A Division Bench of the Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that Income from shareholders’ account liable to be taxed as part of life insurance business, thereby granting relief to M/s. Tata AIA Life Insurance Company Ltd.
The assessee,M/s. Tata AIA Life Insurance Company Ltd is a joint venture between Tata Sons and the AIA Group and carries on life insurance business in India in accordance with the regulations prescribed by the Insurance Regulatory and Development Authority of India (IRDA).
The assessee filed its original return of income declaring taxable income of Rs.103 crores. The taxable income was computed as per Rule 2 of the First Schedule in accordance with the regulations contained in Part-I and Part-ll of the Fourth Schedule of the unamended Insurance Act, 1938. The surplus/ (deficit) in this regard is disclosed by assessee in the Form (Old Form 1) in accordance with the Insurance Act, 1938.
The AO combined the surplus as per the technical/ revenue and non-technical/ shareholder accounts as well as added the differential surplus as per New Form I of Rs.87 crores while computing the taxable income. Further, the AO proceeded to disallow the exemptions claimed u/s 10(34) and u/s 10(23AAB) of the Income Tax Act.
The PCIT invoked revisionary powers contending that the order passed by the AO is prejudicial to the interests of the Revenue and proposes to compute tax payable on life insurance business at the rate of 12.5% under section 115B of the Act and tax on other than life insurance business allegedly.
Quashing the revision order, the Bench comprising Amit Shukla, Judicial Member and M Balaganesh, Accountant Member relied on the decision of the Jurisdictional High Court wherein it was held that “Income earned on shareholders’ amount has to be considered as arising out of Life Insurance Business. Moreover, in terms of Section 44 of the Act, such income has to be taxed in accordance with First Schedule.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
