Income from pension scheme exempt u/s. 10(23AAB) of Income Tax Act

DCIT Vs Future Generali India Life Insurance Co. Ltd (ITAT Mumbai)

ITAT Mumbai held that surplus/ income from pension scheme/ business is exempt under section 10(23AAB) of the Income Tax Act.

Facts- The assessee company is engaged in the business of life insurance and has obtained license of life insurance business from insurance regulatory and development authority. It has filed its income tax returns disallowing total loss of Rs.144, 50,63,150/- from the business after adjusting transfer of Rs.162,48,88,000/- from profit and loss account and revenue account. AO added an amount of Rs.90,43,14,000/- u/s. 10(23AAB) on account of surplus deficit from the pension fund. On this count, he noted that though the decision of Bombay High Court in the case of CIT vs. Life Insurance Corporation of India Ltd is in the favour of the assessee, however, the department has not accepted the said order and SLP is pending.

CIT(A) deleted the addition made by the AO. Being aggrieved, revenue has preferred the present appeal.

Conclusion- Held that in the present case, the pension fund scheme was managed by FGILI in A.Y.2010-11 which was approved by IRDA. The assessee had surplus/deficit of Life Insurance business during the relevant year and same has been taken into consideration while computing actuarial appointed by the assessee. The ld. AO has disallowed the same stating that he is adding the same in order to keep the issue alive. As per the provision of Section 10(23AAB) any income arise from pension scheme is exempt under the Act. Thus, the intention was to bring incentive provided in insurance sector so that terms will be added to the contributors in the insurance industry. In view of the Section 10(23AAB) r.w. First Schedule of Rule 2, assessee had taken into consideration the actuarial valuation report wherein it has considered the total business income / loss without bifurcating into pension / non-pension business. The assessee had surplus from approved pension scheme during the relevant year and since same forms part of the Life Insurance business only, the said amount has been accounted while arriving at the actuarial surplus and that surplus need to be considered for computing profits from life insurance business. This disallowance precisely has been deleted by the Hon’ble High Court in various judgments and also followed by the Tribunal in all the years. Accordingly, the order of the ld. CIT (A) as narrated above is confirmed and the grounds raised by the Revenue are dismissed.

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