Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income Tax ... vs Hdfc Standard Life Insurance Company ... on 2 August, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
M.A. no.249/Mum./2018
(Arising out of ITA no.4079/Mum./2015)
(Assessment Year : 2011-12)
Dy. Commissioner of Income Tax
................ Appellant
Circle-1(1)(2), Mumbai
v/s
HDFC Standard Life Insurance Co. Ltd.
Raman House, H.T. Parekh Marg
................ Respondent
165, Backbay Reclamation
Mumbai 400 020
M.A. no.250/Mum./2018
(Arising out of ITA no.4078/Mum./2015)
(Assessment Year : 2010-11)
Dy. Commissioner of Income Tax
................ Appellant
Circle-1(1)(2), Mumbai
v/s
HDFC Standard Life Insurance Co. Ltd.
Raman House, H.T. Parekh Marg
................ Respondent
165, Backbay Reclamation
Mumbai 400 020
Assessee by : Ms. Aarti Visanji
Revenue by : Shri Manoj Kumar Singh
Date of Hearing - 17.05.2019 Date of Order - 02.08.2019
2
HDFC Standard Life
Insurance Co. Ltd.
ORDER
PER SAKTIJIT DEY. J.M. The aforesaid applications have been filed by the Revenue seeking rectification of mistakes which have crept into order dated 23rd August 2017, passed in ITA no.4078 & 4079/Mum./2015.
2. As stated in these applications and submitted by the learned Departmental Representative, while disposing of Revenue's appeals, the Tribunal has not adjudicated grounds no.2, 3 and 6, which are common in both the appeals.
3. The learned Authorised Representative also agreed with the aforesaid submissions of the learned Departmental Representative. However, learned Counsel appearing for both the parties have also agreed before us that the issues raised in these grounds are covered by the decision of the Tribunal in assessee's own case as well as in case of another Insurance Company.
4. We have considered rival submissions and perused the material on record. On carefully going through the appeal order passed by the Tribunal, it is noticed that grounds no.2, 3 and 6, which are common in both the appeals have not been dealt with by the Tribunal while disposing off the appeals. However, it is relevant to observe, in the 3 HDFC Standard Life Insurance Co. Ltd.
appeal order itself, the Tribunal has recorded the submissions of the Departmental Authorities to the effect that all the grounds raised by the Revenue in the appeals are covered by the decisions of the Tribunal and Hon'ble Jurisdictional High Court in assessee's own case as well as in case of another Insurance Company viz., ICICI Prudential Insurance Co. Ltd. v/s ACIT, [2013] 140 ITD 41 (Mum.). In fact, in course of hearing of the present applications also, learned Counsels appearing for the parties have agreed that all the grounds raised by the Revenue, including grounds no.2, 3 and 6, are covered by the decision of the Tribunal in assessee's own case. Thus, in view of the aforesaid, there is an inadvertent mistake by the Tribunal in not disposing of grounds no.2, 3 and 6, which comes within the ambit of mistake apparent on the face of record as per section 254(2) of the Act, hence, requires rectification. Since, there is consensus between the parties that grounds which have not been decided earlier are also covered by the decision of the Tribunal in assessee's own case but which could not be decided inadvertently, we proceed to dispose of them in terms of earlier decision of the Tribunal in assessee's own case, in the following manner.
5. After Para-7 of the appeal order, the following paragraphs should be added 7(a) and 7(b):-
4
HDFC Standard Life Insurance Co. Ltd.
"7(a) In grounds no.2 and 3, the Revenue has challenged certain observations of the learned Commissioner (Appeals) with reference to applicability of the unamended Insurance Act, 1983 r/w section 44 of the Act and Rule-2 of the First Schedule. As discussed in Para-6 and 7, of the appeal order, learned Commissioner (Appeals) while deciding the issue relating to adjustment of earlier years surplus as per actuarial valuation had observed that assessee's income has to be computed in terms with section 44 of the Act r/w rule contained under the First Schedule. The aforesaid decision of the learned Commissioner (Appeals) was upheld by the Tribunal following its decision in assessee's own case for the assessment year 2008-09 and also the decision of the bench in ICICI Prudential Insurance Co. Ltd. (supra) has held as under:-
2.5.1 So, we would like to decide the issue of computing surplus / deficit disclosed by the actuarial valuation as per rule 2 of the First Schedule. As per the assessee, surplus / deficit had to be calculated in Form nI of the fourth schedule to the Insurance Act, 1938, prior to its amendment by the Insurance (Amendment) Act, 2002. We find that similar issue had arisen in the case IPLIC (supra). Deciding the matter Mumbai Bench of the Tribunals has dealt the issue as under:-
"27. Respectfully following the above principles and examining the provisions of IT Act, we are of the opinion that the 'actuarial valuation made in accordance with the Insurance Act, 1938' do mean that the actuarial valuation done in accordance with the Insurance Act, 1938. In arriving at the above decision we have also taken into consideration that Rule-5 in Part-B of the first schedule with reference to 'other insurance business' did incorporate the IRDA and its Regulations as amended by the Finance Act 2009 w.e.f. 1.4.2011 which is as under:
"B- Other Insurance Business:5
HDFC Standard Life Insurance Co. Ltd.
Computation of profits and gains of other insurance business.
5. The profits and gains of any business of insurance other than life insurance shall be taken to be the profit before tax and appropriations as disclosed in the Profit & Loss A/c prepared in accordance with the provisions of the Insurance Act, 1938 (.j of 1938) or the rules made thereunder or the provisions of the Insurance Regulatory and Development Authority Act, 1999 (i of 1999) or the Regulations made thereunder 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) (i) any gain or loss on realization of investments shall be added or deducted, as the case may be, if such gain or loss is not credited or debited to the Profit & Loss A/c;
(c) such amount carried over to a reserve for unexpired risks as may be prescribed in this behalf shall be allowed as a deduction '. (emphasis supplied) This indicates that the legislature consciously omitted incorporating the provisions of IRDA or the Regulations made there under in Rule 2 which still refers to the Insurance Act 1938 only.
28. Further, we also notice that the Insurance Act itself was amended along with the introduction of IRDA Act 1999. Along with the said IRDA Act, there are various amendments proposed in the Insurance Act in tune with IRDA Act by amending the relevant provisions of Insurance Act 1938. However, since the Rule 5 was amended in the First schedule by specifically referring to the IRDA Act 1999 or the Regulations made there under, we are of the opinion that the legislature intended not to mod jfy or amend the Rule-2. This indicates the intention of legislature that the actuarial valuation has to be made in accordance with the unamended Insurance Act, 1938. We are of the firm opinion that the unamended provisions of Insurance Act 1938 were only incorporated into the Income Tax Act as far as life insurance business is concerned. Therefore, AO's action in following the format prescribed under the Regulations of IRDA Act is not in accordance with the spirit of Rule-2 and provisions as made applicable 6 HDFC Standard Life Insurance Co. Ltd.
under the Income Tax Act.
30. The First to Fourth Schedule of the Insurance Act 1938 was omitted by the Insurance Amendment Act 2002 after incorporation of the relevant schedules in the IRDA Act. Even though the said schedules were omitted from the Insurance Act, 1938, we are of the opinion that as far as Rule-2 is concerned by the principle of 'Legislation by incorporation' unamended Insurance Act, 1938 is applicable and the actuarial valuation has to be made in accordance with the then existing Part-I of the Fourth Schedule and in conformity with the requirements of Part- II of that schedule. Therefore, assessee's contention that the IRDA Regulations even though are applicable to assessee since it has commenced business after the commencement of the IRDA Act, 1999, for the purpose of Rule-2, the actuarial valuation has to be done in accordance with the Regulations contained in erstwhile Fourth schedule Part-I and Part-II. This is what assessee is contending and merging the accounts of Policy-holders' and Share-holders' account and arriving at the actuarial deficit, without taking into consideration the transfer of funds from the Share- holders' account to Policy-holders' account." Respectfully, following the same we hold that the actuarial valuation has to be done in accordance with the Regulations contained in erstwhile Fourth schedule Part-I and Part-11. Grounds no. i and 2 are decided in favour of the assessee." (emphasis supplied) 7(b) Facts being identical, respectfully following the aforesaid decision of the Co-ordinate Bench in assessee's own case, we uphold the decision of the learned Commissioner (Appeals) on this issue. Grounds raised in both the appeals are dismissed.
6. After paragraph no.8, the following paragraphs are to be added as Para-8(a) and 8(b):-
"8(a) In ground no.6, the Revenue has raised the issue of income arising in share holder's account whether to be 7 HDFC Standard Life Insurance Co. Ltd.
assessed as income from business or income from other sources.
8(b) As could be seen, ground no.6, is an off-shoot of ground no.5. While deciding ground no.5, the Tribunal following the decision in assessee's own case in assessment years 2002-03 to 2009-10 and the decision of this Bench in ICICI Prudential Insurance Co. Ltd. (supra), has held that income arising from the shareholder's account being part of insurance business of the assessee has to be assessed under the head income from business irrespective of nomenclature given by the assessee. In view of the aforesaid, the ground raised by the Revenue being of mere academic importance, does not require adjudication, hence, the ground raised is dismissed."
7. The appeal order dated 23rd August 2017, passed in ITA no.4078 & 4079/Mum./2015, is modified to the extent indicated above.
8. In the result, misc. applications are allowed.
Order pronounced in the open Court on 02.08.2019 Sd/- Sd/-
RAMIT KOCHAR SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 02.08.2019
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HDFC Standard Life
Insurance Co. Ltd.
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
True Copy
By Order
Pradeep J. Chowdhury
Sr. Private Secretary
Assistant Registrar
ITAT, Mumbai