United India Insurance Co. Ltd. Vs PCIT (ITAT Chennai)
Section 263 Revision on Exemption u/s 10(38) for Insurers Largely Quashed; Limited Issues Sustained
The Chennai ITAT (D Bench) delivered a comprehensive consolidated order in the case of United India Insurance Co. Ltd. for AYs 2014-15 to 2017-18, examining multiple revision orders passed under section 263.
Key rulings:
1. Exemption u/s 10(38) on sale of investments (Major issue):
- The Tribunal held that profits on sale of equity investments credited to the P&L account prepared under the Insurance Act/IRDAI framework are eligible for exemption u/s 10(38), even after re-introduction of Rule 5(b) of the First Schedule.
- Once gains are already credited to the P&L, Rule 5(b)(i) does not mandate any further adjustment.
- The AO had examined the issue in detail during assessment; hence, the PCIT’s allegation of “no enquiry” was factually incorrect.
- Consistency was emphasized—similar exemption had been allowed in earlier years and upheld by coordinate benches (GIC, Oriental Insurance, ECGC, etc.).
Section 263 revision on this issue was quashed across years.
2. Provision for diminution in value of investments:
- For provisions debited but not added back as required by Rule 5(b)(ii), the AO failed to examine the issue.
Revision u/s 263 upheld on this limited issue.
3. Section 14A disallowance (AY 2017-18):
Paid content
Become a Basic or Premium Member, or log in if you are already a Basic or Premium member.
