Income Tax Appellate Tribunal - Mumbai
Asst Cit Cir 6(1)(2), Mumbai vs Birla Sun Life Insurance Co. Ltd, Mumbai on 19 February, 2019
IN THE INCOME-TAX APPELLATE TRIBUNAL "B" BENCH MUMBAI
BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND
SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER
ITA No. 3911/Mum/2017 for (Assessment Year 2009-10)
ACIT, Cir-6(1)(2), M/s Birla sun life Insurance Co.
R.No. 563, 5th Floor, Ltd., One Indiabulls Centre,
Aayakar Bhavan, Vs. Tower-1, 15th & 16th Floors,
M.K. Road, Churchgate, Jupiter Mill Compound, 841,
Mumbai-400020. Senapati Marg, Elphinston Road,
Mumbai-400013.
PAN: AABCB4623J
Appellant Respondent
Appellant by : Dr. Narender Kumar (DR)
Respondent by : Shri Yogesh Thar with
Shri Aditya Gosalia (AR)
Date of Hearing : 19.02.2019
Date of Pronouncement : 19.02.2019
ORDER UNDER SECTION 254(1)OF INCOME TAX ACT
PER PAWAN SINGH, JUDICIAL MEMBER;
1. This appeal by revenue is directed against the order of ld. Commissioner of Income-tax (Appeals)-12, Mumbai [for short the ld. CIT(A)] dated 22.03.2017, which in turn arises from the assessment order passed under section 143(3) on 30.03.2016 for Assessment Year 2013-14. The assessee has raised the following grounds of appeal:
1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that AO cannot make a disallowance u/s 14A of the Act in respect of income from dividend."
2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made on account of negative reserves of Rs.3634,99,75,000/- by not appreciating the fact that the negative reserve cannot be taken as zero as the same is not in accordance with the Insurance Act 1938 and IRDA Regulations."
ITA No. 3911 Mum 2017-M/s Birla sun life Insurance Co. Ltd.
3. The Appellant prays that the order of the CIT (Appeals) on the above grounds be set aside and that of the AO be restored.
2. At the outset of hearing, the ld. Authorized Representative (AR) of the assessee submits that the grounds of appeal raised by assessee are covered in favour of assessee either in assessee's own case or by the decision of Hon'ble High Courts. Ground No.1 relates to disallowance under section 14A. The ld. AR of the assessee submits that this ground of appeal is covered by the decision of Tribunal in assessee's own case for Assessment Year 2012-13 and 2014-15, wherein the Tribunal while following the order of Assessment Year 2004-05 granted the relief to the assessee. The ld. AR of the assessee furnished the copy of decision of Tribunal in assessee's own case in ITA No. 681/Mum/2017 dated 31.10.2018 and ITA No. 6390/Mum/2017 for Assessment Year 2012-13 and 2014-15 respectively. The ld. AR of the assessee also furnished the decision of Tribunal for Assessment Year 2004-05 in ITA No. 602/Mum/2009 dated 09.09.2010.
3. On the other hand, the ld. Departmental Representative (DR) for the revenue supported the order of lower authorities.
4. We have considered the rival submission of the parties and have gone through the orders of Tribunal in assessee's own case for Assessment Year 2004-05, which was followed in appeal for Assessment Year 2012-13 and 2014-15. The co-ordinate bench of the Tribunal held that it is not permissible for the Assessing Officer to go beyond the scope of section 44, schedule-1 of the Act and make the disallowance by applying section 14A. 2
ITA No. 3911 Mum 2017-M/s Birla sun life Insurance Co. Ltd. We have noted that the co-ordinate bench of Tribunal in appeal for Assessment Year 2012-13 and 2014-15, the co-ordinate bench of Tribunal by following the decision of Assessment Year 2004-05 passed the following order:
"9. We have carefully considered the submissions of the rival parties and perused the material available on record. We find merit in the plea of the ld. Counsel for the assessee that the Assessing Officer after examining the relevant details as discussed in para 5.16 and 5.17 of the assessment order has disallowed the expenses of Rs.30,18,496/- for earning dividend income, therefore, the plea taken by the ld. DR that the issue may be set aside to the file of the Assessing Officer is devoid of any merit. This being so, and keeping in view that the Tribunal in Oriental Insurance Co. Ltd. vs. ACIT (2009) TIOL -172-ITAT-DEL after discussing the identical issue at length has held that sec.44 provides for application of special provisions for computation of profits and gains of insurance business in accordance with Rule 5 of Schedule I and, therefore, it is not permissible to the Assessing Officer to travel beyond sec.44 and Schedule-I and make disallowance by applying sec.14A of the Act. The above order has consistently been followed by the Tribunal in the above three cases relied on by the ld. Counsel for the assessee. In the absence of any distinguishing feature brought on record by the ld. DR we respectfully, following the consistent view of the Tribunal hold that it is not permissible to the Assessing Officer to travel beyond sec.44 and Schedule-I and make A.Y:04-05 disallowance by applying sec.14A of the Act and accordingly the disallowance of Rs.30,18,496/- made by the Assessing Officer and sustained by the ld. CIT(A) is deleted. The ground taken by the assessee is therefore, allowed.
10. Ground No.2 and 3 are against the sustenance of disallowance of expenses of Rs.11.00 lacs for increase of share capital and Rs.2,65,112/- on account of soft ware expenses.
11. The brief facts of the above issues are that during the course of assessment proceeding on examination of balance sheet it was found by the Assessing Officer that the assessee has increased its authorised capital. The assessee was asked to submit the expenses related to increase of share capital and was also asked to explain as to why these expenses should not be disallowed being capital expenses. The Assessing Officer after considering the material available on record and in relying on decisions in Brooke Bond India Ltd. 225 ITR 798(SC), PSIDCL vs. CIT 225 ITR 792(SC) and CIT vs. Hindustan Insecticides Ltd. 250 ITR 338(Del.) disallowed the expenses of Rs.11.00 lacs on account of increase in authorised capital and added to the total income of the assessee . On appeal, the 3 ITA No. 3911 Mum 2017-M/s Birla sun life Insurance Co. Ltd.
ld. CIT(A) while rejecting the claim of the assessee that the assessee's case is covered u/s.44 of the Act upheld the disallowance made by the Assessing Officer.
5. Considering the decision of Tribunal wherein it was held that while making assessment for insurance companies, it is not permissible for Assessing Officer to travel beyond section 44 and First Schedule and made the disallowance by applying section 14A. We have further noted that ld. CIT(A) granted relief to the assessee by following the decision of Tribunal in assessee's own case for Assessment year 2001-02 and 2004-05 that it is not permissible for Assessing Officer to travel beyond section 44 and First Schedule of the Act and cannot made a disallowance under section 14A. No contrary law is brought to our notice, therefore, respectfully following the decision of co-ordinate bench and consistency, ground no.1 of the appeal is dismissed.
6. Ground No.2 relates to addition on account of negative reserve. The ld. AR of the assessee submits that this ground of appeal is also covered in favour of assessee and against the revenue by various decisions of Hon'ble Bombay High Court as well as the co-ordinate bench of Tribunal. The ld. AR of the assessee furnished the copy of following decisions:
1. CIT v. HDFC Standard Life Insurance Company (ITA No. 548 of 2014) (Bom).
2. CIT v Life Insurance Corporation of India (ITA N 1759 of 2013)(Bom).
3. Life Insurance Corporation of India v. CIT 951 ITR 773) (SC).
4. CIT v. ICICI Prudential Insurance Co. Ltd. (ITA No. 711 read with ITA No. 688) (Bom).
5. ICICI Prudential Insurance Co. Ltd. vs. ACIT (ITA No. 6854/Mum/2010) (Mum).4
ITA No. 3911 Mum 2017-M/s Birla sun life Insurance Co. Ltd.
6. ACIT v. SBI Life Insurance Company Ltd. (ITA No. 2557/Mum/2017).
7. Life Insurance Corporation v. ADIT (ITA No. 6221/Mum/2012) (Mum).
8. HDFC Standard Life Insurance Company Ltd. v. DCIT (ITA No. 2203/Mum/2012) (Mum).
7. On the other hand, the ld. DR for the revenue relied upon the order of Assessing Officer.
8. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that the Assessing Officer while passing the assessment order in para-5.14 of the order recorded that the issue of negative reserve is covered by the decision of Hon'ble Bombay High Court in case of Life Insurance Corporation of India (LIC) for Assessment Year 2007-08, 2008-09 & 2009-10 and in case of ICICI Prudential Insurance Co. Ltd. for Assessment Year 2005-06, 2007-08 & 2008-09. The Assessing Officer recorded that the revenue has not accepted the decision of Hon'ble High Court and made a proposal for file Special Leave Petition before the Hon'ble Supreme Court. The Assessing Officer concluded that the contention of assessee in taking the negative reserve is zero is not tenable as the same is not in accordance with Insurance Act, 1938 and IRDA Regulation. The negative reserve reported by the actuary was added to the surplus of actuarial valuation of Life Insurance business of the assessee and made an addition of Rs. 3634,99,75,000/- on account of negative reserve.
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ITA No. 3911 Mum 2017-M/s Birla sun life Insurance Co. Ltd.
9. We have noted that ld. CIT(A) while following the decision of Hon'ble Bombay High Court in ICICI Prudential Insurance Co. Ltd. in ITA No. 711, 688 of 2013 granted relief to the assessee.
10. We have further noted that Hon'ble Bombay High Court in case of CIT v. HDFC Standard Life Insurance in ITA No. 548 of 2014 dated 10.10.2016 while considering the similar question of law followed its earlier decision in ICICI Prudential Insurance Co. Ltd. (supra). Considering the consistent decision of Hon'ble jurisdictional High Court, we do not find any merit in the ground of appeal raised by revenue. No contrary decision is brought to our notice to take other view. In the result, ground no.2 of the appeal is also dismissed.
11. In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 19/02/2019.
Sd/- Sd/-
MANOJ KUMAR AGGARWAL PAWAN SINGH
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 19.02.2019
SK
Copy of the Order forwarded to :
1. Assessee
2. Respondent
3. The concerned CIT (A)
4. The concerned CIT
5. DR "B" Bench, ITAT, Mumbai
6. Guard File
BY ORDER,
Dy./Asst. Registrar
ITAT, Mumbai
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