07/2013, decided the issue in favour of the assessee, which is also reproduced hereunder for ready reference and analysis:-

“These two appeals are filed by the revenue for the assessment years 2007-08 and 2008-09 against the order of CIT(A)-2, Mumbai dated 06.03.2012. Since common issues are involved, these appeals are considered together and are decided by this common order. For the sake of record, the grounds raised by the revenue in appeal No. for assessment year 2007-08 are extracted as under :

“1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) is correct in deleting the addition made by AO on account of loss from Jeevan Suraksha Fund ignoring the settled position of law that income includes loss and that the loss from Jeevan Suraksha Fund can be set off against taxable income of the assessee corporation despite the fact that Jeevan Suraksha Fund is covered u/s. 10(23AAB) of the IT Act whereby the income including the loss is not includible in the total income. 1.1 Whether on the facts and in circumstances of the case and in law, the ld. CIT(A) is justified in igniting the fact that the non obstante clause in section 44 is not extended to section 10(23AAB) of Income tax Act.

2. Whether on the facts and in circumstances of the case and in law, the ld. CIT(A) was correct in law in holding that provision of 115O read with section-Q of the Act are not applicable in the case of Assessee.”

2. Briefly stated, it is the case of the AO that the assessee corporation declared its income on the basis of actuarial valuation surplus. The assessee claimed set off of deficit of Rs.98,95,87,89,023/- from Jeevan Suraksha Fund. The AO has taken a stand that the income from Jeevan Suraksha Fund does not form part of the total income as per section 10(23AAB) of the Income tax Act. Since surplus or profit from the scheme was exempt from taxation, as a corollary the loss or deficit from any such scheme should not be adjusted against taxable surplus arrived at by the assessee. This issue was originally decided by the ITAT in assessment year 2002-03 to 2006-07 vide order in dated 28.10.2009 in favour of the assessee. The ld. CIT(A), after noticing that this issue was also decided by the Hon'ble Bombay High Court in ITA No.3693, 3623, 3691, 5001 of 2000 dated 02.08.2011 in favour of the assessee confirming the order of ITAT, relied on the above decisions vide para-2.3 and directed the AO to delete the addition on the issue. Since the issue is already crystallized by the decision of the Hon'ble Jurisdictional High Court quoted supra, there is no merit in the revenue’s contentions raised in the grounds. In view of this, the ground is rejected.

3. Ground No. 2 pertains to order of CIT(A) on issue of provisions of section 115 0 r.w.s. 115Q of the Act as not applicable to the assessee. 3.1 Briefly, the case of the Assessing Officer was that the Government of India is a shareholder in the assessee corporation. Therefore, it is liable to pay additional tax @ 15% u/s. 115-0 of the Income-tax Act on the dividend distributed to the Government of India. However, during the appellate proceedings, it was argued that it is not actually in the nature of the dividend as normally understood under the Companies Act because Life Insurance Corporation was created by a Special Act of Parliament. The ITAT, Mumbai has already decided this issue in favour of the assessee corporation in the A.Y. 1998-99 vide its order no. dated 18/12/2006 wherein it was held that the Central Govt. is not a shareholder and the amount paid by the LIC to the Govt. of India in terms of Section 28 and 28A of the LIC Act, 1956 is not dividend as defined under section 2(22) of the Income- tax Act. Similar issue was also decided in the favour of the assessee corporation for the AY. 1999-00 to 2001-02 by the ITAT vide its consolidated order passed on 15/10/2007. Further, the issue has been decided in the favour of the assessee corporation for the A.Y. 2006-07 in ITA no. 4993/M/07 dated 23/4/2009 wherein it has been held that amount paid from the profit of life insurance business to the Central Govt. under the statutory obligation is not in the nature of the dividend. Respectfully following the orders of the ITAT,Mumbai Benches in assessee’s own case as mentioned above, CIT(A) took the view that the provisions of section 115-0 are not applicable in the case of the assessee corporation. The Assessing Officer was directed to delete the addition made on this issue.

4. Since the issue was crystallized in favour of the assessee in earlier years by the decision of the co-ordinate Benches and as the ld. CIT(A) relied on the same while giving relief, we do not see any reason to differ from the findings of the CIT(A). Accordingly ground No.2 is rejected.

5. In the result, appeal is dismissed. ITA No.3939/Mum/12 for Assessment year 2008-09: 6. Similar issues were raised in ground No.1 and 2 in this year also. The ld. CIT(A) following the order in assessment year 2007-08 deleted the additions. Since these two issues are decided in the other appeal in ITA No.3938/Mum/12, for the reasons stated therein, there is no merit in the grounds raised

by the Revenue. Accordingly, they are dismissed.

7. In the result, both the appeals of Revenue are dismissed.”

6.3. In the aforesaid orders, the Tribunal duly examined the factual matrix/provisions of the Act and thereafter dismissed the appeal of the Revenue. The Tribunal in a later decision dated 10/07/2013 also followed the decision of Assessment Year 2006-07. No contrary decision was brought to our notice by the Revenue, thus, we find no infirmity, in the order of the First Appellate Authority, on this issue also, therefore, this ground is dismissed, resultantly, the appeal of the Revenue is partly allowed for statistical purposes.

7.1. During hearing, the ld. CIT-DR contended that this issue is covered against the assessee by the decision of the Tribunal for Assessment Year 2010-11 order dated 07/03/2017. The Ld. counsel for the assessee did not controvert the factual matrix that this issue has been decided against the assessee vide order dated in order dated 07/03/2017.

7.2. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion of the aforesaid order dated 07/03/2017 for ready reference and analysis:-

“This appeal by the assessee is directed against order of Ld. CITA dated. 03.03.2014 and pertains to assessment year 2010-11. 2. The grounds of appeal read as under: i) The CIT-A erred in confirming the action of the AO of adding the income from shareholder’s funds credited directly to the shareholder’s Account. ii) The CIT-A erred in his interpretation of Act, the Insurance Act 1938, the IRDA Act and the IRDA (preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations 2002, the IRDA (Assets, Liabilities and Solvency Margin of Insurers) Regulations 2000. iii) The CIT-A erred in not deleting the interest charged by the AO u/s. 234D of the Act. The Appellant craves leave to add to, amend and /or alter all or any of the above Ground of Appeal.

3. At the outset in this case Ld. Counsel of the assessee fairly conceded that ground no. (i) and (ii) are already decided against the assessee by the decision of this Tribunal in assessment year 2009-10 by order dated 03.04.2013 in & others in assessee’s own case.

4. As regards ground no. (iii) Ld. Counsel of the submitted that he shall not be pressing for this ground.

5. Upon here in both the Counsel of perusing the record we find that ground no. (i) and (ii) are decided by the Tribunal in assessee own case in the order cited above vide para 5 thereof. We may gainfully referred to the concluding portion of the ITAT order as under: 1) We have rival submissions and perused the material on record. Basic question to be decided by us is whether the income respect of shareholders’ account should be taxed in the hands of the assessee or not? The undisputed facts relevant for deciding the issue can be summarised as under: i) LIC was established by the LIC Act,1956, ii) In that year Government of India had contributed Rs. 5 Crores towards capital of the Corporation. iii) No shares were issued by the LIC to Government of India. iv) Assessee corporation had prepared its accounts as per the guidelines issued by competent authorities. v) AO did not tax the sum appearing in the policy-holders’ a/c., whereas amount appearing in the shareholders a/c. was treated as income of the assessee by him and taxed accordingly. 2) We find that the basis for allocation for profit between the shareholder and the Government of India is the provisions of section 28 of the LIC Act. From Page no. 313 and 114 of the paper book it becomes clearly that profit was allocated by the assessee on the basis of a particular formula. There is no doubt that income had accrued to the assessee and same was transferred to the share holders’ account. In our opinion once income is earned by the assessee and later on it is applied for some specific purpose it cannot be treated as charge on profit. We are of the opinion that it is application of income. Preparation of books of accounts as per the Insurance account is different from determining the tax liability under income tax. Income transferred to policy holders’ a/c. was not application of income-it was charge on income and therefore AO had rightly excluded it from taxation. 3) Secondly, income earned by the assessee-corporation on dividend and interest, in a strict sense, cannot be held to be earned from the insurance business. As per the provisions of the Act income from insurance business is exempt from taxation and not every type of income. We agree that initial capital contribution was made by the Government of India in 1955 for carrying out insurance business, but income earned by the assessee as dividend and interest in the year under consideration cannot be termed as income of the Sovereign. It is not part of any tax, duty, cess or any other similar levy by the State, which could be termed asincome of Government of India. LIC cannot claim that it represents Government of India it is one of many a corporations established by Government of India for specific purposes. Income earned by it for carrying of business of Life Insurance is exempt as per the provisions of section 44 of the Act and not because that income of LIC is income of Government of India. 4) We have perused the order of the Tribunal dated 18.12.2006 (ITA2025/Mum/2000-AY. 1998-99. The basic question to be decided in that appeal was whether the assessee could be said to be in default u/s.115-Q of the Act on account of non-payment of tax on distributed profits u/s.115- O of the Act in respect of payment made to central government out of the surplus profit. After discussing facts of the case and the provisions of the sections 115-O and 115-Q of the Act, Tribunal held that payment made by the assessee to the Central Government could not be treated as dividend within the ambit of definition clause 2(22) of the Act, that provisions of section 115-O of the Act were not applicable, that assessee could not be declared as assessee in default u/s.115 Q of the Act. In our opinion, in the case relied upon by the AR of the assessee, question of taxability of particular items of income under the head income from other sources was not before the Tribunal. Therefore, upholding the order of the FAA we decide Ground of appeal no.3 against the assessee.

6. Since facts are identical following the above precedent we uphold the order of Ld. CIT-A. Hence the ground raised in this regard stand dismissed.

7. Ground no. 3 is dismissed as not pressed. In the result this appeal file by the assessee stands dismissed.”

7.3. In the aforesaid order, the Tribunal has already considered the factual matrix and no contrary decision was brought to our notice by the assessee and further the assessee has fairly agreed that this ground is covered against the assessee, therefore, this ground in the appeal of the assessee is dismissed.

Finally, the appeal of the Revenue is partly allowed for statistical purposes, whereas, the appeal of the assessee is dismissed.

This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 30/08/2017.