The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the disallowance under Section 14A of the Income Tax Act 1961 against oriental insurance company holding that head wise bifurcation was not required for the computing income of insurance company.
The assessee, Oriental Insurance Company Ltd filed a return of income declaring total income under normal provisions of the Income Tax Act at Nil and the book profit under Section 115JB of the Income Tax Act which was taken up for scrutiny.
The assessee was a public sector undertaking of Government of India and is in the business of Non-Life Insurance. The assessee offers insurance covers for large projects like power plants, petrochemical, steel and chemical plants. It also offers various insurance products like Motor Policies, Health-Mediclaim/Overseas Mediclaim/ Personal Accident etc.
During the assessment proceedings as in earlier years the following issues cropped up for determination and the same were examined by AO including disallowance under Section 14A of the Income Tax Act.
The AO made additions while following the earlier years and Commissioner of Income Tax Appeals (CIT(A)) had given relief to the assessee in regard to the deletion of addition under Section 14A of the Income Tax Act and deleted 50 % of disallowance on account of expenses incurred on guest house.
Taran Deep Singh, appeared on behalf of the assessee and Sujit Kumar who appeared on behalf of the revenue submitted that at one end assessee was taking benefit of Section 10(38) of the Income Tax Act on other hand pleading for benefits under Section 44 qua Section 14A of the Income Tax Act.
The two-member Bench of Anil Chaturvedi, (Accountant Member) and SH Anubhav Sharma, (Judicial Member) observed as Section 44 of the Income Tax Act had provided a complete code for computation of profit and gain of the business of the assessee insurance company. The assessing officer could not make any adjustments in the profit of the assessee’s business when they were calculated in accordance with the rules contained in first schedule.
The Bench dismissed the appeal placing reliance upon the judgement of Delhi High Court in assessee’s own case for A.Y. 2000-01, 2001-02 which held that in the light of aforesaid provisions of Section 44 of the Income Tax Act no requirement was for head wise bifurcation while computing the income under Section 44 of the Income Tax Act in the case of insurance company. Thus, provisions of Section 14A were held not relevant to make a disallowance.
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