DCIT, CC 5(3) vs. Kotak Mahindra Life Insurance Co. Ltd.

Parties Involved

Facts Summary

The brief facts of the case are that the assessee company is involved in the business of life insurance and being governed by the Insurance Act, 1938 and duly registered with Insurance Regulatory and Development Authority (IRDA). In this case the original return of income for the A.Y. 2020-21 was e-filed on 30.12.2020 declaring total income to the tune of Rs. 443,52,05,940/-. The return was processed U/s. 143(1) of the I.T. Act, 1961 by CPC Bengaluru on 30.03.2021 assessed total income at Rs. 443,52,05,940/-. The case was selected for scrutiny under CASS and notice U/s 143(2) was issued on 29.06.2021 and served on the assessee through e-mail. In response to notice u/s. 143(2) of the Act, assessee submitted its reply through e-proceedings portal on 17.08.2021. Further, the case has been transferred to the JAO on 22.09.2022. Accordingly, notices u/s. 142(1) of the Act was issued on 22.09.2022 and 26.09.2022 which were duly served on the assessee through E-mail. The assessee filed its reply on 26.09.2022 and 27.09.2022 through e-proceeding portal.…

Legal Issues

• 1. Whether on the facts & circumstances of the case and in law, the Ld. CIT (A) erred in interpreting the provisions of Section 44 of the Income Tax Act, 1961?
• 2. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in allowing relief to the assessee by holding that surplus available in Share Holders Account is not to be taxed separately as income from other sources and at the normal corporate rate and holding that surplus from Share Holders Account with the surplus available in Policy Holders Account and then and taxing this 'net surplus arrived at the rates specified u/s. 115B of the Act?
• 3. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) is correct in falling to appreciate that negative reserve has an impact of reducing the 'taxable surplus' as per Form-l and therefore corresponding adjustment for "negative reserve" need to be made to arrive at "taxable surplus"?
• 4. Whether on the facts und in the circumstance of the case and in law, the Ld.CIT (A) erred in ignoring the facts that since exemption for dividend income u/s. 10(34) of the Act is being allowed by the Assessing Officer, then separate disallowance under section 14A of the Act read with rule 8D of the Rules needs to be made?
• 5. Whether on the facts & circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the facts that the valuation of the insurance companies is done under the Insurance Act, therefore, what can be reduced is only what is specifically provided in schedule 1 Rule 2 and nothing else. Therefore, exemption under section 10(23AAB) of the Act cannot be granted to an assessee in the business of life insurance where income is computed u/s. 44 of the IT Act?

Judgment Outcome

Decided in favour of Partly Assessee / Partly Revenue.

Precedents Relied Upon

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