ACIT Vs Oriental Insurance Co. Ltd. (ITAT Delhi)
ITAT Delhi held that disallowance made u/s. 14A under the normal provisions of the Act not justified as section 44 overrides other provisions. Further, disallowance u/s. 14A couldn’t be added to book profit u/s. 115JB of the Income Tax Act. Thus, appeal of revenue dismissed.
Facts- The assessee is a Public Sector Undertaking of Government of India and is in the business of Non-Life Insurance, The assessee offers insurance covers for large projects like power plants, petrochemical, steel and chemical plants. It also offers various insurance products like Motor Policies, Health-Medi-claim/Overseas Medi-claim Personal Accident, Motor Vehicle, Agriculture/ Sericulture / Poultry, Aviation, Marine and other miscellaneous policies.
Revenue has contested the action of the Ld. CIT(A) in deleting the disallowance of Rs.2,30,10,949/- on account of u/s 14A of the Act both under the normal provision and as well as the provisions u/s 115JB of the Act.
Conclusion- The disallowance of 14A under the normal provisions of the Act was decided against the Revenue by the Hon’ble Delhi High Court in the case of the assessee company in ITA No.172/2020 vide order dated 04.03.2020. Wherein it was held that section 44 specifically excludes the provisions of the Act relating to computation of income, inter alia, those contained in “Section 28 to 43B”. Thus, the exclusion would take within its sweep Section 14A which is an exemption for deductions as allowable under the Act, as provided under Section 28 to 43B. Further, Section 44 is a special provision applicable in the cases of insurance companies and applies, notwithstanding anything to the contrary contained in the provisions of the Income Tax Act relating to the computation of income chargeable under different heads. For computing the profits and gains of the business of insurance company, the AO had to resort to Section 44 and the prescribed rules, and could not have applied Section 28 to 43B, since the same were excluded from the purview of Section 44. This necessarily includes the exception provision enshrined under Section 14A of the Act. Therefore, in our view, the AO could not have travelled beyond Section 44 in the first schedule of the Act.
