TARIFF ADVISORY COMMITTEE GENERAL INSURANCE, MUMBAI v. DCIT 2(3), MUMBAI

ITA 7220/MUM/2010 | 2005-2006
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 722019914 RSA 2010
Assessee PAN AABFT9908K
Bench Mumbai
Appeal Number ITA 7220/MUM/2010
Duration Of Justice 9 month(s) 8 day(s)
Appellant TARIFF ADVISORY COMMITTEE GENERAL INSURANCE, MUMBAI
Respondent DCIT 2(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 29-07-2011
Date Of Final Hearing 23-05-2011
Next Hearing Date 23-05-2011
Assessment Year 2005-2006
Appeal Filed On 21-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER & SHRI V. DURGARAO JUDICIAL MEMBER. I.T.A. NO.7220/MUM/2010. ASSESSMENT YEAR : 2005-06. M/S TARIFF ADVISORY COMMITTEE DY. COMMISSIONER OF INCOME TAX GENERAL INSURANCE VS. 2(3) NAGPUR. 2 ND FLOOR ADOR HOUSE 6 K. DUBHASHMARG MUMBAI 400 020. PAN AABFT9908K. APPELLANT RESPONDENT. APPELLANT BY : S/SHRIY.P.TRIVEDI MS. RUPALVORA. RESPONDENT BY : SHRI B. JAYA KUMAR. DATE OF HEARING : 23-05-2011. DATE OF PRONO UNCEMENT : 29-07-2011. O R D E R. PER P.M. JAGTAP A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-6 MUMBAI DATED 18-08-1020. 2. THE ASSESSEE IN THE PRESENT CASE IS A STATUTORY BODY ESTABLISHED UNDER THE INSURANCE ACT 1938 WITH AN OBJECTIVE TO CONTROL AN D REGULATE RATES ADVANTAGES TERMS AND CONDITIONS OF GENERAL INSURANCE BUSINESS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31-10-2 005 DECLARING A LOSS OF RS.1 27 45 297/-. THE SAID RETURN WAS INITIALLY PRO CESSED BY THE AO U/S 143(1) ON 2 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. 20-11-2006. SUBSEQUENTLY HE NOTICED THAT THE INCOM E OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS DECLARED IN THE RETURN WAS R S.5 24 29 158/- AND AFTER ADJUSTING BROUGHT FORWARD LOSSES OF RS.6 51 74 455/ - PERTAINING TO ASSESSMENT YEARS 1997-98 TO 2000-01 THE NET LOSS OF RS.1 27 4 5 297/- WAS DECLARED BY THE ASSESSEE. IT WAS ALSO NOTICED BY THE AO THAT NO RET URNS OF INCOME FOR THE ASSESSMENT YEARS 2001-02 TO 2004-05 WERE FILED BY T HE ASSESSEE. ACCORDING TO HIM THE ASSESSEE THEREFORE WAS NOT ENTITLED FOR THE S ET OFF OF LOSSES OF THE EARLIER YEARS AGAINST THE INCOME OF THE YEAR UNDER CONSIDERATION AND THERE WAS ESCAPEMENT OF INCOME TO THE EXTENT OF RS.5 24 29 158/- AS A RESUL T OF ALLOWANCE OF SUCH SET OFF. HE WAS ALSO OF THE OPINION THAT THE CLAIM OF THE ASSES SEE FOR EXEMPTION FOR FEES COLLECTED FROM ITS MEMBERS AMOUNTING TO RS.12 32 62 516/- AS CLAIMED IN THE RETURN WAS NOT ALLOWABLE SINCE THERE WAS NO PROVISI ON IN THE ACT TO GRANT SUCH EXEMPTION. ACCORDING TO HIM THERE WAS THUS ESCAPEM ENT OF INCOME TO THAT EXTENT ALSO. FOR THESE REASONS AS WELL AS OTHER REASONS RE CORDED BY HIM THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS REOPENED BY THE AO BY ISSUING NOTICE U/S 148 ON 01-12-2008. IN REPLY A LETTER DATED 01-01-2009 WAS FILED BY THE ASSESSEE STATING THEREIN THAT THE RETURN ORIGINALLY FILED BY IT ON 3 1-10-2005 MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO NOTICE U/S 148. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE DETAILS OF RETURNS FILED FOR THE E ARLIER YEARS WERE FURNISHED BY THE ASSESSEE. FROM THE SAID DETAILS THE AO NOTICED THA T THE RETURNS FOR ASSESSMENT YEARS 1997-98 TO 2001-02 WERE FILED BY THE ASSESSEE ONLY AFTER THE RESPECTIVE DUE DATES OF FILING THE RETURNS IN UNAUDITED CASES. SIN CE THE ASSESSEE HAD NOT GOT ITS ACCOUNTS AUDITED THE AO HELD THAT THERE WAS A DELA Y ON THE PART OF THE ASSESSEE IN FILING ITS RETURNS OF INCOME FOR ASSESSMENT YEARS 1 997-98 TO 2001-02 AND THE LOSS CLAIMED IN THE SAID RETURNS WAS HELD TO BE NOT ELIG IBLE TO BE CARRIED FORWARD BY HIM AS PER THE PROVISIONS OF SECTION 139(3). 3 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. 3. AS REGARDS THE CLAIM OF THE ASSESSEE FOR EXEMPTI ON OF ITS INCOME ON THE PRINCIPLE OF MUTUALITY THE AO REQUIRED THE ASSESSE E TO EXPLAIN THE BASIS ON WHICH THE SAID EXEMPTION WAS CLAIMED. IN REPLY A LETTER DATED 08-08-1993 ISSUED BY CIT BOMBAY CITY-I WAS FILED BY THE ASSESSEE WHEREIN THE CIT HAD CONVEYED TO THE ASSESSEE THAT THE BOARD WAS PLEASED TO DECIDE VIDE F.NO.26/57/56-IT(AI) DATED 27- 10-1960 THAT THE AMOUNT RECEIVED BY THE TARIFF COMM ITTEE OF THE GENERAL INSURANCE COUNCIL FOR MANUAL SUBSCRIPTION FEES OR L EVIES PAID BY THE MEMBERS WILL NOT BE TAXABLE U/S 10(6) AND THE SAME WILL BE EXEMP T ON THE GROUND OF MUTUALITY. ACCORDING TO THE AO THE SAID LETTER ISSUED BY THE CIT WAS WITH REFERENCE TO INDIAN INCOME-TAX ACT 1922 AND THE SAME THEREFORE WAS N OT APPLICABLE IN THE CONTEXT OF INCOME-TAX ACT 1961. HE ALSO HELD THAT THE CONCEPT OF MUTUALITY HAS UNDERGONE A SEA-CHANGE SINCE 1973. HE THEREFORE REJECTED THE CLAIM OF THE ASSESSEE FOR EXEMPTION MADE ON THE BASIS OF THE LETTER ISSUED BY CIT ON 08-08-1973 AND ADDED THE AMOUNT OF RS.12 32 62 517/- TO THE TOTAL INCOME OF THE ASSESSEE. ACCORDINGLY THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE AO AT RS.25 48 59 322/- AFTER MAKING ONE MORE ADDITION OF RS.5 36 77 053/- ON ACCOUNT OF DISALLOWANCE OF CONTRIBUTION PAID TO V.R. SCHEME IN THE ASSESSMENT COMPLETED U/S 143(3)READ WITH SECTION 147 VIDE AN ORDER DATED 30-09-2009. 4. AGAINST THE ORDER PASSED BY THE AO U/S 143(3) RE AD WITH SECTION 147 AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEA RNED CIT(APPEALS). IN SUPPORT OF ITS CLAIM THAT INCOME FROM INSPECTION FEE FINES AND PENALTIES RECEIVED DURING THE YEAR CONSIDERATION WAS ITS BUSINESS INCOME AND THE SAME WAS ELIGIBLE FOR SET OFF AGAINST LOSSES CARRIED FORWARD FROM THE EARLIER YEA RS THE FOLLOWING SUBMISSION WAS MADE ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED C IT(APPEALS): TARIFF ADVISORY COMMITTEE IS A STATUTORY BODY EST ABLISHED UNDER THE INSURANCE ACT 1938 (AS AMENDED) AND NOW UNDER THE SUPERVISION AND 4 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. CONTROL OF INSURANCE REGULATORY AND DEVELOPMENT AUT HORITY (IRDA) ACT 1999 WHOSE FUNCTION IS TO CONTROL AND REGULATE RAT ES ADVANTAGE TERMS AND CONDITIONS THAT MAY BE OFFERED BY THE INSURED IN RE SPECT OF GENERAL INSURANCE BUSINESS. IT CONDUCTS INSPECTION OF RATES OF PREMIU M CHARGES BY ITS MEMBERS AND IF THERE IS AN UNDERCUTTING IT IMPOSES FINES L EVIES AND PENALTIES ON ITS MEMBERS. THE MAIN SOURCE OF INCOME OF TAC IS AS UND ER : (A) FEES COLLECTED FROM INSURERS DEALING WITH GENERAL I NSURANCE BUSINESS IN ACCORDANCE WITH SECTION 64(UK) OF THE INSURANCE ACT 1938; (B) INSPECTION FEE / FINES / PENALTIES; (C) INCOME FROM INTEREST ON TERM DEPOSIT WITH SBI; (D) HOUSING AND VEHICLE LOAN INTEREST RECOVERED FROM IT S EMPLOYEES IN ACCORDANCE WITH THE SERVICE CONDITIONS; (E) OTHER MISCELLANEOUS RECEIPTS; (I) IF TARIFF COMMITTEE DECIDES THAT THERE IS A BRE ACH THE SECRETARIAL WILL ADVISE THE INSURANCE TO COLLECT THE SHORTFALL IN PR EMIUM AND RECTIFY THE POLICY OR ALTERNATIVELY CANCEL THE POLICY BY GIVING NOTICE OF CANCELLATION AND ADJUST THE SHORTFALL AGAINST THE REFUND. THE INSURER SHOUL D COMPLY WITH THIS WITHIN 30 DAYS FROM THE DATE OF SECRETARIATS LETTER. (II) IN CASE THE INSURER COLLECTS THE SHORTFALL IN PREMIUM IN FULL/RECTIFIES THE POLICY WITHIN THE TIME LIMIT OF 30 DAYS AS STIPULAT ED ABOVE THE SECRETARIAT WILL IMPOSE A FINE OF RS.1000/- (III) IN CASE THE INSURER DOES NOT COLLECT/FULLY AD JUST THE SHORTFALL WITHIN 30 DAYS AS STIPULATED ABOVE THE SECRETARIAT WILL IMPO SE A FINE EQUIVALENT TO THE SHORTFALL NOT SO COLLECTED SUBJECT TO A MINIMUM FIN E OF RS.1000/-. (IV) DELAY IN PAYMENT OF FINE AS PER (II) OR (III) ABOVE WITHIN 15 DAYS OF INTIMATION BY THE SECRETARIAT WILL ATTRACT A PENALT Y OF RS.15 000/- FOR THE DELAY OF EVERY MONTH OR PART THEREOF IN ADDITION T O THE FINE. BUSINESS INCOME: INSPECTION FEE FINES AND PENALTIES RECEIVED BY TAC IS ITS BUSINESS INCOME. RELIANCE IS PLACED ON- (I) SECTION 28(III) INCOME DERIVED BY A TRADE PR OFESSIONAL OR SIMILAR ASSOCIATION FROM SPECIFIC SERVICES PERFORMED FOR IT S MEMBERS. 5 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. (II) SECTION 44A SPECIAL PROVISION FOR DEDUCTION IN THE CASE OF TRADE PROFESSIONAL OR SIMILAR ASSOCIATION. SEE CIT VS. INDIAN MILLS ASSOCIATION (1982) 134 ITR 68 (CAL) SEE SPORT CLUB OF GUJARAT LTD. VS. CIT (1988) 171 I TR 504 (GUJ). (III) IN A.YS. 1967-68 1968-69 AND 1969-70 THE IT AT HAS ACCEPTED TACS STAND BY DISMISSING THE DEPARTMENTS APPEAL A ND ALLOWED BUSINESS LOSSES TO BE CARRIED FORWARD. (IV) IN A.Y. 2001-02 THE AO HAS HIMSELF ASSESSED TA CS INCOME AS INCOME FROM BUSINESS AND ALLOWED LOSS TO BE CARRIED FORWARD. IT IS SUBMITTED THAT EARLIER YEARS FINDINGS CANNOT ALTERED IN LATER YEARS AS A RESULT OF WHICH CURRENT YEARS INCOME FROM INSPECTIO N FEES FINES AND PENALTIES BE ASSESSED AS BUSINESS INCOME AFTER ALLO WING THE NECESSARY EXPENSES AND LOSSES BROUGHT FORWARD FROM EARLIER YE ARS BE ALLOWED TO BE CARRIED FORWARD. 5. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS THE ASSESSEE ALSO MADE THE FOLLOWING FURTHER SUBMISSION IN SUPPORT OF ITS CLAI M FOR EXEMPTION OF INCOME ON THE GROUND OF MUTUALITY : THE CENTRAL BOARD OF DIRECT TAXES HAS CLARIFIED AS FOLLOWS (VIDE ITS CIRCULAR DATE 27.10.1960): IT HAS BEEN DECIDED BY THE BOARD THAT THE RECEIPTS DERIVED BY THE TARIFF COMMITTEE OF THE GENERAL INSURANCE COUNCIL AND ITS REGIONAL COUNCILS FROM ANNUAL SUBSCRIPTION FEES OR LEVIES PAID BY THE MEM BERS WILL NOT BE TAXABLE U/S 10(6) OF THE INDIAN I.T. ACT AND WILL BE EXEMPT ON THE GROUND OF MUTUALITY. HOWEVER THE RECEIPTS DERIVED BY THE TAR IFF COMMITTEE AND THE REGIONAL COUNCILS FROM OTHER SOURCES SUCH AS PRINT ING CHARGES SPECIAL INSPECTION FEES INTEREST ON CURRENT ACCOUNT AND IN VESTMENTS ETC. WILL HOWEVER ARE TAXABLE AFTER ALLOWING THE ADMISSIBLE EXPENSES IN RESPECT OF THOSE SOURCES OF INCOME. 6. IT WAS CLAIMED BEFORE THE LEARNED CIT(APPEALS) T HAT THE ASSESSEE WAS CONTINUED AS A SUCCESSOR OF TARIFF COMMITTEE OF TH E GENERAL INSURANCE COUNCIL AND ACCORDINGLY IT WAS ENTITLED FOR EXEMPTION GRANT ED BY THE CBDT VIDE LETTER 6 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. DATED 27-10-1960 ON THE GROUND OF MUTUALITY. IT WAS SUBMITTED THAT THERE WAS NO CHANGE IN THE COMPOSITION OR STATUS OF THE TARIFF A DVISORY COMMITTEE WARRANTING A REVIEW OF THE EXEMPTION GRANTED BY THE CBDT. 7. THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE W ERE NOT FOUND ACCEPTABLE BY THE CIT(APPEALS) FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER : (A) CBDTS INSTRUCTIONS WERE ISSUED UNDER THE 1922 INCOME TAX ACT WHEN THE APPELLANT WAS NOT IN EXISTENCE IN ITS PRES ENT FORM. (B) THE APPELLANT IS NOT AN ASSOCIATION AS CLAIME D BY THE APPELLANT BUT A WING OF THE INSURANCE SECTOR REGULATOR NAMELY INSUR ANCE REGULATORY DEVELOPMENT AUTHORITY (IDRA). HENCE THE APPELLANT S CASE IS NOT COVERED BY SEC. 28(III) OR SEC. 44A. (C) CHAIRMAN OF TARIFF ADVISORY COMMITTEE IS EX-OFF ICIO CHAIRMAN OF IRDA SINCE 1999 WHEN IRDA ACT 1999 CAME INTO EXISTE NCE. HENCE THE APPELLANT IS HEADED BY A NOMINEE OF THE GOVERNMENT AND IS NOT CHOSEN FROM AMONGST MEMBERS. AGAIN THE VICE CHAIRMAN OF TAC IS MEMBER (NON LIFE) OF IRDA WHO IS AGAIN APPOINTED BY THE GOVERNMENT OF INDIA. THUS THE CONTENTION OF THE APPELLANT THAT THERE HAS BEEN NO CHANGE IN THE COMPOSITION OR STATUS OF THE TAC EVER SINCE 1960 IS INCORRECT. A REGULATOR OF AN IMPORTANT SECTOR OF THE ECONOMY NAMELY THE INSURAN CE SECTOR CANNOT BE SAID TO BE AN ENTITY TO WHICH THE CONCEPT OF MUTUALITY C OULD APPLY. (D) THE ACCEPTANCE OF THE CBDT CIRCULAR BY THE APPE LLATE/ASSESSING AUTHORITIES IN THE EARLIER YEARS WAS BASED ON INCOM PLETE FACTS BROUGHT TO THEIR NOTICE AND NOT ON COMPLETE EXAMINATION/APPRECIATION OF THE FACTUAL AND LEGAL POSITION. (E) SINCE THE APPELLATE IS A WING OF THE REGULATORY BODY AND NOT AN ASSOCIATION; THE RATIONALE PUT FORWARD BY THE AR FO R ASSESSING THE INCOME OF THE APPELLANT UNDER THE HEAD BUSINESS INCOME IN T ERMS OF SEC. 28(III) AND SEC. 44A FAILS. ALSO SINCE THE APPELLANT IS NOT CA RRYING ON ANY BUSINESS THERE IS NO QUESTION OF ALLOWING CARRY FORWARD OF L OSSES OF EARLIER YEARS. (F) THE FINDINGS OF THE ITAT RELIED UPON BY THE AR ARE NOT RELEVANT HERE SINCE THEY RELATE TO A.YS. 1967-68 1968-69 AND 196 9-70 WHEN THE IRDA WAS NOT IN EXISTENCE. THE LEGAL POSITION HAS SINCE CHANGED AND SO HAS THE CONSTITUTION OF THE APPELLANT. 7 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. 8. FOR THE REASONS GIVEN ABOVE THE LEARNED CIT(APP EALS) HELD THAT THE ASSESSEE WAS NOT ENTITLED FOR EXEMPTION OF ITS INCOME ON THE GROUND OF MUTUALITY. HE THEREFORE UPHELD THE ACTION OF THE AO IN DISALLOWI NG THE CLAIM OF THE ASSESSEE FOR THE SAID EXEMPTION. HE ALSO UPHELD THE ACTION OF TH E AO IN DISALLOWING THE ASSESSEES CLAIM FOR SET OFF OF BROUGHT FORWARD LOS SES PERTAINING TO THE EARLIER YEARS AGAINST THE INCOME FOR THE YEAR UNDER CONSIDERATION ON THE GROUND THAT THE ASSESSEE DID NOT CARRY ON ANY BUSINESS AND ITS ENTIRE INCOME WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS) THE ASSESSEE HAS PREFERRED THIS APPEA L BEFORE THE TRIBUNAL. 9. GROUND NO. 1 TO 6 INVOLVE A COMMON ISSUE RELATIN G TO THE ASSESSEES CLAIM FOR EXEMPTION OF ITS INCOME ON THE GROUND OF MUTUAL ITY WHICH HAS BEEN DISALLOWED BY THE AO AS WELL AS BY THE LEARNED CIT(APPEALS). 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THA T ITS INCOME WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE ON THE GROUND OF MUTUALITY R ELYING ON THE NOTIFICATION F.NO. 26/57/56-IT(AI) DATED 27 TH OCT. 1960 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES. A COPY OF THE SAID CIRCULAR IS PLACED AT PAG E NO. 9 OF THE ASSESSEES PAPER BOOK AND THE RELEVANT PORTION THEREOF AS RELIED UPO N BY THE ASSESSEE IN SUPPORT OF ITS CLAIM IS REPRODUCED BELOW : IT HAS BEEN DECIDED BY THE BOARD THAT THE RECEIPTS DERIVED BY THE TARIFF COMMITTEE OF THE CENTRAL INSURANCE COUNCIL AND ITS REGIONAL COUNCILS FROM ANNUAL SUBSCRIPTIONS FEES OR LEVIES PAID BY THE ME MBERS WILL NOT BE TAXABLE UNDER SECTION 10(6) OF THE INDIAN INCOME-TAX ACT AN D WILL BE EXEMPT ON THE GROUND OF MUTUALITY. HOWEVER THE RECEIPTS DERIVED BY THE TARIFF COMMITTEE AND THE REGIONAL COUNCILS FROM OTHER SOURCES SUCH A S PRINTING CHARGES SPECIAL INSPECTION FEES INTEREST ON CURRENT ACCOUN T AND INVESTMENTS ETC. WILL 8 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. HOWEVER BE TAXABLE AFTER ALLOWING THE ADMISSIBLE E XPENSES IN RESPECT OF THOSE SOURCES OF INCOME. 11. THE AO AS WELL AS THE LEARNED CIT(APPEALS) HOW EVER HAVE NOT ALLOWED THE CLAIM OF THE ASSESSEE FOR EXEMPTION AS ACCORDING T O THEM THE BOARD CIRCULAR RELIED UPON BY THE ASSESSEE IN SUPPORT OF THE SAID CLAIM WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE REASONS GIVEN BY THEM IN SUPPORT ARE THAT THE SAID CIRCULAR WAS ISSUED IN THE CONTEXT OF SECTION 10(6) OF THE 1 922 ACT WHEREAS THE 1961 ACT IS APPLICABLE IN THE CASE OF THE ASSESSEE. OTHER REASO N GIVEN BY THEM IS THAT THE SAID CIRCULAR WAS APPLICABLE TO TARIFF COMMITTEES AND TH E REGIONAL COUNCILS AS THEY EXISTED AT THE RELEVANT TIME AND NOT TO THE ASSESSE E BEING A TARIFF ADVISORY COMMITTEE. AT THE TIME OF HEARING BEFORE US THE LE ARNED COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE RELEVANT PROVISION S OF SECTION 10(6) OF 1922 ACT AND THAT OF SECTION 28(III) OF THE 1961 ACT AND AS RIG HTLY POINTED OUT BY HIM THE SAID PROVISIONS ARE PARI-MATERIA WITH EACH OTHER. MOREOV ER AS POINTED OUT BY HIM FROM THE PROVISIONS OF CLAUSE OF SUB-SECTION (2) OF SECT ION 297 DEALING WITH REPEALS AND SAVINGS ANY NOTIFICATION ISSUED UNDER THE REPEALE D ACT OF 1922 WHICH WAS IN FORCE IMMEDIATELY BEFORE THE COMMENCEMENT OF 1961 A CT SHALL TO THE EXTENT TO WHICH PROVISION HAS NOT BEEN MADE UNDER 1961 ACT C ONTINUE TO BE IN FORCE UNLESS THE SAME IS AMENDED BY THE CENTRAL BOARD. IN THIS R EGARD NEITHER THE AO NOR THE LEARNED CIT(APPEALS) HAS BROUGHT ANY THING ON RECOR D TO SHOW THAT THE CIRCULAR ISSUED UNDER 1922 ACT AND RELIED UPON BY THE ASSESS EE TO CLAIM EXEMPTION WAS SUBSEQUENTLY AMENDED OR WITHDRAWN BY THE CENTRAL BO ARD. 12. IT IS NO DOUBT TRUE THAT TARIFF COMMITTEE AND R EGIONAL COUNCILS FOR THE BENEFIT OF WHOM THE CBDT CIRCULAR DATED 27 TH OCT. 1960 WAS ISSUED HAVE BEEN SUBSEQUENTLY ABOLISHED AND TARIFF ADVISORY COMMITTE E HAS BEEN ESTABLISHED AS PER THE INSURANCE (AMENDMENT) ACT 1968. THE RELEVANT P ROVISIONS OF THE SAID ACT 9 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. HOWEVER CLEARLY SHOW THAT NOT ONLY THE ASSETS OF T HE ERSTWHILE TARIFF COMMITTEE AND REGIONAL COUNCILS HAVE BEEN TAKEN BY THE TARIFF ADV ISORY COMMITTEE BUT EVEN THE FUNCTIONS PERFORMED BY THEM ARE CONTINUED TO BE PER FORMED BY TARIFF ADVISORY COMMITTEE. THE RELEVANT PROVISIONS MAKING THIS POSI TION CLEAR ARE REPRODUCED BELOW : SECTION 64UD(1) : NOTWITHSTANDING ANYTHING CONTAINED IN THIS PART UN TIL THE NAMES OF THE MEMBERS OF THE ADVISORY COMMITTEE ELECTED FOR THE F IRST TIME AFTER THE COMMENCEMENT OF THE INSURANCE (AMENDMENT) ACT 1968 ARE NOTIFIED THE TARIFF COMMITTEE OF THE GENERAL INSURANCE COUNCIL A PPOINTED UNDER REGULATIONS MADE UNDER SUB-SECTION (2) OF SECTION 6 4O AS IT WAS IN FORCE IMMEDIATELY BEFORE THE COMMENCEMENT OF THE INSURANC E (AMENDMENT) ACT 1968 AND IN EXISTENCE ON SUCH COMMENCEMENT (HEREIN AFTER IN THIS PART REFERRED TO AS THE TARIFF COMMITTEE) SHALL CONTINUE TO FUNCTION AND SHALL BE DEEMED TO BE THE ADVISORY COMMITTEE DULY ELECTED UN DER THIS PART AND THE CONTROLLER OF INSURANCE FROM THE COMMENCEMENT OF TH E INSURANCE (AMENDMENT) SHALL BECOME THE CHAIRMAN OF THAT COMMI TTEE WITH EFFECT FROM THE COMMENCEMENT OF THE INSURANCE (AMENDMENT) ACT 1968 AND FUNCTION IS SUCH AND ANY CHAIRMAN OF THE TARIFF CO MMITTEE HOLDING OFFICE IMMEDIATELY BEFORE SUCH COMMENCEMENT SHALL CEASE TO BE THE CHAIRMAN THEREOF FROM THE DATE OF SUCH COMMENCEMENT BUT SHAL L CONTINUE TO BE AN ORDINARY MEMBER OF THE ADVISORY COMMITTEE. SECTION 64UF(1) : ON THE COMMENCEMENT OF THE INSURANCE (AMENDMENT) AC T 1968 ALL THE ASSETS AND LIABILITIES OF THE GENERAL INSURANCE COU NCIL APPEARING TO ITS TARIFF COMMITTEE AND TO ITS REGIONAL COUNCILS AND THEIR SE CTIONAL COMMITTEES EXISTING ON THAT DAY SHALL BE TRANSFERRED TO AND V EST IN THE ADVISORY COMMITTEE. 10 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. SECTION 64UG(1) PAGE 33 UNLESS OTHERWISE EXPRESSLY PROVIDED BY OR UNDER TH IS ACT ALL CONTRACTS AGREEMENTS AND OTHER INSTRUMENTS OF WHAT EVER NATURE SUBSISTING OR HAVING EFFECT IMMEDIATELY BEFORE THE COMMENCEMENT O F THE INSURANCE (AMENDMENT) ACT 1968 AND TO WHICH THE TARIFF COMM ITTEE OR ANY REGIONAL COUNCIL IS A PARTY OR WHICH IS IN FAVOUR O F THAT COMMITTEE OR THAT COUNCIL SHALL BE OF AS FULL FORCE AND EFFECT AGAIN ST OR IN FAVOUR OF THE ADVISORY COMMITTEE AND MAY BE ENFORCED OR ACTED UPO N AS FULLY AND EFFECTUALLY AS IF INSTEAD OF THE TARIFF COMMITTEE OR THE REGIONAL COUNCIL THE ADVISORY COMMITTEE HAD BEEN A PARTLY THERETO OR AS IF THEY HAD BEEN ENTERED INTO OR ISSUED IN FAVOUR OF THE ADVISORY CO MMITTEE. KEEPING IN VIEW THE ABOVE PROVISIONS MAKING IT CLEA R THAT THE TARIFF AVISORY COMMITTEE HAS NOW TAKEN OVER NOT ONLY THE ASSETS AN D LIABILITIES OF THE TARIFF COMMITTEE AND REGIONAL COUNCILS BUT ALSO THE FUNCTI ONS THEREOF WE DO NOT SEE ANY JUSTIFIABLE REASON FOR NOT EXTENDING THE BENEFIT OF THE CBDT CIRCULAR WHICH WAS EARLIER GIVEN TO THE TARIFF COMMITTEE AND REGIONAL COUNCIL TO THE ASSESSEE BEING A TARIFF ADVISORY COMMITTEE. WE THEREFORE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND DIRECT THE A O TO ALLOW THE CLAIM OF THE ASSESSEE FOR EXEMPTION ON PRINCIPLE OF MUTUALITY AS PER THE CBDT CIRCULAR F.NO.26/57/56-IT(AI) DATED 27-10-1960. 13. THE ISSUE RAISED IN GROUND NO. 7 AND 8 RELATES TO THE ASSESSEES ALTERNATIVE CLAIM THAT IF IT IS TREATED AS A WING OF INSURANCE REGULATORY DEVELOPMENT AUTHORITY (IRDA) AS HELD BY THE LEARNED CIT(APPEALS) EXEMPTI ON FROM TAX SHOULD BE GRANTED IF NOT ON THE PRINCIPLE OF MUTUALITY THEN U /S 10(23BBE) AS THE IRDA ENJOYS THE SAID EXEMPTION. 14. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE. EVEN THOUGH IT APPEARS TO US THAT THERE IS MERIT IN THE ALTERNATI VE CLAIM MADE BY THE ASSESSEE THIS 11 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. ISSUE HAS BECOME INFRUCTUOUS AS A RESULT OF OUR DEC ISION ON THE MAIN ISSUE RENDERED ABOVE ALLOWING THE CLAIM OF THE ASSESSEE FOR EXEMPT ION OF ITS INCOME FROM TAX ON THE PRINCIPLE OF MUTUALITY RELYING ON THE BOARD CIR CULAR F.NO.26/57/56-IT(AI) DATED 27-10-1960. WE THEREFORE DISMISS GROUND NO. 7 AND 8 OF THE ASSESSEES APPEAL AS THE ISSUE RAISED THEREIN HAS BECOME INFRU CTUOUS. 15. THE ISSUE RAISED IN GROUND NO. 9 RELATES TO THE ASSESSEES CLAIM FOR SET OFF OF BROUGHT FORWARD LOSSES AMOUNTING TO RS.6 51 74 455/ - WHICH HAS BEEN DISALLOWED BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) . 16. THE SET OFF OF BROUGHT FORWARD LOSSES PERTAININ G TO ASSESSMENT YEARS 1997-98 TO 2000-01 AS CLAIMED BY THE ASSESSEE IN THE YEAR U NDER CONSIDERATION WAS DISALLOWED BY THE AO ON THE GROUND THAT RETURNS OF INCOME FOR THE SAID YEARS WERE FILED BY THE ASSESSEE AFTER THE RESPECTIVE DUE DATE S GIVEN IN SECTION 139(1). AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE I N THIS REGARD THE DUE DATES TAKEN BY THE AO ARE THOSE APPLICABLE TO UNAUDITED CASES. HE HAS CONTENDED THAT THE ASSESSEE IN THE PRESENT CASE WAS REQUIRED TO GET IT S ACCOUNTS AUDITED BY CONTROLLER AND AUDITOR GENERAL OF INDIA (CAG) AND EVEN THOUGH THERE WAS A DELAY ON THE PART OF THE CAG TO AUDIT THE ACCOUNTS OF THE ASSESSEE T HE DUE DATES FOR FILING THE RETURNS IN ITS CASE WERE THOSE APPLICABLE TO AUDIT CASES. W E FIND MERIT IN THIS CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IN VIEW OF CLA USE (II) OF EXPLANATION 2 TO SECTION 139(1) WHICH PROVIDES THAT A PERSON OTHER T HAN A COMPANY WHOSE ACCOUNTS ARE REQUIRED TO BE AUDITED UNDER THIS ACT OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE THE DUE DATES FOR FILING OF THE RETURN WI LL BE THE EXTENDED DATES. THE ASSESSEE IN THE PRESENT CASE WAS UNDER AN OBLIGATIO N TO GET ITS ACCOUNTS AUDITED AND THIS BEING SO THE DUE DATES FOR FILING OF RETURNS AS APPLICABLE TO AUDIT CASES WERE APPLICABLE IN THE CASE OF THE ASSESSEE IRRESPECTIVE OF WHETHER SUCH AUDIT WAS ACTUALLY DONE OR NOT. WE THEREFORE DIRECT THE AO TO CONSIDER THE CLAIM OF THE 12 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. ASSESSEE FOR SET OFF OF BROUGHT FORWARD LOSSES OF T HE EARLIER YEARS BY TAKING SUCH DUE DATES AS ARE APPLICABLE IN AUDIT CASES. IT IS A LSO OBSERVED THAT WHILE CONFIRMING THE AOS ACTION IN DISALLOWING ASSESSEES CLAIM FOR SET OFF OF BROUGHT FORWARD LOSSES THE LEARNED CIT(APPEALS) HAS ADOPTED AN ALT OGETHER DIFFERENT BASIS THAT THE ASSESSEE DID NOT CARRY ON ANY BUSINESS IN THE YEAR UNDER CONSIDERATION. WHILE DOING SO HE APPEARS TO HAVE NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE OF BEING HEARD NOR HAS PASSED ANY WELL REASONED AND WELL DISCUSSED ORD ER ON THIS ISSUE. WE THEREFORE DIRECT THE AO TO EXAMINE THIS ASPECT ALSO WHILE DEC IDING THE ISSUE RELATING TO ASSESSEES CLAIM FOR SET OFF OF BROUGHT FORWARD LOS SES AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEA RD.GROUND NO. 9 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED AS INDICATED ABOVE. 17. THE ISSUE RAISED IN GROUND NO.10 RELATING TO LE VY OF INTEREST U/S 234B IS CONSEQUENTIAL AND THE AO IS ACCORDINGLY DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE ASSESSEE ON THIS ISSUE. 18. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THIS 29 TH DAY OF JULY 2011. SD/- SD/- (V. DURGARAO) (P.M. JAGTA P) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI DATED: 29 TH JULY 2011. WAKODE 13 ITA NO. 7220/MUM/2010 ASSESSMENT YEAR : 2005-06. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR E-BENCH. (TRUE COPY ) BY ORD ER ASSTT. REGISTRAR ITAT MUMBAI BEN CHES MUMBAI.