Bajaj Allianz General Insurance Company Ltd., v. Addl.CIT. Range-1, Pune,

ITA 1579/PUN/2008 | 2002-2003
Pronouncement Date: 31-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 157924514 RSA 2008
Assessee PAN AABCB5730G
Bench Pune
Appeal Number ITA 1579/PUN/2008
Duration Of Justice 2 year(s) 1 month(s) 19 day(s)
Appellant Bajaj Allianz General Insurance Company Ltd.,
Respondent Addl.CIT. Range-1, Pune,
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-01-2011
Assessment Year 2002-2003
Appeal Filed On 12-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER I.T.A. NO. 1579/PN/2008: A.Y. 2002-03 BAJAJ ALLIANCE GENERAL INSURANCE COMPANY LTD. 1 ST FLOOR GE PLAZA AIRPORT ROAD PUNE-411 013 PAN AABCB 5730 G APPELLANT VS. ASSTT. CIT RANGE 1 PUNE RESPONDENT APPELLANT BY: SHRI P.J. PARDIWALLA AND SMT VASANTI PATEL RESPONDENT BY: SHRI A.S. SINGH ORDER PER SHAILENDRA KUMAR YADAV JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-I PUNE DATED 15-9-2008 FOR A.Y. 2002-03 ON THE FOLLOWING GROUNDS. GROUND NO. 1 THE LEARNED CIT(A) HAS ERRED IN CONCLUDING THAT IN COMPUTING TAXABLE INCOME OF THE APPELLANT DISALLOWANCE UNDER SECTION 14A IS APPLICABLE IN RESPECT OF NON TAXABLE INCOME EARNED BY THE APPELLANT FROM PROFIT ON SALE/REDEMPTION OF INV ESTMENTS. GROUND NO. 2 THE LEARNED CIT(A) HAS ERRED IN COMPUTING DISALLOWA NCE UNDER SECTION 14A OF RS. 228 073 014 AGAINST PROFIT FROM SALE/REDEMPTION OF INVESTMENTS OF RS. 35 920 365 HE LD AS NON TAXABLE ON VARIOUS GROUNDS INCLUDING THE FOLLOWING GROUNDS: I. THE LEARNED CIT(A) HAS ERRED IN CONSIDERING ALL THE EXPENSES RECORDED IN THE FINANCIAL STATEMENTS OF TH E PAGE 2 OF 7 ITA NO. 1579/PN/2008 BAJAJ ALLIANZE A.Y. 2002-03 APPELLANT UNDER THE HEAD 'OPERATING EXPENSES RELATE D TO INSURANCE BUSINESS' AS EXPENSES WHICH NEED TO BE APPORTIONED BETWEEN TAXABLE INSURANCE INCOME AND NO N TAXABLE INCOME FROM PROFIT ON SALE/REDEMPTION OF INVESTMENT. II. THE LEARNED CIT(A) HAS ERRED IN IGNORING THE CONTEN TION OF THE APPELLANT THAT IF AT ALL ANY EXPENDITURE IS DIS ALLOWANCE BY INVOKING SECTION 14A THEN IT COULD ONLY BE DIRE CT EXPENDITURE INCURRED ON THE MEMBERS OF THE INVESTME NT DEPARTMENT OF RS. 1 89 972. III. THE LEARNED CIT(A) HAS ERRED IN IGNORING THE 'NET I NCOME' METHOD OF APPORTIONING EXPENSES SUBMITTED BY THE APPELLANT AS PER WHICH THE DISALLOWANCE UNDER SECT ION 14A AGGREGATES TO RS. 27 CRORE. IV. THE LEARNED CIT(A) HAS ERRED IN FOLLOWING THE 'GROS S TURNOVER' METHOD FOR APPORTIONMENT OF EXPENSES BETW EEN TAXABLE INSURANCE AND INVESTMENT INCOME AND NON TAX ABLE INCOME FROM SALE/REDEMPTION OF INVESTMENTS. V. THE LEARNED CIT(A) HAS ERRED IN JUSTIFYING THE USE OF 'GROSS TURNOVER' METHOD FOR APPORTIONMENT OF EXPENSES BASE D ON THE DECISION OF THE HONORABLE SUPREME COURT IN CONSOLIDATED COFFEE LTD VS. STATE OF KARNATAKA (248 ITR 432) WHEN THE FACTS IN THAT CASE WERE TOTALLY DIFFE RENT FROM THE FACTS IN THE INSTANT CASE. VI. VI. THE LEARNED CIT(A) HAS ERRED IN CONSIDERING 'PR EMIUM RECEIPTS' AS THE TURNOVER FOR INSURANCE INCOME BUSI NESS INSTEAD OF 'SUM ASSURED' UNDER THE 'GROSS TURNOVER' METHOD. VII. VII. THE LEARNED CIT(A) HAS ERRED IN CONCLUDING THA T INVESTMENTS MADE BY THE APPELLANT ARE CLEARLY FINAN CED BY LOAN EVEN THOUGH THE COMPANY DID NOT HAVE ANY BORROWINGS. VIII. VIII. THE LEARNED CIT(A) HAS ERRED IN IGNORING THE APPELLANT'S SUBMISSIONS THAT THE LEARNED ASSESSING OFFICER ('A 0') HAS ERRED IN CONCLUDING THAT NONE OF THE CITATIONS IN T HE SUBMISSIONS OF THE APPELLANT ARE DIRECTLY IN RELEVA NCE TO SECTION 14A AND IN CONCLUDING THAT NO SPECIFIC PLAU SIBLE REASON IS OFFERED BY THE ASSESSEE FOR NOT WORKING O UT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. IX. IX. THE LEARNED CIT(A) HAS ERRED IN IGNORING THE AP PELLANT'S SUBMISSIONS THAT THE LEARNED ASSESSING OFFICER (' A O') HAS ERRED IN CONCLUDING THAT HEAD-WISE INCOME AND EXPEN DITURE ACCOUNTS AND SOURCES OF FUNDS HAVE NOT BEEN MAINTAI NED BY THE APPELLANT. GROUND NO. 3 THE LEARNED CIT(A) HAS ERRED IN CONFIRMING LEVY OF INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT IN RESPECT OF DIF FERENCE IN RETURNED INCOME ARISING ON ACCOUNT OF ORDER OF INSU RANCE. PAGE 3 OF 7 ITA NO. 1579/PN/2008 BAJAJ ALLIANZE A.Y. 2002-03 REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA ('IRD A') ISSUED IN NOVEMBER 2002 THE APPELLANT CRAVES LEAVE TO ADD ALTER VARY OMI T SUBSTITUTE AMEND OR DELETE ONE OR MORE OF THE ABOVE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL SO AS TO ENABLE THE HONORABLE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. 2. AS FAR AS GROUND NO. 1 IS CONCERNED THE ISSUE IS COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1447/PN/ 2007 FOR A.Y. 2003-04 WHEREIN VIDE ITS ORDER DATED 31 ST AUGUST 2009 THE ISSUE HAS BEEN DECIDED AS UNDER: 13. WE HAVE HEARD BOTH THE SIDES AT LENGTH AND ALSO CAREFULLY PERUSED THE MATERIAL PLACED BEFORE US. THE LD. CIT( A) HAS BIFURCATED CERTAIN EXPENDITURE AND ADJUSTED THE SAM E AGAINST THE NON TAXABLE INCOME EARNED ON REALIZATION OF INV ESTMENT. SINCE THE AMOUNT OF EXPENDITURE WAS MORE THAN THE A MOUNT OF INCOME THEREFORE THE RESULTANT FIGURE WAS A NEGATIV E AMOUNT AND THE LOSS WAS NOT ALLOWED TO BE ADJUSTED AGAINST THE INSURANCE BUSINESS INCOME. AT THE OUTSET IT IS WORT H TO MENTION AS POINTED OUT DURING THE COURSE OF HEARIN G THAT THE LD. CIT(A) HAS TAKEN A WRONG FIGURE OF INTEREST AN D BANK CHARGES AS NOTED IN SCHEDULE IV OF OPERATING EXPE NSES RELATED TO INSURANCE BUSINESS FOR THE YEAR ENDED 31 ST MARCH 2003. IT WAS POINTED OUT THAT THE TOTAL AMOUNT OF I NTEREST AND BANK CHARGES WERE RS. 22 41 119/- HOWEVER LD. CIT( A) HAS WRONGLY TAKEN THE FIGURE OF SERVICE CHARGES WHICH WAS RS. 23 81 85 483/-. IT WAS STATED THAT THIS FIGURE IS S UBSTITUTED THEN THE ENTIRE APPROACH OF THE AMOUNT OF DISALLOWA NCE SHOULD GET ALTERED. WE FIND FORCE IN THIS ARGUMENT. SINCE THE GRIEVANCE RELATED TO THE ASCERTAINMENT OF CERTAIN FIGURES OF EXPENSES; AS APPEARED IN THE BOOKS OF ACCOUNTS THEREFORE WE CAN TAKE THE RECOURSE OF DIRECTING THE LD. CIT(A) TO VERIFY THE SAME AND IF FOUND CORRECT MUST RECTIFY THIS MISTAKE HOWEVER IT IS ALSO PERTINENT TO OBSERVE AT THIS JUNCTURE THAT THIS DIR ECTION OF OURS SHALL NOT PREJUDICE IN ANY MANNER THE MAIN GRIEVAN CE OF THE ASSESSEE ABOUT THE APPLICABILITY OF THE PROVISIONS OF SEC. 14A OF I.T. ACT IN THE PRESENT SITUATION. 3. THIS VIEW HAS BEEN FOLLOWED BY A CO-ORDINATE BEN CH OF I.T.A.T. D MUMBAI BENCH OF THE TRIBUNAL IN THE CA SE OF PAGE 4 OF 7 ITA NO. 1579/PN/2008 BAJAJ ALLIANZE A.Y. 2002-03 M/S. RELIANCE GENERAL INSURANCE CO. LTD. VS. DY. CI T IN ITA NO. 781/MUM/2007 FOR A.Y. 2003-04 AND DECIDED T HE ISSUE BY OBSERVING AS UNDER: HAVING HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE TRIBUN AL HAS DISPOSED OFF THIS ISSUE IN THE AFOREMENTIONED O RDER BY HOLDING THAT SECTION 14A CONTEMPLATES AN EXCEPTI ON FOR DEDUCTIONS AS ALLOWABLE UNDER THE ACT U/S 28 TO 43B OF THE ACT. IT HAS FURTHER BEEN HELD THAT SINC E SECTION 44 IS A SPECIAL PROVISION APPLICABLE TO INSURANCE COMPANIES IT IS NOT PERMISSIBLE FOR THE A.O TO TRAVEL BEYOND SECTION 44 AND FIRST SCHEDULE OF T HE INCOME-TAX ACT. THE RESULTANT DISALLOWANCE SUSTAIN ED BY THE LEARNED CIT(A) WAS DELETED BY THE TRIBUNAL. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE HAVING BE EN BROUGHT TO OUR NOTICE BY THE LEARNED DR RESPECTFULL Y FOLLOWING THE PRECEDENT WE OVERTURN THE IMPUGNED ORDER ON THIS ISSUE AND ORDER FOR THE DELETION OF ADDITION OF RS. 75 82 LAKHS. THIS GROUND IS ALLOWE D. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS THIS I SSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 3. GROUND NO. 2 IS REGARDING COMPUTATION OF DIS- PROPORTIONATE DISALLOWANCE U/S 14A AS COMPARED TO T HE NON-TAXABLE INCOME FROM PROFITS ON SALE OF INVESTME NTS. CHALLENGING THE METHOD OF COMPUTING SECTION 14A. TH IS ISSUE HAS GONE ACADEMIC IN THE LIGHT OF OUR DECISIO N ON GROUND NO. 1 BEING DECIDED IN FAVOUR OF THE ASSESSE E ON THE POINT OF DISALLOWANCE U/S 14A AS DISCUSSED ABOVE. 4. GROUND NO. 3 RELATES TO LEVY OF INTEREST U/S 234 B AND 234C IN RESPECT OF DIFFERENCE IN RETURNED INCOME AR ISING ON ACCOUNT OF ORDER DATED 22-11-2002 ISSUED BY INSURAN CE PAGE 5 OF 7 ITA NO. 1579/PN/2008 BAJAJ ALLIANZE A.Y. 2002-03 REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA (IRDA ) (WHICH IS THE GOVERNING BODY FOR INSURANCE COMPANIE S). THE LEARNED AR SUBMITTED THAT SIMILAR MATTER IS SUB-JUD ICE BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WHEREI N THE MATTER WAS TAKEN BY WAY OF A WRIT PETITION AND THE LEARNED AR WAS FAIR ENOUGH TO SUBMIT THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE A.O TO DECIDE IN THE LI GHT OF FINAL OUTCOME OF WRIT CLAIMED TO BE SUB-JUDICE AS PER LA W AVAILABLE AT THE RELEVANT POINT OF TIME. THE LEARN ED DR DID NOT DISPUTE THE SAME. SO IN THE INTEREST OF JUSTI CE WE RESTORE THIS ISSUE TO THE FILE OF THE A.O TO DECIDE THE SAME SUBJECT TO FINAL OUTCOME IN THE WRIT PETITION CLAIM ED TO HAVE BEEN FILED AND SUB-JUDICE BEFORE THE JURISDICT IONAL HIGH COURT AND NOT DISPUTED BY THE LEARNED DR. SIN CE WE ARE RESTORING THIS ISSUE ON A PRELIMINARY GROUND S O WE ARE REFRAINED TO COMMENT ON THE MERITS OF THE CASE. 5. THE ASSESSEE VIDE ITS LETTER DATED 9-11-2010 HAS PRAYED FOR ADMITTING THE FOLLOWING ADDITIONAL GROUN D. THE LEARNED ASSESSING OFFICER WHILE PASSING THE OR DER U/S 143(3)R.W.S. 147 OF THE ACT FOR A.Y. 2002-03 HA S ERRED IN LEVYING INTEREST OF RS. 290.568 U/S 234D O F THE ACT BROUGHT ON STATUTE WITH EFFECT FROM 1-6-20 03 AND APPLICABLE FROM A.Y. 2004-05. 6. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ISSUE RAISED IN THIS ADDITIONAL GROUND IS LEGAL ONE AND H ENCE WE ADMIT THE SAME FOR ADJUDICATION. THE ISSUE RAISED IN THIS PAGE 6 OF 7 ITA NO. 1579/PN/2008 BAJAJ ALLIANZE A.Y. 2002-03 GROUND IS WITH REGARDS TO CHALLENGING INTEREST U/S 234D OF THE ACT. THE ASSESSING OFFICER WHILE RAISING DEMAN D FOR A.Y. 2003-04 HAS LEVIED INTEREST AT RS. 2 90 568/- U/S 234D OF THE ACT. SECTION 234D HAS BEEN INSERTED IN THE ACT VIDE FINANCE ACT 2003 W.E.F. 1-6-2003. THE I.T .A.T. SPECIAL BENCH IN THE CASE OF ITO VS. EKTA PROMOTERS PVT. LTD. (305 ITR 1) CAME TO BE IMPLIEDLY APPROVED BY H ONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. JACOBS CIVI L INCORPORATED ITA NO. 491 OF 2008 INTER ALIA IT IS HELD THAT THE PROVISIONS OF SECTION 234D HAS NO RETROSPECTIVE APPLICABILITY AND HENCE NO INTEREST BE LEVIABLE UPT O A.Y. 2003-04. THE SPECIAL BENCH IN THE CASE OF EKTA PRO MOTERS PVT. LTD. (SUPRA) HAS ALSO HELD THAT INTEREST U/S 2 34D COULD NOT BE CHARGED FOR ASSESSMENT YEARS PRIOR TO A.Y. 2 004-05 EVEN THOUGH THE REFUND FOR SUCH EARLIER YEARS HAVE BEEN RECEIVED AFTER 1-6-2003. WE ARE AWARE THAT KERALA HIGH COURT IN THE CASE OF CIT VS. KERALA CHEMICAL AND PR OTEINS LTD. (325 ITR 1) HAS TAKEN A CONTRARY VIEW. IT IS SETTLED LEGAL POSITION THAT IN CASE THERE ARE TWO CONTRARY VIEWS ON A PARTICULAR ISSUE THE VIEW WHICH FAVOURS THE ASSE SSEE SHOULD BE ADOPTED. IN VIEW OF ABOVE INTEREST U/S 234D IS NOT JUSTIFIED AND THE SAME IS DIRECTED TO BE DELETE D. PAGE 7 OF 7 ITA NO. 1579/PN/2008 BAJAJ ALLIANZE A.Y. 2002-03 7. IN THE RESULT THE APPEAL IS PARTLY ALLOWED AS I NDICATED ABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY 2011. SD/- SD/- (G.S. PANNU) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER PUNE DATED THE 31 ST JANUARY 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT- (A) I PUNE 4. THE CIT I PUNE 5. THE D.R B BENCH PUNE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE