CHNHB Health Insurance Co. Ltd. Vs ACIT (ITAT Kolkata)
Summary: The appeal was filed by CHNHB Health Insurance Co. Ltd. against the order dated 31.01.2025 passed by the Addl/Joint Commissioner of Income-tax (Appeals)-1, Gurugram under section 250 of the Income-tax Act, 1961 for Assessment Year 2017-18.
The assessee, a private limited company, had filed its return declaring a total loss of ₹(-)1,03,10,740/-. The case was selected for limited scrutiny through Computer Assisted Scrutiny Selection (CASS) for examination of expenses incurred for earning exempt income. Notices under sections 143(2) and 142(1) were issued.
The Assessing Officer noted that the assessee had shown investments in equity shares of ₹122,22,51,000/- as at 31.03.2017 and had claimed dividend and interest on Tax Free Bonds amounting to ₹2,33,02,492/- as exempt. The Assessing Officer, relying inter alia on CBDT Circular No. 5/2014 dated 11.02.2014, required the assessee to furnish computation of expenditure incurred in relation to exempt income.
The assessee had itself computed the expenses relatable to exempt income by allocating expenses relating to the non-insurance business on a pro-rata basis according to the ratio of tax-free dividend and taxable interest. The assessee had disallowed ₹49,74,192/- on this basis. The Assessing Officer, however, was not satisfied with the computation and invoked section 14A read with Rule 8D.
