T.c.a v. The Assistant Commissioner Of Income Tax,Large Tax Payer Unit,Chennai – 600 101

IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved on : 25.10.2021Pronounced on : 18.11.2021 THE HONOURABLEMRS.JUSTICE PUSHPA SATHYANARAYANA and THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ T.C.A.Nos.,839,842,848 ,852,853 and 854 of 2018 andC.M.P.Nos.20685,20688,20700 and 20701 of 2018 andC.M.P.Nos.14584,14585,14587,14581,14588,14595,14596 and 14597 of2021 M/s Cholamandalam MS General Insurance Co.Limited,Dare House,No.2, NSC Bose Road,Chennai – 600 001,PAN AABBC 6633 K....Appellant in T.C.A. No.839 of 2018 / Appellant M/s Cholamandalam MS General Insurance Co.Limited,Chennai – 600 001,PAN AABBC 6633 K....Appellant in T.C.A. No.842 of 2018 / Respondent M/s Royal Sundaram General Insurance Co.Limited,Chennai – 600 001,PAN ...Appellant in T.C.A. No.848 of 2018 (Cause Title accepted vide Court orderdated 13.11.2018 made inC.M.P.Nos.15577to 15584, 15736 to 15745 of 2018) ... T.C.A. No.852 of 2018... T.C.A. No.853 of 2018and ... T.C.A. No.854 of 2018 / Respondent Vs The Assistant Commissioner of Income Tax,Large Tax Payer Unit,Chennai – 600 101....Respondent in T.C.A. No.839 of 2018 / Respondent The Deputy Commissioner of Income Tax,Large Tax Payer Unit, Chennai 600 101 ...Respondent in T.C.A.No.848,852,853 and 854 of 2018 / Appellant 842 of 2018 Prayer in 839 of 2018: This Tax Case Appeal is filed underSection 260A of the Income Tax Act, 1961 to set aside the Orderof the Tribunal in I.T.A. No.1620/Chny/2011 dated 31.07.2018. (for all the appeals) against the order dated 03.08.2011 on thefile of the Commissioner of Income Tax (Appeals) Large Tax PayerUnit Chennai – 101 made in I.T.A.No.43/09-10/CTV(A) for theAssessment Year 2006-07 and against the order dated 02.12.2009on the file of the Assistant Commissioner of Income Tax, LargeTax Payer Unit, Chennai for the Assessment year 2006-07.(TCANo.839/2018). Prayer in 842 of 2018:This Tax Case Appeal filed underSection 260A of the Income Tax Act, 1961 to set aside the Orderof the Tribunal in I.T.A. No.1366/Chny/2013 dated 31.07.2018 forthe Assessment Year 2008-09 against the order dated 26.03.2013on the file of the Commissioner of Income Tax (Appelas), LargeTax Payer Unit, Anna Nagar, Western Extension, Chennai – 600 101for the Assessment Year 2008-09 and against the order dated23.12.2011 on the file of the Deputy Commissioner of Income TaxLarge Tax Payer Unit, Chennai made in GI.No.AABLC 6633K for theAssessment Year 2008-09. Prayer in 848 of 2018:This Tax Case Appeal filed underSection 260A of the Income Tax Act, 1961 to set aside the Orderof the Tribunal in I.T.A. No. 1367/Chny/2013 dated 06.08.2018for the Assessment Year 2009-10 against the order dated26.03.2013 on the file of the Commissioner of Income Tax(Appeals), Large Tax Payer Unit, Chennai – 600 101 made inITA.No.105/11-12/LTU(A) for the Assessment Year 2009-10 andagainst the order dated 22.12.2011 on the file of the AssistantCommissioner of Income Tax Large Tax Payer Unit, Chennai made inAABCR7106G for the Assessment Year 2009-10. Prayer in 852, 853 and 854 of 2018:These Tax Cases Appeal isfiled under Section 260A of the Income Tax Act, 1961 to setaside the Order of the Tribunal in I.T.A. No.1670/Chny/2011,1668/chny/2011,ITA.No.1669/chny/2011dated06.08.2018,06.08.2018, 06.08.2018 respectively for the Assessment Year2008-09, 2006-07, and 2007-08 respectively and against the orderdated 29.07.2011, 29.07.2011, 29.07.2011, respectively on thefile of the Commissioner of Income Tax(Appeals), Large TaxPayer Unit, Anna Nagar, Western Extension, Chennai – 600 101made in ITA.No.57/10-11/LTU(A) for the Assessment Year 2008-09,ITA.No.46/09-10/LTU(A) for the Assessment Year 2006-07, andITA.No.47/09-10/LTU(A) for the Assessment Year 2007-08respectively and against the order dated 24.12.2010, 10.12.2009 Prayer in 852, 853 and 854 of 2018:These Tax Cases Appeal isfiled under Section 260A of the Income Tax Act, 1961 to setaside the Order of the Tribunal in I.T.A. No.1670/Chny/2011,1668/chny/2011,ITA.No.1669/chny/2011dated06.08.2018,06.08.2018, 06.08.2018 respectively for the Assessment Year2008-09, 2006-07, and 2007-08 respectively and against the orderdated 29.07.2011, 29.07.2011, 29.07.2011, respectively on thefile of the Commissioner of Income Tax(Appeals), Large TaxPayer Unit, Anna Nagar, Western Extension, Chennai – 600 101made in ITA.No.57/10-11/LTU(A) for the Assessment Year 2008-09,ITA.No.46/09-10/LTU(A) for the Assessment Year 2006-07, andITA.No.47/09-10/LTU(A) for the Assessment Year 2007-08respectively and against the order dated 24.12.2010, 10.12.2009 and 14.12.2009 respectively on the file of the DeputyCommissioner of Income Tax, Large Tax Payer Unit, Chennai madein AABCR7106G, AABCR7106G and AABCR7106G respectively for theAssessment Year 2008-09, 2006-07, and 2007-08 respectively. For Appellant : Mr.R.Sandeep Bagmarin all TCAsFor Respondent :Mr.M.Swaminathanín all TCAsSenior Standing Counselassisted byMs.V.Pushpa, Junior StandingCounsel JUDGMENT MOHAMMED SHAFFIQ,J. This is a batch of six appeals, out of which 4 appeals arefiled by M/s Royal Sundaram General Insurance Co. Ltd and theother two appeals are filed by M/s Cholamandalam MS GeneralInsurance Co.Ltd. challenging the orders of the Income TaxAppellate Tribunal thereby raising to the followingissues/questions viz., (a) Whether the payments of reinsurance premium made by theappellant to non-resident re-insurers is to be disallowed underSection 37 read with Explanation 1 of the Act on the ground thatthe same is prohibited under the Insurance Act, 1938. (b) Whether the deductions under Section 14A of the IncomeTax Act, 1961 stands excluded while computing income of anInsurance Company, in view of Section 44 of the Income Tax Act,1961? (c) Whether the profits on sale of investments is exemptedunder Income Tax Act, 1961? (d) Whether the exemption under Section 10(23G) of IncomeTax Act, 1961 is not available if investment is made in company,being a infrastructure facility, which is in distribution ofelectricity. The four questions of law, do not arise for all theassessment years. Hence for the sake of convenience the detailsof substantial questions of law arising for consideration in thevarious tax appeal is furnished in the tabulated statementbelow:- C H A R T: M/s RoyalSundaram General Insurance Co.Ltd C H A R T: M/s Cholamandalam MS General Insurance Co.Ltd. 2. In so far as the first issue namely the payment of Re-Insurance Premium is concerned, it is submitted by both thecounsels that the above question was considered by this Court inthe matter of Cholamandalam General Insurance Company Ltd VsDeputy Commissioner of Income-Tax, Large Tax payer unit andothers reported in [2019] 411 386 (Mad), wherein after findingthat no inference could be drawn as done by the Tribunaltherein, that there can be a bar or prohibition under theInsurance Company Act, which prohibits ceding with foreign re-insurance outside India, remanded the matter back to theTribunal to take a decision on the following aspects: (i) Whether the Assessing Officer was right in dis-allowingthe re-insurance premium under Section 40(a)(i) of the Act? (ii) Whether the Commissioner of Income-Tax (Appeals) wasright in rejecting partially the appeal filed by the assessee?and (iii) Whether the Commissioner of Income-Tax (Appeals) wasjustified in restricting the claim of the assessee to 15 percentinstead of confirming the order passed by the Assessing Officer? (i) Whether the Assessing Officer was right in dis-allowingthe re-insurance premium under Section 40(a)(i) of the Act? (ii) Whether the Commissioner of Income-Tax (Appeals) wasright in rejecting partially the appeal filed by the assessee?and (iii) Whether the Commissioner of Income-Tax (Appeals) wasjustified in restricting the claim of the assessee to 15 percentinstead of confirming the order passed by the Assessing Officer? 3. We are informed that the matters are pending before theTribunal pursuant to the order of this Hon'ble High Court inT.C.No.754 of 2018. We are thus inclined to remit the matterback to the Tribunal, issuing the very same directions anddirecting the Tribunal to examine the above aspects in theseappeals as well. 4. In so far as the second issue namely applicability ofSection 14A of the Income Tax Act,1961 in computation of Incomeof an Insurance Company, we find that the issue stands resolvedby the decision of the Delhi High Court in the matter ofPrincipal Commissioner of Income Tax LTU, New Delhi Vs OrientalInsurance Company Ltd reported in [2020] 118 taxmann.com 248(Delhi) wherein in para No.9 it is held that: “For computing the profits and gains of the businessof insurance company, the AO had to resort to section 44and the prescribed rules and could not have appliedsection 28 to 43B, since the same were excluded from thepurview of Section 44. This necessarily includes theexception provision enshrined under section 14A of theAct. Therefore in our view, the AO could not havetravelled beyond Section 44 in the first schedule of theAct.” 5. It is thus clear that Section 14A of Income Tax Act, 1961stands excluded while computing the Income Tax of an InsuranceCompany, in view of the non-obstante clause contained in Section44 of Income Tax Act, 1961, the questions of law stand decidedagainst the assessee. 6. The third issue, whether the profit on sale ofinvestments by the appellant company is exempted, standsresolved by the decision of this Court in the matter ofCommissioner of Income Tax Vs. United India Insurance Co.reported in [2019] 111 taxmann.com 217 (Madras ). It issubmitted by the Revenue that the above matter has beenchallenged before the Supreme Court by way of a special leave petition in S.L.P(Civil) Dairy No.5280 of 2020 and the same istagged with Civil Appeal No.7681 of 2019. 8. The learned counsel for the appellant and the respondenthave submitted that the matter may be remitted to the Tribunalto re-examine the issue in the light of the order of theDivision Bench of this Court in the matter of United IndiaInsurance Co. reported in [2019] 111 taxmann.com 217 (Madras ).Though the question of disallowance of exemption under Section10(23G) of the Income Tax Act, 1961 is raised in T.C.A.No.839 of2018, we are informed by the learned counsel for the appellanton instructions that the same has not been pressed. In view ofthe above, the question of law stands decided against theassessee. 9. In view of the above, the above tax case appeals aredisposed of in the following manner:- (A) In so far as Issue A is concerned, the matters areremanded back to the Tribunal to decide and take into accountthe directions given above. (B) In respect of issue B, the question of law is decidedagainst the assessee. (C) In respect of issue C the matter is remitted back to theTribunal to re-examine, in the light of the decisions of theMadras High Court in TCA No.323 of 2019 in the case of UnitedIndia Insurance Co. reported in 111 Taxmann.com 217. 10. In respect of Issue D the question of law stands decidedagainst the assessee, the same is not pressed by the appellant. 11. These appeals are disposed of on the above terms. Nocosts. Consequently, the connected miscellaneous petitions areclosed. Sd/- Assistant Registrar(CS III) /True Copy// smn Sub Assistant Registrar To (A) In so far as Issue A is concerned, the matters areremanded back to the Tribunal to decide and take into accountthe directions given above. (B) In respect of issue B, the question of law is decidedagainst the assessee. (C) In respect of issue C the matter is remitted back to theTribunal to re-examine, in the light of the decisions of theMadras High Court in TCA No.323 of 2019 in the case of UnitedIndia Insurance Co. reported in 111 Taxmann.com 217. 10. In respect of Issue D the question of law stands decidedagainst the assessee, the same is not pressed by the appellant. 11. These appeals are disposed of on the above terms. Nocosts. Consequently, the connected miscellaneous petitions areclosed. Sd/- Assistant Registrar(CS III) /True Copy// smn Sub Assistant Registrar To 1. The Assistant Commissioner of Income Tax, Large Tax Payer Unit, Chennai – 600 101. Large Tax Payer Unit, Chennai – 600 101. 2. The Commissioner Income Tax (Appeals), Large Tax Payer Unit, Anna Nagar, Western Extension, Chennai – 600 101. Large Tax Payer Unit, Anna Nagar, Western Extension, Chennai – 600 101. 3. The Deputy Commissioner of Income Tax, Large Tax Payer Unit, Chennai. Large Tax Payer Unit, Chennai. +6ccs to Mr.R.Sandeep Bagmar, Advocate, S.R.No.59519 to 59524+6ccs to Mr.M.Swaminathan, Advocate, S.R.No.59621 to 59626+6ccs to Mr.M.Swaminathan, Advocate, S.R.No.59525 to 59530 T.C.A.Nos.,839,842,848,852,853 and 854 of 2018 andC.M.P.Nos.20685,20688,20700 and 20701 of 2018 andC.M.P.Nos.14584,14585,14587,14581,14588,14595,14596 and 14597 of 2021 SR[co]NSK 12/01/2022