ICICI Lombard General Insurance Co. Ltd. v. Assistant Commissioner of Incometax

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The Tax PublishersITA No. 2398 (Mum.) of 2009 2013 TaxPub(DT) 0147 (Mum-Trib) : (2013) 154 TTJ 0083 : (2012) 054 SOT 0538 : (2013) 082 DTR 0379 INCOME TAX ACT, 1961 --Insurance business--Income from business Profit on sale of investment--Assessee-company engaged in insurance business reduced the gain on sale of investment while calculating profit or loss of business in view of Circular No. 528, dated 16-12-1998 issued by CBDT and deletion of rule 5(b) by Finance Act, 1988. Assessing officer disputed the same holding that that the amendment by the Finance Act, 1988 was made whereby sub-rule (b) of Rule 5 of First Schedule had been deleted due to the reasons because corresponding amendment was also made in the Insurance Act whereby the Insurance Companies had to decide to include the income on sale of investments in the P&L account prepared in compliance with the Insurance Act and, therefore, once the profit on sale of investment was included in the P&L account prepared as per the Insurance Act and copy of which is required to be furnished to the Controller of Insurance, then no adjustment is required to be made as per the provisions of section 44 read with First Schedule. As per the Circular No.525 dated 16-12-1988, the amendment had been brought with the object to enable the general insurance company and its subsidiaries and not for other private Insurance companies like the assessee. Therefore, the said circular cannot be applied in the case of the assessee. Held: Was not justified in various decisions Tribunal had taken view that the amendment vide Finance Act, 1988 with effect from the sub-rule (b) of rule 5 of First Schedule was omitted with the purpose to grand exemption to the insurance companies with regard to the profit on sale of investments as per Circular No. 528, dated 16-12-1988. Income Tax Act, 1961 Section 44 Income Tax Rules, 1961 Rule 5 INCOME TAX ACT, 1961 --MAT--Applicability of section 115JBInsurance Act--Assessee contended that insurance companies are required to prepare their accounts as per Insurance Act and not as per companies Act therefore, section 115JB was not applicable because profit and loss account was not required to be prepared as per the part II of schedule VI of Companies Act, which was basic requirement for computation of book profit. Further amendment had been brought by Finance Act, 2012 with effect from 1-4-2013 whereby sub-section 92) had been substituted therefore, prior to 1-4-2013 section 115JB cannot be applied. Assessing officer viewed that as per section 115JB every company was required to prepare its accounts as per schedule VI of Companies Act, 1956. *Held:* ,/i>Was not justified as assessee prepared its accounts in view of accounting policies under insurance Act, therefore, there was no possibility of preparing accounts in accordance with Part II and III of Schedule VI of Companies Act then section 115JB cannot be applied and also section 115JB was amended with effect from 1-4-2013 therefore, prior to 1-4-2013 section 115JB cannot be applied in case of insurance, banking, electricity and other class of companies. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA No. 2398 (Mum.) of 2009
2013 TaxPub(DT) 0147 (Mum-Trib) : (2013) 154 TTJ 0083 : (2012) 054 SOT 0538 : (2013) 082 DTR 0379

INCOME TAX ACT, 1961

--Insurance business--Income from business Profit on sale of investment--Assessee-company engaged in insurance business reduced the gain on sale of investment while calculating profit or loss of business in view of Circular No. 528, dated 16-12-1998 issued by CBDT and deletion of rule 5(b) by Finance Act, 1988. Assessing officer disputed the same holding that that the amendment by the Finance Act, 1988 was made whereby sub-rule (b) of Rule 5 of First Schedule had been deleted due to the reasons because corresponding amendment was also made in the Insurance Act whereby the Insurance Companies had to decide to include the income on sale of investments in the P&L account prepared in compliance with the Insurance Act and, therefore, once the profit on sale of investment was included in the P&L account prepared as per the Insurance Act and copy of which is required to be furnished to the Controller of Insurance, then no adjustment is required to be made as per the provisions of section 44 read with First Schedule. As per the Circular No.525 dated 16-12-1988, the amendment had been brought with the object to enable the general insurance company and its subsidiaries and not for other private Insurance companies like the assessee. Therefore, the said circular cannot be applied in the case of the assessee. Held: Was not justified in various decisions Tribunal had taken view that the amendment vide Finance Act, 1988 with effect from the sub-rule (b) of rule 5 of First Schedule was omitted with the purpose to grand exemption to the insurance companies with regard to the profit on sale of investments as per Circular No. 528, dated 16-12-1988.

Income Tax Act, 1961 Section 44

Income Tax Rules, 1961 Rule 5

INCOME TAX ACT, 1961

--MAT--Applicability of section 115JBInsurance Act--Assessee contended that insurance companies are required to prepare their accounts as per Insurance Act and not as per companies Act therefore, section 115JB was not applicable because profit and loss account was not required to be prepared as per the part II of schedule VI of Companies Act, which was basic requirement for computation of book profit. Further amendment had been brought by Finance Act, 2012 with effect from 1-4-2013 whereby sub-section 92) had been substituted therefore, prior to 1-4-2013 section 115JB cannot be applied. Assessing officer viewed that as per section 115JB every company was required to prepare its accounts as per schedule VI of Companies Act, 1956. Held: ,/i>Was not justified as assessee prepared its accounts in view of accounting policies under insurance Act, therefore, there was no possibility of preparing accounts in accordance with Part II and III of Schedule VI of Companies Act then section 115JB cannot be applied and also section 115JB was amended with effect from 1-4-2013 therefore, prior to 1-4-2013 section 115JB cannot be applied in case of insurance, banking, electricity and other class of companies.