Exclusive HOLI Discounts!
Get Courses and Combos at Upto 50% OFF!
Upgrad
LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Profit on sale of investment by insurance companies not applicable to tax

Nida Khatri ,
  16 September 2020       Share Bookmark

Court :

Brief :
AO was held to have erred in adding back the said loss in the computation of the Assessee's income.
Citation :
Petitioner: Oriental Insurance Co. Ltd Respondent:Deputy Commissioner Of Income Tax Citation: WP No 2602 of 2017

Bench:

PRATHIBA M. SINGH ,Dr. S. Muralidhar

Issue:

Whether sec 115 of the Income Tax act applies to insurance companies?

Facts:

  • These are three appeals under Section 260A of the Income Tax Act, 1961.
  • Plaintiffis the subsidiary of General Insurance Corporation of India ('GIC') and is engaged in the business of General Insurance comprising of Fire, Marine and Miscellaneous Insurance Business.
  • It was originally incorporated as the Oriental Fire Insurance Company Ltd and later changed its name to Oriental Insurance Ltd.
  • Plaintiff filed a tax return declaring a loss of Rs. 76,71,41,581/- and a book profit of Rs. 3,62,45,18,770/- under the special provisions of Section 115JB of the Act.
  • The return was picked up for scrutiny&Assessing Officer ('AO') passed the assessment order assessing the total income at Rs. 4,65,97,73,716/- and book profits of Rs. 9,05,14,34,065/-.
  • Additions were made to the returned income profits at Rs. 457,60,43,000/-.

Appellant’s contentions:

  • The provisions of Sec 115JB of Income Tax Act is not applicable to insurance companies.
  • Assessee’s plea was to gain exemption in respect of the profit on sale of investments.
  • Petitioner is availing the non-taxation of its profits from sale of investments and also not claiming the loss suffered on these investments.

Respondent’s contentions:

  • The ITAT upheld the decision of the CIT (A) in deleting the addition of Rs. 3,39,60,000/- made by the Assessing Officer ('AO') on account of the investment written off.
  • The ITAT held that the income earned on sale/redemption of investment is chargeable to tax.
  • The investments made by the Assessee have to be treated as its stock-in-trade.
  • The long term capital gains (LTCG) on the investments in equity shares only qualified for exemption under Section 10 (38) of the Act.
  • Contradictory pleas have been taken by the Assessee before the ITAT.

Final judgement:

  • AO was held to have erred in adding back the said loss in the computation of the Assessee's income.
  • It is held that CIT (A) erred in deleting the addition of Rs. 3,39,60,000/- by the AO on account of the investment written off.
  • Section 115JB of the Act does not apply to insurance companies.
 

Enroll the Course on CPC by Mr. S.C Virmani:
Click Here

 
"Loved reading this piece by Nida Khatri?
Join LAWyersClubIndia's network for daily News Updates, Judgment Summaries, Articles, Forum Threads, Online Law Courses, and MUCH MORE!!"



Published in Others
Views : 590




Comments