Case Law Details
TATA AIG General Insurance Company Ltd. Vs DCIT (ITAT Mumbai)
It is to be noted that the expressions ”intimation” and ”assessment order” have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes ”the computation of income”, sometimes ”the determination of the amount of tax payable” and sometimes ”the whole procedure laid down in the Act for imposing liability upon the tax payer”. In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(l) (a) as it stood prior to 1-4-1989, the assessing officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain J) in Apogee International Limited v. Union of India (1996) 220 ITR 248 (Delhi). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any assessing officer, but mostly by ministerial staff. Can it be said that any ”assessment” is done by them? The reply is an emphatic ”no”. The intimation under section 143 (1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise.
Intimation issued under section 143(1) cannot be treated as order of assessment and on the basis of such order the assessee denied his statutory rights to file a revised return within the period of limitation.
We set aside the order of the Commissioner (Appeals) and direct the assessing officer to accept the revised return filed by the assessee as a valid return and complete the assessment after considering the revised return be a valid return.
Section 115JB do not apply in case of Insurance Companies
When the insurance companies, banking companies and electricity generation and distribution companies are treated in the same class as per the provisions of section 211 of the Companies Act in preparing their final accounts, then these companies cannot be treated differently for the purposes of section 115JB and accordingly, the provisions of section 115JB are not applicable in the case of the assessee.
Full Text of the ITAT Order is as follows:-
This appeal has been filed by the assessee against the order of the Commissioner (Appeals)-6, Mumbai dated 14-10-2014 for assessment year 2005-06 by taking the following effective grounds of appeal:–
“1. The learned Commissioner (Appeals) erred in permitting the reassessment proceedings under section 147 of Act. The reassessment proceedings have been done pursuant to issuance of notice under section 148 of the Act after the expiry of 4 years from the end of the relevant assessment year resulting in the proceedings becoming time barred.
2. The learned Commissioner (Appeals) erred in concluding that the reassessment proceedings were not on the basis of mere change in opinion on the records available at the time of original scrutiny assessment and therefore the reassessment proceedings are void ab-initio and bad in law.
3. The learned Commissioner (Appeals) erred in concluding that mere issuance of intimation under section 143(1) amounts to completion of assessment proceedings and therefore the revised return of income filed for assessment year 2004-05 subsequent to the intimation is invalid. Further the learned Commissioner (Appeals) has misinterpreted the judicial precedent of ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007 291 ITR 500 (SC)).
4. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in applying the provisions of section 115JB of the Act to the Appellant which is in the business of general insurance.
5. Notwithstanding to Ground No. 4, the learned Commissioner (Appeals) failed to appreciate the fact that in the absence of any specific guidance in the Act on the manner of set-off of unabsorbed loss/unabsorbed depreciation, the assessee may adopt any such method which is logical and does not violate any provisions of the Act.
6. Notwithstanding to Ground No. 4, on the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in making an addition of Rs. 27,12,326 being expenditure relatable to any income to which section 10 (other than section 10(38)) or section 11 or section 12 applies, while computing the book profits under the provisions of section 115JB of the Act.
7. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in uploading the disallowance under section 14A done by the learned assessing officer.”
2. At the outset, the learned Authorised Representative contended that ground Nos. 3 to 7 may be heard and in case these grounds are allowed ground Nos. 1 & 2 shall become infructuous.
3. The learned Departmental Representative was also fair enough to concede the position.
4. We, therefore, decided to dispose off ground Nos. 3 to 7 first. Ground No. 3 relates to the issue whether revised return filed by the assessee in the impugned assessment year subsequent to the issue of the intimation under section 143(1) is valid or not. The facts relating to this ground are that the assessee filed the original return of income on 28-10-2005 declaring Nil income under the normal provisions of the Income Tax Act while computing the book profit under section 115JB at Rs. 13,80,48,000. The original return was processed under section 143(1) on 6-10-2005. The assessee subsequently filed a revised return under section 139(5) on 31-3-2006. In the revised return the assessee has increased the loss available for set off which was claimed at Rs. 24,74,10,047 in the original return. In the revised return the assessee has set off brought forward losses at Rs. 2,57,03,358 and claimed carry forward of loss at Rs. 32.76 crores. The assessment under section 143(3) was completed on 28-12-2007 wherein the original loss of Rs. 32,76 crores was allowed to be set off as per the revised return of income of assessment year 2004-05. Subsequently the assessment so completed was reopened by issue of notice under section 148 dated 24-6-2011 as it was found that brought forward losses have been allowed in excess. The assessee, in response thereto, submitted that the original return filed by the assessee should be treated as the return in response to the notice under section 148. The assessing officer, while completing the assessment, was of the view that the assessee’s revised return of income filed on 31-3-2006 for assessment year 2004-05 was not to be considered as the same was filed after the completion of the assessment and therefore he allowed the loss to the assessee in accordance with the original return filed by the assessee. The assessee contended that he has filed the revised return within the time allowed under section 139 as per the provisions of section 139(5). The assessing officer did not agree with the contention of the assessee as in his view the assessee has filed its revised return after the assessment has been completed under section 143(1). When the matter went before the Commissioner (Appeals), the Commissioner (Appeals) confirmed the order of the assessing officer.
5. Now the question before us is whether the return filed by the assessee under section 139(5) after processing of the return under section 143(1) is a valid return or not so that the assessee can be entitled for the benefit of excess set off of losses and carry forward of the same as per the revised return filed by the assessee.
6. We heard the rival submissions and gone through the orders of the tax authorities below. We noted that similar issue has come before the Hon’ble Punjab and Haryana High Court in the case of Tarsem Kumar v. ITO 256 CTR 116 in which the Hon’ble High Court while dealing with the said position held as under:–
“7. In the present case, the assessee had been forwarded with the intimation regarding processing of return under section 143(1)(a) of the Act on 8-12-2005. The question for consideration would be whether an intimation under section 143(1)(a) of the Act would constitute assessment so as to disentitle the assessee to file the revised return. The said question stands answered by the Hon’ble Apex Court in Asstt. CIT v. Rajesh Jhaveri Stock Brothers (P) Ltd. (2007) 291 ITR 500 (SC) in the following terms :–
“It is to be noted that the expressions ”intimation” and ”assessment order” have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes ”the computation of income”, sometimes ”the determination of the amount of tax payable” and sometimes ”the whole procedure laid down in the Act for imposing liability upon the tax payer”. In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(l) (a) as it stood prior to 1-4-1989, the assessing officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain J) in Apogee International Limited v. Union of India (1996) 220 ITR 248 (Delhi). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any assessing officer, but mostly by ministerial staff. Can it be said that any ”assessment” is done by them? The reply is an emphatic ”no”. The intimation under section 143 (1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise.
8. The aforesaid judgment was followed by the Division Bench of this Court in CWP No. 17854 of 2007 (Baljit Singh v. CIT-II & Anr.) decided on 3-12-2007 (Annexure P-21).
9. Once that is so, there was no regular assessment framed in the present case. Therefore, the assessee for assessment year 2005-06 could file the revised return after complying with the provisions of section 139(5) of the Act up to 31-3-2007. The revised return filed on 26-9-2006 was thus validly filed within limitation. Consequently, the claim of the petitioner-assessee for the refund of the additional tax deposited amounting to Rs. 3,61,188 is valid and justified.
10. Learned counsel for the petitioner has further relied upon a Division Bench judgment of this Court in Roadmaster Industries of India (P) Ltd. v. CIT & Anr., (2009) 329 ITR 69 to canvass that the petitioner was also entitled to interest from the date the amount was deposited till the date of granting of the refund to the petitioner. Reliance was placed on the following observations :–
“As a sequel to the aforesaid discussion, these writ petitions are allowed and the order dated 30-4-2007 (P-12) passed by the Commissioner is hereby quashed. Consequently, the respondents are directed to calculate the amount of interest payable to the assessee-petitioner from the date the amount was deposited by it till the date the refund is granted. The assessee-petitioner shall also be entitled to the amount of interest on interest. The aforesaid directions shall be subject to adjustment of the amount which might have already been paid to the assessee-petitioner. The needful shall be done within a period of three months from the date of receipt of a certified copy of this order.”
11. In view of the above, we allow the writ petition and direct that the refund be released to the petitioner within three months from the date of receipt of certified copy of order along with interest at the rate of 12% per annum till the date of making the payment to him.”
Similar issue has arisen before the Hon’ble Gujarat High Court in the case of S.R. Koshti v. CIT 276 ITR 165 in which also the Hon’ble High Court took the view that the intimation issued under section 143(1) cannot be treated as order of assessment and on the basis of such order the assessee denied his statutory rights to file a revised return within the period of limitation. No contrary decision was brought to our notice. In view of the aforesaid decisions of both the High Courts, we set aside the order of the Commissioner (Appeals) and direct the assessing officer to accept the revised return filed by the assessee as a valid return and complete the assessment after considering the revised return be a valid return. Thus ground No. 3 taken by the assessee is allowed.
7. Ground No. 4 relates to the applicability of provisions of section 115JB.
8. The learned Authorised Representative before us vehemently contended that provisions to section 115JB is not applicable to the assessee as the assessee is a general insurance company during the impugned assessment year. In this regard reliance was placed on pages 13 to 14 (paras 36 to 42) of assessee’s own case order in ITA No. 7748/Mum/2013 in which the “E” Bench of this Tribunal vide order dated 4-12-2015 took the view that provisions of section 115JB do not apply in the case of the assessee. Reliance was also placed on the decision of the Hon’ble Delhi High Court in the case of CIT v. The Bank of Tokyo Misubishi UFJ Ltd. in ITA 604/2015 in which case also the Hon’ble Delhi High Court vide order dated 8-4-2016 in para 20 taken the same view.
9. The learned Departmental Representative, on the other hand, relied on the order of the assessing officer as well as Explanation 3 of section 115JB which was inserted under section 115JB by the Finance Act, 2012.
10. The learned Authorised Representative in counter drawn our attention towards the decision of the Delhi Bench of this Tribunal in the case of The Bank of Tokyo Mitsubishi UFJ Ltd. v. ADIT 152 ITD 796 in which this Tribunal has discussed Explanation 3 as inserted by the Finance Act, 2012 with effect from 1-4-2013 and on that basis it was contended that the Tribunal had taken a view that the amendment which brings substantial change in the computation provision cannot be held to be retrospective. It was further pointed out that this decision of the Tribunal has been confirmed in para 12 by the Hon’ble Delhi High Court in ITA 604/2015 vide order dated 8-4-2016.
11. We have heard the rival submissions and gone through the orders of the tax authorities below. The question before us is whether the provisions of section 155JB are applicable in the case of the assessee or not. It is not denied that the assessee is an insurance company incorporated under the Insurance Act. In the case of assessee in ITA No. 7748/Mum/2013 we noted that this Tribunal vide order dated 4-12-2015 took the view that provisions of section 115JB are not applicable in the case of the assessee by holding as under :–
“36. The assessee has also raised an additional ground which pertains to provisions of section 115JB. Counsel for the assessee has submitted that by virtue of powers conferred vide section 254 of the Act read with rule 11 of the Income Tax Appellate rules, the Tribunal has jurisdiction to pass any order which is deemed fit after giving opportunity of being heard to the parties, therefore, the additional ground of appeal may be allowed and the additional ground may be decided on merit. On the other hand the learned Dr opposed the application on the ground that since this ground was not raised by the assessee before the learned Commissioner (Appeals) the assessee is stopped from taking additional ground at this stage.
37. In ICICI Lombard General Insurance Co Ltd. v. ACIT, in (IT Appeal No. 2398 (Mum.) of 2009, dt. 10-10-2012), the coordinate Bench of the Mumbai ITAT has allowed the similar application holding as under:–
“We have heard the learned Authorised Representative of the assessee as well as the learned Departmental Representative on the point of admissibility of the additional ground and considered the relevant material on record. Since the additional ground raised by the assessee is on the issue of applicability of the provisions of section 115JB with respect to Insurance Companies, which is purely a legal issue and therefore, no new facts are required to be examined or investigated for adjudication of the additional ground raised by the assessee. Accordingly, in view of the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 299 ITR 383, we admit the additional ground raised by the assessee for adjudication on merit”.
38. In view of the decision of coordinate Bench of ITAT Mumbai passed in ICICI Lombard General Insurance Co Ltd. v. ACIT (supra), we allow the application for additional ground of appeal.
39. On merit the assessee has submitted that the provisions of section 115JB of the Act are not applicable to insurance companies because the profit and loss accounts of the insurance companies are not required to prepare as per Part II and III of schedule VI to Companies Act, 21956) to prepare such accounts as per Schedule VI to Companies Act, 1956 which is the basic requirement for computation of book profit under section 1153B. On the other hand the learned Departmental Representative has submitted that as per the pre-amendment provisions, the accounts prepared in accordance with the Insurance Act can be taken for the purpose of section 115JB.
40. We have carefully considered the rival submissions. In ICICI Lombard General Insurance Co Ltd. v. ACIT, in (IT Appeal No. 2398 (Mum.) of 2009, dt. 10-10-2012) the coordinate Bench, following the order of Hyderabad Bench of ITAT passed in State Bank of Hyderabad v. DCIT, ITA No 578/Hyd/2010 and order of Mumbai Tribunal in Kung Thai Bank v. 3CIT (133 TT3 435) has decided the identical issue in favour of the assessee holding as under–
“Following the decisions of the coordinate bench of this Tribunal we hold that when the insurance companies, banking companies and electricity generation and distribution companies are treated in the same class as per the provisions of section 211 of the Companies Act in preparing their final accounts, then these companies cannot be treated differently for the purposes of section 115JB and accordingly, the provisions of section 115JB are not applicable in the case of the assessee.”
41. Respectfully following the decision of the coordinate Bench of the Mumbai Tribunal aforesaid, we allow the additional ground of appeal of the assessee and hold that the provisions of section 115JB of the Act do not apply in the case of the assessee.”
12. We have also considered the contention raised by the learned Departmental Representative that in view of Explanation 3 the provisions of section 115JB could apply to the assessee. We have gone through Explanation 3 to section 115JB. We noted that the said Explanation has been inserted by Finance Act, 2012 with effect from 1-4-2013. The question before us is whether this amendment is retrospective and is applicable in the impugned assessment year or not. We noted that similar issue has arisen before the Delhi Bench of this Tribunal in the case of The Bank of Tokyo Mitsubishi UFJ Ltd. v. ADIT 152 ITD 796 in which this Tribunal duly considered the plea whether Explanation 3 inserted in section 115JB is retrospective or not. The Tribunal in para 74 of the order held as under:–
“74. Learned Commissioner (Departmental Representative) however, pointed out that Tribunal has not considered in detail the import of this amendment and has simply on the basis of date of insertion has observed that it is prospective. He has pointed out that in the case of State Bank of Hyderabad primarily the decision in the case of Maharashtra State Electricity Board has been followed and Explanation 3 has not been considered. In our opinion this explanation cannot be held to be retrospective in operation because it has brought in a substantial change in the computation provision. Till the insertion of this amendment, various decisions clearly held that in case of Banking Companies, Electricity Companies and Insurance Companies, since they were governed by Special Acts and the profit and loss account was not prepared as per part II of schedule VI to the Companies Act, therefore, the computation provisions failed. Accordingly, in view of the decision of Hon’ble Supreme Court in the case of B.C. Srinivasa Setty (supra), 128 ITR 294, the law till the insertion of this explanation was that the provisions of section 115JB were not applicable on account of impossibility of computation as the accounts were not prepared in accordance with part II, schedule VI to the Companies Act. Now by incorporating Explanation 3, the Companies governed by Special Acts which come within the ambit of company under section 2(17) are covered by the provisions of section 115JB. Therefore, this amendment brings substantial change in the taxability of companies governed by the special acts and, therefore, cannot be held to be retrospective. In this regard we also find strength from the ratio laid down by the Hon’ble Supreme Court in its decision dated 16-9-2014 in the case of CIT v. Vatika Township (P) Ltd. In Civil Appeals arising out of SLP (C) No. 1362 of 2009 & Ors. The five judges Bench of the Hon’ble Supreme Court strikes down division Bench ruling on retrospective applicability of proviso to section 113 of the Income Tax Act holding the proviso to operate prospectively. Laying down perusal principles governing retrospectively, the Hon’ble Supreme Court has been pleased to rule that unless contrary intention appears, a legislation is presumed not to be intended to have retrospective operation, current law ought to govern current activities, law passed today cannot apply to past events.”
13. The aforesaid finding of this Tribunal has been confirmed by the Hon’ble Delhi High Court in the case of Pr. CIT v. The Bank of Tokyo Misubishi UFJ Ltd. in ITA 604/2015 in which vide order dated 8-4-2016 the Hon’ble High Court held as under:–
“20. The ITAT has after an elaborate discussion had come to the conclusion that the assessee’s claim for lower tax will have to be accepted because section 115JB is subject to section 90(2) of the Act and the taxable income of the assessee would have to be computed in terms of Article 7(3) of the DTAA. What is significant is that the profit and loss account of the assessee has not been prepared in terms of Part II of Schedule VI of the Companies Act, 1956 and in fact could not have been prepared in terms thereof. Consequently, the question of applicability of section 1I5JB did not arise. As rightly pointed out till the insertion of section 115JB, banking companies were required to prepare their accounts in terms of special acts that they were governed by, and therefore there were no computation provisions as regards such banking companies. The change brought out by section 115JB was therefore not retrospective.”
14. No contrary decision was brought to our notice. Even we noted that the Revenue has gone before the Hon’ble Bombay High Court against the order of this Tribunal in the case of the assessee in ITA No. 7748/Mum/2013 but has not raised the issue regarding applicability of provisions of section 115JB. In view of this fact we set aside the order of the Commissioner (Appeals) and hold that provisions of section 115JB are not applicable in the case of the assessee as the assessee is engaged in the business of general insurance. This ground of the assessee stands allowed.
15. Ground Nos. 5, 6 and 7 are consequential to ground No. 4. Since we have allowed ground No. 4, therefore ground No. 5, 6 and 7, as contended by the learned Authorised Representative, would become infructuous and dismissed as such.
16. Now coming to ground Nos. 1 and 2, since we have on merit decided the issue in favour of the assessee that the revised return filed by the assessee is a valid return while disposing ground No. 3, ground Nos. 1 and 2 became infructuous and stand dismissed as such.
17. In the result, appeal filed by the assessee is partly allowed.
My friend who has only salaried income filed IT return for FY 2016-17, availing relief u/s 89 for arrears. But he forgot to file Form 10E. Now he has received a notice u/s 143(1) asking for a demand.
Can he file a revised return now along with Form 10E or does he have to approach AO with the Form 10E?