GENERAL INSURANCE CORPORATION OF INDIA, MUMBAI v. ASST.C.I.T. RANGE 1(3), MUMBAI

ITA 6260/MUM/2008 | 2006-2007
Pronouncement Date: 10-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 626019914 RSA 2008
Assessee PAN AAACG0615N
Bench Mumbai
Appeal Number ITA 6260/MUM/2008
Duration Of Justice 2 year(s) 1 month(s) 19 day(s)
Appellant GENERAL INSURANCE CORPORATION OF INDIA, MUMBAI
Respondent ASST.C.I.T. RANGE 1(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 10-12-2010
Date Of Final Hearing 16-09-2010
Next Hearing Date 16-09-2010
Assessment Year 2006-2007
Appeal Filed On 22-10-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI BEFORE SHRI P.M.JAGTAP ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) GENERAL INSURANCE CORPORATION OF INDIA SURAKSHA 170 J TATA ROAD CHURCHGATE MUMBAI-400020 PAN: AAACG0615N APPELLANT VS ACIT RANGE 1(3) AAYAKAR BHAVAN M K ROAD MUMBAI-400020 RESPONDENT ASSESSEE BY : SHRI F V IRANI REVENUE BY : SHRI SURENDRA KUMAR O R D E R PER VIJAY PAL RAO JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 28.08.2008 OF THE LEARNED CIT(A)-XXI M UMBAI FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N THIS APPEAL: 1. THE UNDER MENTIONED GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER: . A) THE LD. AO HAS ERRED IN CONFIRMING THE ADDITI ON TO THE APPELLANTS TOTAL INCOME OF AN AMOUNT OF RS.7849093534/- BY THE DCIT ON ACCOUNT OF PROFIT O N SALE OF INVESTMENTS ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 2 . B) WITHOUT PREJUDICE AND IN THE ALTERNATIVE THE CIT(A) ERRED IN FAILING TO CONSIDER THE APPELLANTS ALTERNATIVE GROUND TO THE EFFECT THAT THE APPELLANT SHOULD BE GIVEN THE BENEFIT OF THE EXEMPTION INS SECTION 10(38) OF IT ACT IN RESPECT OF THIS SUM AND THE REBATE UNDER SECTION 88E OF THE ACT AND THE CONCESSIONAL RATE OF TAX UNDER SECTION 111A OF THE ACT IN RESPECT OF THIS SUM. THE CIT(A) FACTUALLY ERRED IN ALLEGING THAT IT WAS AGREED THAT THIS ISSUE WAS COVERED AGAINST THE APPELLANT BY THE CIT(A)S ORDE R FOR THE ASSESSMENT YEARS 2002-03 TO 2004-05 2. THE LD. AO HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.3 73 76 789/- BY THE DCIT ON ACCOUNT OF INVESTMENTS WRITTEN OFF 3. THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.34 00 22 121/- BY THE DCIT ON ACCOUNT OF LOSS ON AMORTIZATION 4 THE LD. CIT(A) ERRED IN CONFIRMING HE ADDITION/DISALLOWANCE OF RS.44 03 609/- ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE U/S 14A THE CIT (A) ERRED IN HOLDING THAT THE AMENDMENT TO SECTION 14A BY THE FINANCE ACT 2006 WAS CLARIFICATORY; 5. THE LD. CIT(A) ERRED IN NOT DIRECTING THE DELETION OF THE INTEREST U/S 234D OF THE ACT CHARG ED UPON THE APPELLANT. THE CIT(A) ERRED IN HOLDING TH AT NO SUBMISSION WAS MADE BY THE APPELLANT ON THIS ISSUE 3. THE APPELLANT IN THIS APPEAL IS A GOVERNMENT OF INDIA CORPORATION AND FOR FILING THE APPEAL BEFORE THIS TRIBUNAL THE APPROVAL OF THE COMMITTEE ON DISPUTES IS TO BE T AKEN BEFORE FILING OF THE APPEAL. THE COD GRANTED THE PERMIS SION TO THE ASSESSEE FOR PURSUING THE GROUNDS OF APPEAL NO.1 T O 4 AND NO PERMISSION HAS BEEN GRANTED BY THE COD FOR GROUNDS OF ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 3 APPEAL NO.5. ACCORDINGLY GROUNDS OF APPEAL NO.5 I S DISMISSED FOR WANT OF PERMISSION OF COD. 4. GROUNDS OF APPEAL NO.1 REGARDING ADDITION ON A CCOUNT OF PROFIT ON SALE OF INVESTMENT. WE HAVE HEARD THE LEARNED AR AS WELL AS THE LEARNED DR AND CONSIDERED THE RELEVA NT RECORD. AT THE OUTSET WE NOTE THAT THIS ISSUE HAS BEEN CO NSIDERED AND ADJUDICATED UPON BY THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO.7437/MUM /2007 VIDE ORDER DATED 14.2.2009. THIS TRIBUNAL HAS ADJU DICATED THIS ISSUE IN PARAGRAPHS 5 TO 8 AS UNDER: 5. THE FIRST GROUND RELATES TO CONFIRMING ADDITION OF RS.4 648 476 597/- ON ACCOUNT OF PROFIT ON SALE OF INVESTMENT. 6. THE LD. A.R. OF THE ASSESSEE STATED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN EARLIER YEARS. COPY OF THE ORDER OF THE TRIBUNAL FOR ASST. YEARS 2002-03 2003 -04 & 2004-05 DECIDED IN I.T.A.NOS. 6500 6501 & 6502/M/05 DATED 22-10-2009 IS ALSO FILED. 7. ON THE OTHER HAND THE LD. D.R. PLACED RELIANCE ON THE ORDER OF THE CIT(A). 8. AFTER CONSIDERING THE SUBMISSIONS AND THE ORDER OF THE TRIBUNAL (SUPRA) WE FIND THAT THIS I SSUE HAD BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. WE NOTE THAT THE TRIBUNAL FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN BAJAJ ALLIANZ GENERAL INSURANCE CO.LTD. DECIDED IN ITA NO.1447/PN/07 VIDE ORDER DATED 31-8-2009 BY WHICH SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE ALLOWED THE APPEALS OF THE PRESENT ASSESSEE FOR THE THREE ASSESSMENT YEARS. THE FINAL FINDINGS OF TH E TRIBUNAL HAVE BEEN RECORDED IN PARAGRAPHS 8 9 & 10 OF ITS ORDER DATED 22-10-2009 WHICH ARE AS UNDE R : ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 4 8. WE HAVE ALSO NOTICED THAT THE LEGISLATURE HAS NOW BROUGHT IN A PROSPECTIVE AMENDMENT WITH EFFECT FROM ASSESSMENT YEAR 2011-12 IN RULE 5(B)(I) OF FIRST SCHEDULE TO THE INCOME- TAX ACT. BY THE VIRTUE OF THIS AMENDMENT PROFITS ON SALE OF INVESTMENTS IN THE CASE OF INSURANCE COMPANIES WILL BE TAXABLE W E F 2011- 12. SINCE THE AMENDMENT SO MADE IN THE STATUTE WHICH CANNOT BE INFERRED TO BE A SUPERFLUOUS AMENDMENT IS WITH EFFECT FROM 2011-12 THE CONCLUSION ARRIVED AT BY THE PUNE BENCH STANDS FURTHER FORTIFIED. THIS FORTIFIES THE STAND TAKEN BY THE CO ORDINATE BENCH IN THE CASE OF BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. (SUPRA) WE UPHOLD THE GRIEVANCE OF THE 9. IN VIEW OF THESE DISCUSSIONS AS ALSO FOLLOWING THE COORDINATE BENCH DECISION IN THE CASE OF BAJAJ ALLIANZ GENERAL INSURANCE COMPANY ASSESSEE. THE PROFITS ON SALE OF INVESTMENT IN THE YEARS BEFORE US WHICH ARE YEAR PRIOR TO THE YEARS WITH EFFECT FROM WHICH PROSPECTIVE AMENDMENT IS MADE ARE NOT TAXABLE IN THE HANDS OF THE ASSESSEE. THE TAXABILITY OF INCOME OF INSURANCE COMPANIES UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION AS GOVERNED BY PROVISIONS OF SECTION 44 READ WITH FIRST SCHEDULE TO THE INCOME- TAX ACT DOES NOT EXTEND TO TAXABILITY OF PROFITS ON SALE OF INVESTMENTS SO FAR AS THE ASSESSMENT YEARS BEFORE US ARE CONCERNED. 10. FOR THE REASONS SET OUT ABOVE WE DIRECT THE ASSESSING OFFICER TO EXCLUDE PROFITS ON SALE OF INVESTMENTS FROM INCOME OF THE ASSESSEE LIABLE TO BE TAXED. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 5 FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR EARLIER YEARS WE ALLOW THE GROUND FOR THE YEAR UNDER CONSIDERATION ALSO. 5. ACCORDINGLY BY FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL WE DECIDE THIS ISSUE IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE. THE ADDITION MADE ON ACCOUNT OF PROFIT ON SALE OF INVESTMENT IS DELETED. 6. GROUNDS OF APPEAL NO.2 AND 3 ARE INTERCONNECTED WITH THE GROUNDS OF APPEAL NO.1. AS PER RULE 5 (B) OF T HE FIRST SCHEDULE OF THE INCOME TAX RULES WHICH WAS OMITT ED BY THE FINANCE ACT WITH EFFECT FROM 1.4.1989 THE AMOUNT E ITHER WRITTEN OFF OR RESERVED IN THE ACCOUNT TO MEET DEPR ECIATION OR LOSS OR REALIZATION OF THE INVESTMENT WAS ALLOWED A S DEDUCTION AND ANY SUM TAKEN CREDIT FOR IN THE ACCOUNTS OF AP PRECIATION OF OR GAIN ON THE REALIZATION OF INVESTMENT WAS TO BE TREATED AS PART OF THE PROFIT AND GAIN. AFTER THE OMISSION OF THIS CLAUSE (B) OF RULE 5 THIS TRIBUNAL HAS HELD THAT THE PROFIT ON SALE OF INVESTMENT CANNOT BE ADDED TO THE TOTAL INCOME O F THE ASSESSEE WHO IS IN THE INSURANCE OTHER THAN LIFE IN SURANCE. THEREFORE ON THE SIMILAR ANALOGY ANY PROVISION OR WRITTEN OFF THE AMOUNT ON ACCOUNT OF DEPRECIATION OR LOSS ON TH E REALIZATION OF INVESTMENT SHALL NOT BE ALLOWED AS DEDUCTION. ACCORDINGLY GROUNDS OF APPEAL NO.2 AND 3 ARE DECID ED AGAINST THE ASSESSEE ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 6 7. GROUNDS OF APPEAL NO.4 REGARDING THE EXPENDITURE U/S 14A. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT RECORD. WE NOTE THAT THIS ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE PUNE BENCH OF THIS TRIBUNAL IN THE CASE OF BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LIMITED V/ S ADD. CIT IN ITA NO.1447/PN/2007 FOR THE ASSESSMENT YEAR 2003 -04 ORDER DATED 31.08.2009. THIS TRIBUNAL IN THE CAS E OF JCIT V/S M/S RELIANCE GENERAL INSURANCE CO. IN ITA NO.3085/MUM/2008 FOR THE ASSESSMENT YEAR 2005-06 VI DE ORDER DATED 26.2.2010 HAS CONSIDERED THIS ISSUE AND DECIDED IN FAVOUR OF THE ASSESSEE. THIS ORDER WAS FOLLOWE D BY THIS TRIBUNAL WHILE DECIDING THE ISSUE IN ITA NO.781/M UM/2007 VIDE ORDER DATED 30.4.2010. THUS THIS ISSUE HAS B EEN CONSISTENTLY DECIDED IN FAVOUR OF THE ASSESSEE AN D AGAINST THE REVENUE BY THIS TRIBUNAL. THE PUNE BENCH OF THIS TRIBUNAL IN THE CASE OF BAJAJ ALLIANZ GENERAL INSUR ANCE COMPANY LIMITED V/S ADD. CIT (SUPRA) HAS DECIDED T HIS ISSUE IN PARAGRAPHS 17 TO 20 AS UNDER : 17. FINALLY THE QUESTION TO BE ANSWERED IS ABOUT THE APPLICABILITY OF S. 14A IN RESPECT OF SALE OF INVES TMENT WHICH IS NOT TAXED UNDER THE SPECIAL CIRCUMSTANCES OF DELETION OF A SUB-RULE FROM THE STATUTE. IT IS NOT QUESTIONED THAT THE IMPUGNED PROFIT WAS NON-TAXABLE PER SE RATHER THE ACCEPTED LEGAL POSITION IS THAT T HE IMPUGNED PROFIT WAS VERY MUCH TAXABLE IN THE PAST. NOW IT HAS BEEN INFORMED THAT THIS CONTROVERSY IN RESPECT OF INSURANCE COMPANY SET AT REST BY A DECISION OF TRIBUNAL DELHI BENCH VERDICT IN THE CA SE OF ORIENTAL INSURANCE CO. LTD. (ITA NOS. 5462 & ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 7 5463/DEL/2003) ASST. YRS. 2000-01 AND 2001-02 ORDER DT. 27TH FEB. 2009 [REPORTED AS ORIENTAL INSURANCE CO. LTD. V. ASSTT. CIT [2010] 130 TTJ (DELHI) 388 : [2010] 38 DTR (DELHI) 225ED.]. THEREFORE CONSIDERING THE VEHEMENT RELIANCE OF LEARNED AUTHORISED REPRESENTATIVE IT IS WORTH TO MENTION AT THE OUTSET ITSELF THAT THE ISSUE NOW STOOD RESOLVED BY THIS LATEST DECISION OF DELHI TRIBUNAL IN THE CASE OF ORIENTAL INSURANCE CO. LTD. (SUPRA) THE RELEVANT PORTION REPRODUCED BELOW : '17. WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IDENTICAL ISSUE AROSE IN ASSESSEE'S OWN CASE FOR ASST. YR. 1985-86. THE TRIBUNAL ACCEPTED THE PLEA OF THE ASSESSEE AND IN FACT THE ISSUE WENT UP TO THE HON'BLE DELHI HIGH COURT IN ASST. YRS. 1986- 87 TO 1988-89 WHICH IS REPORTED AS CIT V. ORIENTAL INSURANCE CO. LTD. [2003] 179 CTR (DELHI) 85 : [2002] 125 TAXMAN 1094 (DELHI) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT S. 44 OF THE ACT IS A SPECIAL PROVISION DEALING WITH THE COMPUTATION OF PROFITS AND GIFTS OF BUSINESS OF INSURANCE. IT BEING A NON OBSTNATE PROVISION HAS TO PREVAIL OVER OTHER PROVISIONS IN THE ACT. IT CLEARLY PROVIDES THAT INCOME FROM INSURANCE BUSINESS HAS TO BE COMPUTED IN ACCORDANCE WITH THE RULE CONTAINED IN THE FIRST SCHEDULE. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT COMPUTED THE PROFITS AND GAINS OF ITS INSURANCE BUSINESS IN ACCORDANCE WITH THE SAID RULES. RELIANCE WAS PLACED ON THE SCOPE OF S. 144 AS HELD IN THE CASE OF GENERAL INSURANCE CORPORATION OF INDIA V. CIT [1999] 156 CTR (SC) 425 : [1999] 240 ITR 139 (SC) WHEREIN THEIR LORDSHIPS OF THE APEX COURT HAVE CATEGORICALLY HELD THAT THE PROVISIONS OF S. 44 BEING A SPECIAL PROVISION GOVERN COMPUTATION OF TAXABLE INCOME EARNED FROM BUSINESS OF INSURANCE. IT MANDATES THE TAX AUTHORITIES TO COMPUTE THE TAXABLE INCOME IN RESPECT OF INSURANCE BUSINESS IN ACCORDANCE WITH THE PROVISIONS OF THE FIRST ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 8 SCHEDULE TO THE ACT. IN THE LIGHT OF THESE THEIR LORDSHIPS OF DELHI HIGH COURT HAVE HELD THAT NO QUESTION OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW SURVIVES FOR THEIR CONSIDERATION. IN OTHER WORDS ORDER OF THE TRIBUNAL HAS BEEN AFFIRMED. FOLLOWING THE SAME REASONING ADDITION MADE BY THE AO IS DELETED. 22. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORDS. THE PROVISIONS OF S. 44 READ AS UNDER : '44. INSURANCE BUSINESS.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 S. 199 OR IN SS. 28 TO 43B THE PROFITS AND GAINS OF ANY BUSINESS OF INSURANCE INCLUDING ANY SUCH BUSINESS CARRIED ON BY A MUTUAL INSURANCE COMPANY OR BY A CO-OPERATIVE SOCIETY SHALL BE COMPUTED IN ACCORDANCE WITH THE RULES CONTAINED IN THE FIRST SCHEDULE.' 23. THE ABOVE PROVISION MAKES IT VERY CLEAR THAT S. 44 APPLIES NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED WITHIN THE PROVISIONS OF THE IT ACT RELATING TO COMPUTATION OF INCOME CHARGEABLE UNDER DIFFERENT HEADS. WE AGREE WITH THE LEARNED COUNSEL THAT THERE IS NO REQUIREMENT OF HEAD-WISE BIFURCATION CALLED FOR WHILE COMPUTING THE INCOME UNDER S. 44 OF THE ACT IN THE CASE OF AN INSURANCE COMPANY. THE INCOME OF THE BUSINESS OF INSURANCE IS ESSENTIALLY TO BE AT THE AMOUNT OF THE BALANCE OF PROFITS DISCLOSED BY THE ANNUAL ACCOUNTS AS FURNISHED IN THE CONTROLLER OF INSURANCE. THE ACTUAL COMPUTATION OF PROFITS AND GAINS OF INSURANCE BUSINESS WILL HAVE TO BE COMPUTED IN ACCORDANCE WITH R. 5 OF THE FIRST SCHEDULE. IN THE LIGHT OF THESE SPECIAL PROVISIONS COUPLED WITH NON OBSTANTE CLAUSE THE AO IS NOT PERMITTED TO TRAVEL BEYOND THESE PROVISIONS. ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 9 24. SEC. 14A CONTEMPLATES AN EXCEPTION FOR DEDUCTIONS AS ALLOWABLE UNDER THE ACT ARE THOSE CONTAINED UNDER SS. 28 TO 43B OF THE ACT. SEC. 44 CREATES SPECIAL APPLICATION OF THESE PROVISIONS IN THE CASES OF INSURANCE COMPANIES. WE THEREFORE AGREE WITH THE ASSESSEE AND DELETE THE ACT AS ACCORDING TO US IT IS NOT PERMISSIBLE TO THE AO TO TRAVEL BEYOND S. 44 AND FIRST SCHEDULE OF THE IT ACT.' 18. IT MAY NOT BE OUT OF PLACE TO MENTION THAT THE RESPECTED CO-ORDINATE BENCH HAS DULY TAKEN THE NOTE OF AN EARLIER DECISION OF THAT VERY BENCH DECIDED I N THE CASE OF THAT VERY ASSESSEE VIDE ORDER DT. 29TH SEPT. 2004 BEARING ITA NOS. 7815/DEL/1989 3607 TO 3609/DEL/1990; 5035/DEL/ 1998 AND 3910/DEL/2000 NAMED AS DY. CIT V. ORIENTAL GENERAL INSURANCE CO. LTD. [2005] 92 TTJ (DELHI) 300. AS SEEN FROM THE PARAS REPRODUCED ABOVE ON DUE CONSIDERATION OF THE RELEVANT PROVISIONS AS APPLICABLE TO RESOLVE THIS I SSUE A CONCLUSION WAS DRAWN THAT SINCE THE COURTS HAVE HELD S. 44 CREATES A SPECIAL PROVISION IN THE CASE S OF ASSESSMENT OF INSURANCE COMPANIES THEREFORE IT WAS NOT PERMISSIBLE TO THE AO TO TRAVEL BEYOND S. 44 OF FIRST SCHEDULE OF IT ACT. 18. THE NEXT COMMON DISPUTE RELATES TO THE ORDER OF THE CIT(A) IN SUSTAINING THE ACTION OF AO IN ALLOWING ONLY 50 PER CENT OF THE MANAGEMENT EXPENSES BY INVOKING THE PROVISIONS OF S. 14A OF THE ACT. THE ADDITION IS MADE BY THE AO ON THE PLEA THAT THE PROVISIONS OF S. 14A WAS INSERTED BY FINANCE ACT 2001 W.E.F. 1ST APRIL 1962. IT IS STATED THAT THE INVESTMENTS MADE BY THE ASSESSEE ARE BOTH TAXABLE AS WELL AS TAX FREE. AN ESTIMATED DISALLOWANCE OF 50 PER CENT OUT OF THE MANAGEMENT EXPENSES INCURRED AND AS CLAIMED IN THE P&L A/C IS TREATED AS EXPENSES INCURRED IN CONNECTION WITH THE LOOKING AFTER TAX-FREE INVESTMENT. ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 10 19. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE INCOME OF THE ASSESSEE IS TO BE COMPUTED UNDER S. 44 R/W R. 5 OF SCH. 1 OF THE IT ACT. SEC. 44 IS A NON OBSTANTE CLAUSE AND APPLIES NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED WITHIN THE PROVISIONS OF THE IT ACT RELATING TO COMPUTATION OF INCOME CHARGEABLE UNDER DIFFERENT HEADS OTHER THAN THE INCOME TO BE COMPUTED UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION'. FOR COMPUTATION OF PROFITS AND GAINS OF BUSINESS OR PROFESSION THE MANDATE TO THE AO IS TO COMPUTE THE SAID INCOME IN ACCORDANCE WITH THE PROVISIONS OF SS. 28 TO 43B OF THE ACT. IN THE CASE OF THE COMPUTATION OF PROFITS AND GAINS OF ANY BUSINESS OF INSURANCE THE SAME SHALL BE DONE IN ACCORDANCE WITH THE RULES PRESCRIBED IN FIRST SCHEDULE OF THE ACT MEANING THEREBY SS. 28 TO 43B SHALL NOT APPLY. NO OTHER PROVISION PERTAINING TO COMPUTATION OF INCOME WILL BECOME RELEVANT. ACCORDING TO THE LEARNED COUNSEL TWO PRESUMPTIONS THAT FOLLOW ON A COMBINED READING OF SS. 14 14A 44 AND R. 5 OF THE FIRST SCHEDULE ARE : (A) THAT NO HEAD-WISE BIFURCATION IS CALLED FOR. THE INCOME INTER ALIA OF THE BUSINESS OF INSURANCE IS ESSENTIALLY TO BE AT THE AMOUNT OF THE BALANCE OF PROFITS DISCLOSED BY THE ANNUAL ACCOUNTS AS FURNISHED TO THE CONTROLLER OF INSURANCE UNDER THE INSURANCE ACT 1938. THE SAID BALANCE OF PROFITS IS SUBJECT ONLY TO ADJUSTMENTS THEREUNDER. THE ADJUSTMENTS DO NOT REFER TO DISALLOWANCE UNDER S. 14A OF THE ACT. (B) PROFITS AND GAINS OF BUSINESS AS REFERRED TO IN (A) ABOVE HAVE ONLY TO BE COMPUTED IN ACCORDANCE WITH R. 5 OF THE FIRST SCHEDULE. 22. SEC. 44 CREATES A SPECIFIC EXCEPTION TO THE APPLICABILITY OF SS. 28 TO 43B. THEREFORE THE PURPOSE OBJECT AND PURVIEW OF S. 14A HAS NO APPLICABILITY TO THE PROFITS AND GAINS OF AN INSURANCE BUSINESS. 21. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY JUSTIFIED THE ACTION OF THE AO AND ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 11 THAT OF THE CIT(A) IN THE LIGHT OF THE CLEAR PROVISIONS OF S. 14A OF THE ACT. SINCE THE VIEW HAS ALREADY BEEN EXPRESSED BY RESPECTED CO-ORDINATE BENCH THEREFORE WE HAVE NO REASON TO TAKE ANY OTHER VIEW EXCEPT TO FOLLOW THE SAME. WITH THE RESULT WE HEREBY ACCEPT THE ARGUMENT OF LEARNED AUTHORISED REPRESENTATIVE TO THE EXTENT THAT IN THE PRESENT SITUATION THE PROVISIONS OF S. 14A NEED NOT TO APPLY WHILE GRANTING EXEMPTION TO AN INCOME EARNED ON SALE OF INVESTMENT PRIMARILY BECAUSE OF THE REASON OF THE WITHDRAWAL OR DELETION OF SUB-R. 5(B) TO FIRST SCHEDULE OF S. 44 OF IT ACT. O NCE WE HAVE TAKEN THIS VIEW THEREFORE THE ENHANCEMENT AS PROPOSED BY LEARNED CIT(A) IS REVERSED AND THE DIRECTIONS IN THIS REGARD ARE SET ASIDE. RESULTANTL Y GROUND NO. 1 IS ALLOWED CONSEQUENT THEREUPON GROUND NO. 2 AUTOMATICALLY GOES IN FAVOUR OF THE ASSESSEE. 9. ACCORDINGLY BY FOLLOWING THE EARLIER ORDERS OF THIS TRIBUNAL WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED.. ORDER PRONOUNCED IN THE OPEN COURT ON 10.12.2010 SD SD (P.M.JAGTAP) (V IJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ON THIS 10 TH DAY OF DECEMBER 2010 SRL:61210 ITA NO. 6260/MUM/2008 (ASSESSMENT YEAR: 2006-07) 12 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI