DCIT Vs SBI Life Insurance Co. Ltd. (ITAT Mumbai)
ITAT Mumbai held that income from the shareholders’ account was held to be taxable as income from life insurance business. Accordingly, income from shareholders’ account is taxable under the head “Profits and Gains of Business or Profession”. Thus, appeal of revenue dismissed.
Facts- The assessee is carrying on the business of life insurance, including life annuity linked, non-linked term, whole term assurance, pension business, long term health insurance, family insurance, group insurance, etc. During the assessment proceedings, it was observed that the assessee has income in the shareholders’ account but treated the same as income from the insurance business.
AO held that as per section 44 of the Act, the income of life insurance business alone is taxable on the basis of actuarial surplus and the same is accounted by the assessee in Form A-RA, i.e., policyholders’ account, and therefore, the actuarial report in case of a life insurance is prepared on the basis of asset in the policyholders’ account only. The AO further held that the income of the assessee in shareholders’ account has to be taxed separately, and since the assessee is not permitted to do any business activity other than life insurance, the income in shareholders’ account is taxable under the head “Income from Other Sources”. Accordingly, the income of the assessee as per the shareholders’ account, without giving the benefit of deduction on account of transfer of funds from the shareholders’ account to the policyholders’ account, was held to be taxable as income of the assessee under the head “Income from Other Sources” at normal rates.
