By TIOL News Service

MUMBAI, AUG 08, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether any transfer from Share holder's A/c to Policy holder's A/c shown as part of 'surplus from insurance business' in the 'actuarial valuation', can be taxed u/s 44 of I-T Act. NO is the answer.

Facts of the case:

The Assessee i.e., M/s. Future Generali India Life Insurance Co. Ltd. filed its return declaring total loss of Rs. 300,45,37,430. Subsequently, the same was revised disclosing total loss of Rs. 320,16,20,117 following the judgement of Bombay High Court in the case of CIT vs. Life Insurance Corporation of India Ltd. - 2011-TIOL-483-HC-MUM-IT in respect of loss from pension business u/s 10(23AAB). The AO however made an addition of Rs. 5,83,46,630/- representing the surplus as disclosed in Form – 1. On appeal, the CIT(A) held that the working of actuarial surplus / deficit was in accordance with the relevant regulations as per IRDA guidelines and the loss disclosed in the computation of income was according to the corresponding provisions of Section 44 r/w Rule 2 of the First Schedule of the Act. Therefore, the CIT(A) directed the AO to delete the addition of Rs. 583,46,630/- on account of actuarial surplus.

On appeal, the ITAT held that,

++ it is found that Bombay High Court in the case of ICICI Prudential Insurance Co. Ltd. has held that "where assessee was carrying on life insurance business and Tribunal following a decision of Supreme Court, while determining assessee's income u/s 44, had taken into consideration total surplus as arrived at by actuarial valuation and further held that income from shareholders account was also to be taxed as a part of life insurance business, there was no substantial question of law arising for consideration". Reference was made to the decision in LIC of India vs. CIT, wherein the Supreme Court has held that the AO has no power to modify the account after actuarial valuation is done. Respectfully following the same, this Tribunal holds that transfer from Share Holders Account to Policy Holder's Account and shown as part of 'surplus' in the 'actuarial valuation' was only transfer of capital asset and not taxable u/s 44 of the I-T Act r/w Rule 2 of the first schedule;

(See 2017-TIOL-1106-ITAT-MUM)