Loss in pension fund has to excluded from insurance business income

Issue before tribunal:

• Whether pension fund is liable to excluded from the actual income of the insurance business.
• Whether AO rightly rejected the assessee’s application u/s 154 filed by assessee to rectify mistake in calculating income in the light of subsequent decision of Hon’ble Bombay High Court.

Brief Facts of the case:

• Assessee company engaged in the business of providing life insurance and allied services. It filed its return of income for the relevant year on disclosing a loss of Rs.59,656.76 lacs. In arriving at the said figure, loss from pension business (at Rs.14,162.68 lacs) was deducted. This was in view of the income – which would include loss as well, of the pension business being exempt u/s. 10(23AAB) of the Act.
• During the assessment proceedings assessee explained that the computation of profits and gains of the insurance business is covered by section 44 of the Act.
• Income was assessed at the returned income vide order u/s. 143(3).
• Subsequently, the assessee moved an application u/s.154 claiming of a mistake in reducing the loss of its pension business in-as-much as the same was also a part of its insurance business in the light of decision of the Hon’ble jurisdictional High Court in CIT vs. Life Insurance Corporation of India Ltd. [2011] 338 ITR 212 (Bom).
• The hon’ble High Court had clarified that the loss incurred from pension fund, like Jeevan Suraksha Fund maintained by LIC of India, had to be excluded while determining the actuarial valuation from the insurance business u/s44.
• AO rejected the application u/s 154 by holding that no mistake apparent from record was found which was confirmed by CIT(A).

Contention of the revenue:

• The income was accepted by assessee and thus matter has attained finality. No doubt a subsequent decision by the apex court or the jurisdictional high court could give rise to a mistake apparent from record but however the same would apply only where the issue stands agitated and is, accordingly, alive, while in the present case the assessment had attained finality.

Contention of the assessee :

• The Apex Court in the case of ACIT vs. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 (SC), held that a subsequent decision by the apex court or the jurisdictional high court would be a valid basis for inferring a mistake apparent from record.

Held by the tribunal:

• The proposition that a subsequent decision by the jurisdictional high court renders an order by the subordinate court under its jurisdiction mistaken, liable for rectification, is well accepted in the light of decision of the Apex Court in Saurashtra Kutch Stock Exchange Ltd. (Supra).
• Decision of jurisdictional high court in CIT vs. Life Insurance Corporation of India Ltd. (Supra) is binding on us that the loss of the pension fund had to be excluded in determining the business income under Chapter IV-D, i.e., in terms of section 44 of the Act.

Conclusion:

Tribunal in this above case decided two debatable issues. Firstly that the mistake can be rectified after assessment attained finality and assessee had accepted the assessment order. The same is decided by the tribunal in the light of decision of apex court. Second issue relates to computation of income when there is loss of pension fund related to insurance business and the same is decided in the light of decision of jurisdictional high court.