IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H , MUMBAI BEFORE SHRI R C SHARMA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA No. : 1035/Mum/2011 (Assessment year: 2002-03) ITA No.: 1036/Mum/2011 (Assessment year: 2003-04) ITA No.: 1037/Mum/2011 (Assessment year: 2004-05) ITA No.: 1038/Mum/2011 (Assessment year: 2005-06) ITA No.: 1039/Mum/2011 (Assessment year: 2006-07) ITA No.: 1823/Mum/2011 (Assessment year: 2007-08) ITA No.: 4111/Mum/2012 (Assessment year: 2008-09) Addl. CIT 2(3), Vs TATA AIG LIFE INSURANCE R. No.555, Aayakar Bhavan, CO. LTD, M K Road, 2nd Floor, Delphi B Wing, Mumbai -400 020 Arcade Avenue, Hiranandani Business Park, Powai, Mumbai -400 076 PAN:AABCT 3784 C (Appellant) (Respondent) CO No.:56/Mum/2012 Arising out of ITA No.1039/Mum/2011, AY 2006-07 CO No.: 57/Mum/2013 Arising out of ITA No .:1035/Mum/2011, AY 2002-03 CO No. 53/Mum/2013 Arising out of ITA No.: 1036/Mum/2011, AY 2003-04 CO No. 54/Mum/2013 Arising out of ITA No.: 1037/Mum/2011, AY 2004-05 CO No. 55/Mum/2013 Arising out of ITA No.: 1038/Mum/2011, AY 2005-06 CO No. 195/Mum/2013 Arising out of ITA No.: 1823/Mum/2011, AY 2007-08 ITA No.3980/Mum/2012 (Assessment year: 2008-09) 2 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs Vs Addl. CIT 2(3), TATA AIG LIFE INSURANCE R. No.555, Aayakar Bhavan, CO. LTD, M K Road, 2nd Floor, Delphi B Wing, Mumbai -400 020 Arcade Avenue, Hiranandani Business Park, Powai, Mumbai -400 076 PAN:AABCT 3784 C (Appellant) (Respondent) Appellant by : Shri Soli E. Dastur Ms Aarti Vissanji Ms. Deeksha Manchandaand & Mansi Trivedi Respondent by : Shri Rahul Raman Date of Hearing : 31-08-2016 /Date of Pronouncement : __ -09-2016 ORDER PER BENCH: aforesaid appeals and cross objections have been filed by revenue as well as by assessee, against separate impugned orders of even date 23.11.2010, for quantum of assessment passed under section 143(3) for assessment years 2002-03, 2003-04, 2004-05, 2005-06 and under section 143(3) for assessment year 2006-07; and order dated, 01.02.2010 and 30.03.2012 for assessment year 2007-08 and 2008-09 respectively, all passed by Ld. CIT(Appeals )-6, Mumbai. 3 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs 2. Since common issues were involved in all impugned years arising out of identical set of facts, therefore, they were heard together and are being disposed off by way of this consolidated order. We will first take-up revenue s appeal for AY 2006-07, being ITA No.1039/Mum/2011, which on merits will cover similar issues contested by revenue in various other assessment years. In grounds of appeal, revenue has raised following grounds:- 1. order of CIT(A) is opposed to law and facts of case. 2. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directing AO to reduce capital contribution of Rs.57.42 crores from shareholder s account to policy holder s account while computing income u/s 44 read with First Schedule of I T Act. 3. On facts and in circumstances of case and in law, Ld. CIT(A) erred in holding that surplus disclosed in Actuarial Report in Form I can be changed by way of adjustments. 4. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directing AO to reduce dividend from surplus as per Form I as dividend is exempt u/s 10(34) without appreciating that income of assessee was computed u/s 44 read with First Schedule of I T Act in which dividend was not included hence there is no question of its exclusion. 5. For these and other grounds that may be urged at time of hearing, decision of CIT(A) may be set aside and that of AO restored . 3. Background of assessee in brief is that, Tata AIG Life Insurance Company was incorporated in August, 2000 as joint venture by M/s Tata Sons Ltd. and American 4 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs International Group. former held 74% stake, whereas, later held 24% through its subsidiary American International Company (Bermuda). assessee company is Insurance Company in terms of section 2(7A) of Insurance Act, 1938 and is carrying on business of life insurance business in India w.e.f. 2th February, 2001 and has started its operations on 1st April, 2001. Being Life Insurance Company, its computation of income is done u/s 44 of Income Tax Act, which envisages that its income shall be computed in accordance with rules contained in First Schedule and not like any other heads of income prescribed under Act. 4. relevant facts, as noted by CIT(A) are that Assessee Company filed its return of income for previous year relevant to AY 2006-07 on 29.11.2006 declaring loss of Rs.44,88,11,261/-. Appointed Actuary of assessee under Insurance Act, 1938, showed surplus of Rs.58.04 crores as on 31.03.2006 in Form I . AO made following adjustments to returned income. Disregarding net deficit of Rs.44,88,11,261/- declared in return of income filed by Appellant and adopting, instead, surplus amounting to Rs.58,04,28,000/- as per Form I . as income of Appellant; Not deducting previous year's surplus from surplus of Rs.58,04,28,000/- as on 31.03.2006 as per Form T; Adding back deficit amounting of Rs.4,03,48,000/- in relation pension scheme (qualifying for exemption 5 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs under section 10(23AAB) of Act), to surplus as per Form T, in computing taxable income; and Disallowing exemption under 10(34) of Act, in relation to dividend income earned by Appellant. reconciliation between assessed income and returned income is given below: Particulars Amt Amount Rs in crores Rs. in crores Total income as per assessment order 62.07 Add: Income/ (loss) as per shareholders A/c Net Income in Shareholders A/c (Non-technical account) 22.16 Less: Amount transferred to Policyholders A/c (76.07) (53.91) Less: Amount transferred from Policyholders A/c (3.51) (57.42) Less: 4.65 Surplus b/f from preceding year 30.17 Transfer from linked fund (lapsed policies) 4.24 Bonus to policyholders 11.08 Deficit in pension scheme u/s 10(23AAB) 4.04 (49.53) Total income/ (loss) as per return filed (44.88) 5. Ld. CIT (A), in impugned order has dealt with provision of section 44 r.w. Rule 2 of First Schedule and various other regulatory provision relating to insurance companies and their accounting requirements and also analyzed case of Assessing Officer as well as contentions raised by assessee and various decisions on this point. His observations and finding as under on impugned issues (as raised by revenue) are reproduced hereunder:- 6.7 I have considered facts of the-issue and submissions made by AR. There is no merit in AR's contention that prof its as - per financials adopted by it in return of income meet requirements of Rule 2. In Life Insurance Corporation of 6 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs India v. CIT, 190 ITR 900 (Born), Bombay High Court observed as follows: ... In view of artif icial mode of compu tation, unless there is special power vested in ITO under provisions of 1kw 1.7'. Act, it will he difficult to hold that instead of taking statutory surplus as starting point of computation of profit of life insurance bu siness, he should take f igu re d iff eren t f rom th e o n e w h i c h represents actual surplus ascertained on basis of Form '1' in Fourth Schedule of Insurance Act, 1938." Thus, High Court has very categorically held that Form 1 should be basis for computation of actuarial surplus. In view of this judgment of Jurisdictional Nigh Court, it is held that Appellants contention of adopting surplus as shown in financials for purpose of Rule 2 of First Schedule cannot be accepted. At same time, there is merit in AR's contention that amount of surplus disclosed in Form 'I is not sacrosanct and it could be adjusted, if necessary. Apart from above, main reasons for this decision are as follows: (a) As mentioned above, life insurance company is now required to maintain and prepare separate Prof it and Loss A/cs f or shareholders' funds and policy holders' funds. Assessing Off icer has himself accepted that shareholders' accounts are part of insurance business (para 4.11..f; page 15 of assessment order). If th is is case, then in year in which there is no transf er f rom shareholders' fund to policy holders' f und by ad optin g f igure in Form 'I' (,wh ich does not take into consideration income in shareholders' account), entire income in _shareholders' account' would escape tax ation. Again in old formats of Fin ancial statements prescribed for Life Insurance - Companies, there was no distin ction between policyholders' account and shareholders' account. It is noted that mere ch ange in f ormats f or presentation' of accounts of Insurance Companies cannot result in different taxable result. (b) Further, rule 2 is computation provision in relation to section 14, which is par t of provisions relating to computation of prof its and gains of bu siness that is section 28 to 43B. Hence, it does not override other provisions, namely, section 2(24) def ining total income, section 5 containing 7 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs scope thereof and section 10 providin g for exclusions theref rom. In other words, if item is not income within meaning of section 2(24) itself or is specif ically excluded theref rom by virtue of section 10, it cannot be taxed on ground that it f orms part of actuarial surplus disclosed in Form I '. 6.8 Thus, correct approach to commutation of income under Rule -2 would be as follows: Step 1: Adopt figure of surplus as per Form 'I' as starting point. Step 2: Examine and ascertain individual items in Form 'I' which need adjustments. Step 3: Reduce / increase surplus as per Form 'I' in respect of individual items in step 2 that require adjustments. Keeping above approach in mind, various adjustments suggested/contested by Appellant are discussed in following paragraphs. Regarding Deduction of Rs.57.42 crores being capital infusion included in transfer of Rs.76. 07 crores from shareholders account to policyholders account in shareholders account, surplus of Rs.58.04 crores in Form I arose after- transfer of Rs.76.07 crores from shareholders' account has been dealt by Ld. CIT(A) in following manner:- This sum of Rs.76.07 crores was total deficit in 5 segments of business as shown in statement giving details of Form I filed by Appellant. said sum comprised following: Rs.in 000 Par Policies (Pension u/s 10(23AAB) 40,348 NON PAR POLICIES Group Life 67,632 Credit Life 74,790 Non-par Policies (Pension) 95,411 8 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs Health Policies 19,912 Linked Policies 462,667 ------------- Total 7,60,760 -------------- break up of Rs.76.07 crores shows that it comprised capital contribution of Rs.57.42 crores and income in shareholders' account of Rs 18.65 crores (net of transfer from policyholders' account of Rs 3.51 crores). Thus capital contribution of Rs 57.42 crores has also been taxed by adopting surplus as per Form 'I'. 7.1 contention of AR that capital contribution of Rs.57.42 crores needed to be reduced from surplus of Rs.58.04 crores for working out taxable income is accepted for following reasons: (a) If AO's interpretation is accepted, internal transfer which is not represented by any income but which is transfer out of capital infusion will result in taxable income. It is obvious that such interpretation cannot be accepted. (b) AO's treatment of taxing internal transfer is against principle of taxation that person cannot make profit from itself, principle established by Supreme- Court in Kiabhai Premchand v CIT [19531 24 ITR 506 and since followed in number of decisions including in Betts Hartley Huett & Co. Ltd. v. CIT, 116 ITR 425 (Cal) where Court observed that debiting or crediting one account does not alter legal position that no person can enter into contract with oneself. Since in present case, gain/loss is computed on account of transfer of funds from shareholders account to policyholders revenue account, it amounts to notional gain and hence cannot be taxed based on aforesaid principle. (c) Section 44 only overrides provisions relating to computation under various heads and does not create charge to tax (as provided for in section 5). 1-lence, notwithstanding special provisions relating to computation of income of life insurance 9 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs business, notional gain/loss arising on transfer of funds from one fund to another is not liable to tax since there is no income at all. (d) Courts have held that amounts which are not income in nature cannot be taxed, whatever be entries in books of accounts. In this connection, following decisions are relevant: Godhra Electricity Co. Ltd. v C17'[1997] 225 17'J? 746 (SC); CIT v Shoorji Vallabhdas & Co. /1962/46 ITR 144 (SC); and CIT v Birla Gwalior P) Ltd. /1973189 ITR 266 (SC) In present case also, entries passed in books of account lot- transfer of funds from shareholders account to policyholders revenue account (to extent of capital contributions) represent hypothetical income and not real income and hence, based on above decisions, cannot be subject to tax. (e) Act envisages only one assessment on every assessee. There cannot be multiple assessments on same assessee. Thus, there is only one assessment on Appellant and hence, its entire income after considering internal adjustments alone is taxable. So far as Act is concerned, there is no distinction between shareholders account and policy holders account. (f) If Assessing Officer's interpretation is accepted, by implication, transfers from policy holder s account to shareholder s account would also be allowable as deduction. 7.2 Thus, it is held that internal transfer of funds cannot be taxed since it is not income at all. At same time income in shareholders account is clearly taxable. If this approach is adopted, computation will yield file following amount: Transfer from shareholder s account to policyholder s account: Rs.76.07 Crores Less:- Income in shareholders account (net of transfer from policy holder s account): Rs.18.65 crores Net: Rs.57.42 crores 10 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs Accordingly, AO is directed to reduce capital contribution of Rs.57.42 crores form surplus of Rs. 58.04 crores . During year, Form 'I' included surplus of Rs.4.24 crores on account of linked policies, which have lapsed. AR contended that this amount has to be reduced for purpose of computation of actuarial surplus under Rule 2 of First Schedule. main thrust of AR's contention is that amount represents liability towards policyholders and cannot be distributed to shareholders until expiry of revival period. It is submitted by AR that said credit is merely book entry which does not result in true surplus or true income, which will happen only subsequently when policy will not at all be entitled for revival in future. In circumstances said amount ought to be reduced from surplus computed under Form I and should be considered as taxable only in subsequent year. 9.1 I have considered submissions of .he AR but do not find merit in them for following reasons: (a) Rule 2 is artificial mode of computation of income (as noted elsewhere in this order); it may not conform to normal and classical cannons of computation. However, once Legislature in its wisdom has prescribed actuarial surplus as basis of computation of income, surplus as disclosed by Form 1 has to be respected unless adjustment is otherwise permitted. In my view, this adjustment is not permitted adjustment. (b) perusal of IRDA circular in connection with lapsed policies under linked business shows that IRDA has categorized lapsed policies into three types: (i) Lapsed policies, which are entitled to be revived and might be revived in future. (ii) Lapsed policies, which are entitled to be revived and might not be revived in future. 11 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs (iii) Lapsed policies, which are not entitled to be revived in future. amount of Rs.4.24 crores represents amount in respect of category ('ii') above i.e. lapsed policies, which are entitled to be revived and might not be revived in future. Thus there is separate provision for policies which might be revived in future, namely category (i) which has been consciously considered by IRDA not to form part of actuarial surplus. At same time amount in category (ii)' has been consciously stipulated by IRDA that it should form part of surplus in Form 'I'. Having regard to this, it is held that merely because it cannot be distributed to shareholders, it cannot be considered as hypothetical income or mere book entry. Thus, it is held that impugned amount has been rightly included by AO in surplus as per Form I . 10. Thus, ground no.1 is disposed off as partly allowed in terms of directions given in forgoing paragraphs. ( i v ) G R O U N D N O. 2 : "Without prejudice, Assessing Officer has erred in not deducting previous year's surplus from surplus of Rs.58,04,28,000/as on 31.03.2006 as per Form I." 11.1 During appellate proceedings, AR submitted that AO erred in computing surplus for financial year ended 31.03.2006 by considering entire amount of surplus as profit of life insurance business without reducing amount of surplus pertaining to earlier Financial years. AR submitted as follows: (a) As mentioned above, Rule 2 reads as follows: "The profits and gains of life insurance business shall be taken to be annual average of surplus arrived at by adjusting surplus or deficit disclosed by actuarial valuation made in ac c o r d ce wi th th e In su r c e Ac t, 1 9 3 8 (4 of 1 9 3 8 ), in r e spe c t of th e l as t in te r - v al u ati on p e r iod en d in g b ef or e th e commencement of assessment 12 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs year, so as to exclude from it any surplus or def icit included therein which was made in any earlier inter-valuation period." Thus, paraphrasing, rule provides that profits & gains of l if e in su r ce bu s in e s s sh al l be su r pl u s d is cl o sed b y th e actu arial valu atio n at th e end of year less su rplus disclosed by actuarial valuation in earlier year. Thus, rule itself envisages reduction of earlier year's surplus for determining profits & gains. (b) During course of assessment proceedings for AY 2005-06. assessing officer had adopted surplus as per Form 1 as profits of life insurance business. However, amount of surplus reflected in Form I was inadvertently understated by Rs.30,17,82,000/-. Thus, same was not brought to tax in AY 2005-06. Though surplus in Form I was understated, surplus as per financials reflected correct position and same was offered to tax in return of income filed for AY 2005-06. (c) Assessing Officer in AY 2006-07 mentioned as follows: "Further, without prejudice to action taken in respect of previous year 04-05 relevant to AY 2005-06 for b/f surplus of Rs.30,17,82,000/-. same is taken as total income here on protective basis. balance rice of Rs.27,86,46,000/- is treated as assessee's income from business on substantive basis" (para 4.11 I, pg. 15/16). Thus, while in order, AO has observed that he is treating Rs.27,86,46,000/- as business income on substantive basis, in final computation. he made protective assessment in impugned order by taxing full amount of surplus of Rs.58,04,28,000/- as per Form 'I' and did not reduce preceding year's surplus of Rs.30, 17,82,000/-. assessment for AY 2005-06 was reopened under section 147 and amount of Rs.39,36,31,000/- (including amount of Rs.30,17,82,000/- erroneously not disclosed in actuarial abstract of AY 2005-06) has been be bi-ought to tax in AY 2005-06 itself. 13 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs 11.2 I have considered facts of issue and submissions made by AR and find merit in them. In view of clear provisions of Rule 2, which requires deduction of surplus of earlier year and fact that said surplus has been taxed by AG in re-assessment under section 147, AO is directed to reduce amount of Rs30,17,82,000 brought forward from earlier valuation period from surplus of Rs.58.04 crores reflect l in Form 1 for assessment year 2006 - 07. This ground is allowed. GROUNDN O4: Assessing Officer has erred in disallowing exemption under 10(34) of Act, in relation to dividend income earned by Appellant." 13.1 AO made impugned disallowance by observing as follows: "6.4.a In life insurance business, assessee normally accepts premium from policyholder and invests it in various .investments including loans, deposits, bonds, shares etc. income received from these investments is nothing but income from its normal business and as such, it is to be assessed under head "income front or profession". As stated by assessee, prescribed schedule of (Form D to third Schedule) of Insurance Act. 1938 specifically shows dividend as income, Had legislators intention was to exclude dividend income of Life Insurance Company from taxation, it would have amended Form 'G' to third Schedules of Insurance Act, 1938. There was no such amendment to Insurance Act. This shows that this income is "business income" and hence it is taxable. assessee,- does not have any right to alter surplus determined by Actuarial Valuation. 6.4.b. judgment in LIC v. CIT (115 ITR 45) of Hon ble High Court of Mumbai is considered regarding dividend. In said case, High Court considered six points (deductions) together and decided it in fauour of assessee. first point was regarding agricultural income and income from post office deposits. other five points were regarding deductions which are allowable under Chapter-VIA of Income Tax Act, 1961. As all six points were considered together, Hon'ble High Court took combined view treating exempted income similar to deduction under Chapter VIA assessee s submission in respect of non applicability of ratio Supreme Court decisions in case of Goetz India Ltd. us. C 284 ITR 323 cannot be accepted." (pg. 18/19) 14 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs 13.2 During appellate proceedings, AR submitted as follows: (a) AO has himself observed in para 5.6 (pg. 17) of his order ft since surplus of pension scheme is not includible in total income under section 10(23AAB), so deficit too shall not included. Now, both section 10(23AAB) & section 10(34) fall under t same section. If deficit under section 10(23AAB) cannot included, by same logic, income except under section 10(should also be excluded in computing total income. (b) decision in LIC v. CIT(1978) 115 ITR 45 (Born), CIT v. N India Assurance Co. Ltd. (1980) 122 ITR 633 (Born) and Lax Insurance Co. Ltd. v. CIT (1969) 72 ITR 474 (Del) that clearly hold U amount can be reduced by tax free income. (c) AO has disallowed claim on pretext that divide income forms part of income of life insurance business. 'I learned AO contended that income received from in-vestments is taxable under head "income from business & profession". It is submitted that whether income is business income or not, section 10 covers all dividend income. (d) exemption for amount of dividend received under section 10(34) of Act has not been claimed in return of income filed. However, such claim was made before Assessing Officer vide submissions dated 17.11.2008 wherein AO was requested to consider Circular no. 14 (XL-35) dated 11.04.1955 and decision of Supreme Court in case of CIT v. Mahalaxmi Sugar Mills Ltd. 1160 ITR 920 (SC)). (e) decision of Apex Court in case of Goetze Ltd v CIT has been considered by Mumbai Tribunal in case of Chicago Pneumatic India Ltd. v. DCIT (15 SOT 252) where Tribunal allowed taxpayer's claim for deduction under sections 80HH and 80-1 of Act during course of assessment proceedings without filing revised return. (f) aforesaid principle of accepting Circular No. 55 and allowing claims through letter has been followed by Tribunal all over country in following cases (i) Dodsal Pvt. Ltd. v. DCIT, ITA No. 680/M/04 dt. 30.04.2007 (ii) ACIT v. Technofab Engg. Ltd. 2009 T.IOL 664 ITAT (Del) (iii) DCIT v. Essar Oil Ltd. ITA No. 4177/Mum/2000 (AY 1994-95) (iv) Kisan Discretionary Family Trust v ACIT [113 TTJ 918 (2007)[ (para. 39, 40) (power o f t h e T r i b u n l t o l l o w c l i m s ) (g) Finally in Balmukund Acharya v. DCIT,(2009) 310 ITR 310 (Born), assessee had mistakenly offered higher income on which he was assessed by Officer. Bombay High Court observed as follows: - "Tax can be collected or-only as provided under Act. If any, assessee, under mistake, misconceptions or on not being properly 15 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs instructed is over assessed, authorities under Act are required to assist 1-rim and ensure that only legitimate taxes due are collected (see S.R. Kosti v. CIT [20051 276 JTI'R 1651 (Guj.), CPA Yoosuf v. ITO 119701 77 ITR 237 (Ker.), CIT v. Bharat General Reinsurance Co. Ltd. [1971J 81 ITR 303 (Delhi) CIT v. Archana R. Dhanwatey 119821 136 JTR 3552 (Bom.). 32. If purchaser levy is not permitted under Act, tax cannot be levied applying doctrine of estoppel.* (See Dy. CST u. Sreeni Printers [1987] 67 SCC 279). 33. This Court in case of Nirmala L. Mehta v. A. Balasubramaniam, C17'[20041 269 ITR 13 has held that there cannot be any estoppel against statute. Article 265 of Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from party relief that he is entitled to where tax is levied or collected without authority of law. In case on hand, it was obligatory on part of Assessing Officer to apply his mind to facts disclosed in return and as s e s s th e s s e s s e e k e e p in g i n m i n d th e l w 1 1 0 1 ( 1 m g th e f i e l d . " It is submitted that Appellant's case is better inasmuch as it had even made claim before Assessing Officer. h) Further, where exemption under section 10(34) can be granted for amount of dividend, no disallowance under section 14A of Act could be made. In this regard, section 14A of Act provides that no deduction shall be-allowed in respect of expenditure incurred in rotation to income which does not form part of total income. Hon ble Delhi Tribunal in case of Oriental Insurance Company Limited v. ACIT, (2009-TIOL-172-ITAT- DEL) has held that no disallowance under section 14A of Act could be made for insurance companies as its income would be computed under specific provisions of section 44 read with First Schedule of Act. In light of aforementioned decision in context of insurance companies, no disallowance is required to be made under section 14A of Act. 13.3 I have considered facts of issue and submissions made by AR. Broadly there are three issues to be considered: A) Whether Appellant could have made claim for exemption, although not claimed in return of income. B) If yes, whether income exempt under section 10(34) is to be reduced from surplus as per Form I. C) If yes, whether such reduction is subject to disallowance under section 14A. 16 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs In my view, Appellant deserves to succeed on preliminary issue as to whether it can make claim for first time before AO during assessment proceedings in vie* of circular no. 14 of 1955 dated 11.04.1955 and ration laid down by various Tribunals cited by AR. Corporation, there is, no reason why exemption should not be allowed in respect of dividend income exempted under section 10(34). This is especially so because AO has rightly disallowed loss in res In view of direct judgment of Jurisdictional High Court in LIC v. CIT (1978) 115 ITR 45 (Born) allowing exemption under section 10 to Life Insurance pact of pension business, whose profits are exempted under section .1O(23AAB). So far as disallowance under section 14A is concerned, in view of decisions of Tribunal in case of Oriental Insurance (Supra), Bajaj Alliance General insurance Co. Ltd. vs. Add!. CIT [(2010) 130 TTJ 398 (Pune) (Trib.)] and Reliance general Insurance Co Ltd vs. Dy CIT 120101 (ITA No.781 /Mum/2007), it is held that section' 14A.. is not applicable to Life Insurance Company. AG is accordingly directed to reduce sum of Rs.2,33,26,330/- from surplus as per Form T. This ground is allowed. 6. Before us, Ld. Senior Counsel submitted that issues raised by Revenue in their grounds of appeal are squarely covered by decisions of Co-ordinate Bench in following cases:- Sr.No. Particulars (i) ICICI Prudential Insurance Company Limited v ACIT, Circle 6(1), Mumbai [2013] 140 ITD 41 (Mumbai Tribunal) (ii) HDFC Standard Life Insurance Company Limited v DCIT (OSD)-1(1) ITA No. 2203/Mum/2012 and Others 7. On other hand, Ld. DR strongly relied upon order of AO. 8. After considering relevant finding given in impugned order as well as aforesaid decisions of Tribunal, we agree with Ld. Counsel that all three issues raised in grounds raised by revenue are covered in favour of assessee and against Department by aforesaid decisions of Tribunal. We find that Tribunal 17 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs in case of ICICI Prudential Insurance Co. Ltd. (supra) has dealt with all these issues in detail after considering judgment of jurisdictional High Court; catena of other decisions and relevant provisions of law. relevant observations and findings of Tribunal in case of ICICI Prudential Insurance Co. Ltd. (supra) on various points, paragraph wise are summarized as under:- 24. Before analyzing issue, it is necessary to discuss principles of incorporation of Insurance Act 1938 into Income Tax Act 1961. As rightly pointed out by learned Counsel, reference to Insurance Act 1938 in Income Tax Act as such can only be considered as legislation by incorporation . 27. actuarial valuation made in accordance with Insurance Act, 1938 do mean that actuarial valuation done in accordance with Insurance Act, 1938. In arriving at above decision we have also taken into consideration that Rule-5 in Part-B of first schedule with reference to other insurance business did incorporate IRDA and its Regulations as amended by Finance Act 2009 w.e.f. 1.4.2011 is also taken into consideration. This indicates that Legislature consciously omitted incorporating provisions of IRDA or Regulations made there under in rule 2 which still refers to Insurance Act, 1938 only. 28. Further, we also notice that Insurance Act itself was amended along with introduction of IRDA Act 1999. Along with said IRDA Act, there are various 18 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs amendments proposed in Insurance Act in tune with IRDA Act by amending relevant provisions of Insurance Act 1938. However, since Rule 5 was amended in First schedule by specifically referring to IRDA Act 1999 or Regulations made there under, we are of opinion that legislature intended not to modify or amend Rule-2. This indicates intention of legislature that actuarial valuation has to be made in accordance with unamended Insurance Act, 1938. We are of firm opinion that unamended provisions of Insurance Act 1938 were only incorporated into Income Tax Act as far as life insurance businesses are concerned. Therefore, AO s action in following format prescribed under Regulations of IRDA Act is not in accordance with spirit of Rule-2 and provisions as made applicable under Income Tax Act. 29. It is also noticed that actuarial report and abstracts under Insurance Act carrying on life insurance business shall, in accordance with Regulations contained in Part I of Fourth Schedule and in conformity with requirements of Part II of that Schedule. 30. First to Fourth Schedule of Insurance Act 1938 was omitted by Insurance Amendment Act 2002 after incorporation of relevant schedules in IRDA Act. Even though said schedules were omitted from Insurance Act, 1938, we are of opinion that as far as Rule-2 is concerned by principle of Legislation by incorporation unamended Insurance Act, 1938 is applicable and actuarial 19 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs valuation has to be made in accordance with then existing Part-I of Fourth Schedule and in conformity with requirements of Part-II of that schedule. Therefore, assessee s contention that IRDA Regulations even though are applicable to assessee since it has commenced business after commencement of IRDA Act, 1999, for purpose of Rule-2, actuarial valuation has to be done in accordance with Regulations contained in erstwhile Fourth schedule Part-I and Part II. This is what assessee is contending and merging accounts of policyholder s and shareholder s account and arriving at actuarial deficit, without taking into consideration transfer of funds from shareholder s account to policyholder s account. 31. After introduction of IRDA Act, entire Regulation of insurance business has gone to authority and in order to protect interests of holders of insurance policies, to regulate, to promote and ensure orderly growth of insurance industry number of regulations have been prescribed by IRDA. One such is, Insurance Regulatory and Development Authority (IRDA) (Actuarial Report and Abstract) Regulations 2000 by which method of preparation of actuaries report and abstracts were prescribed. actuary is responsible for analyzing possible outcomes of types of events that would potentially cost policy holders to make claims against their insurance policies. Insurance companies need to make sure that money they are charging and collecting from policy holders is adequate to cover costs of certain claims that might beneficially be made by policy holders as 20 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs well as their other expenses. In fact, work that actuaries perform is crucial to insurance company s ability to remain in business. Actuaries are involved at all stages in product development and in pricing risk assessment and marketing of products. Their job involves making estimates of ultimate out-come of insurable events. In business of insurance product cost is abstraction, depending on timing issues, variability issues and risk parameters. One big function actuaries provide is making reserves to insure that insurance companies keep enough money on their balance sheets to make good of all claims they will have to pay. This involves arriving at actuarial surplus or deficit depending on various factors. In order to ensure fair play in business, IRDA prescribed regulations according to which various norms were prescribed in order to ensure that Life Insurance business (even other insurance business) are done according to healthy business practices. As per above regulations, Regulation 4 prescribes number of abstracts and statements in respect of (a) linked business; (b) non-linked business and (c) health insurance business. As part of this Regulation 4(2) (d) item no. iv, Form-"I" was prescribed for purpose of valuation results and to indicate surplus or deficit in life insurance business of company. Apart from above regulations, IRDA also prescribed Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor s Report of Insurance Companies) Regulations 2002. surplus or deficit arrived at by actuary in his valuation for inter valuation period has to be 21 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs taken into consideration under regulations in financial accounts as well. 32. IRDA Regulations specifically require maintaining policyholder s account and shareholder s account separately and permits transfer of funds from shareholder s account to policyholder s account as and when there is deficit in policyholder s account. As rightly noted by Hon'ble Bombay High Court, as policy, company is transferring funds/assets from shareholder s account to policyholder s account even during year periodically as and when actuarial valuation was arrived at in policyholder s account. Most of companies are required to submit quarterly accounts under Company Law, there is requirement of actuarial valuation report periodically and accordingly assessee was transferring funds from shareholder s account to policyholder s account. Since insurance business will not yield required profits in initial 7 to 10 years, lot of capital has to be infused so as to balance deficit in policyholder s account. During year as already stated assessee has issued fresh capital to extent of Rs.250 crores and transferred funds to extent of Rs.233 crores from shareholder s account to policyholder s account. Since assessee is having only one business of life insurance, entire transactions both under policyholder s and shareholder s account do pertain to life insurance business only as it was not permitted to do any other business. Once assessee is in life insurance business, computation has to be made in accordance with Rule-2 as per provisions of section 44. Therefore, there 22 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs is valid argument raised by assessee that both policyholder s & shareholder s account has to be consolidated into one and transfer from one account to another is tax neutral. What AO has done is to tax surplus after funds have been transferred from shareholder s account to policyholder s account at gross level while ignoring such transfer in shareholder s account, while bringing to tax only incomes declared in shareholder s account that too under head other sources of income . In fact while giving finding that assessee is in life insurance business only and incomes are to be treated as income from life insurance business, CIT (A) surprisingly in subsequent assessment years appeals accepted AO s contention that surplus in shareholder s account is to be taxed as other sources of income. But once provisions of section 44 of IT Act are invoked anything contained in heads of income like income from other sources, capital gains, house property or even interest on securities does not come into play and only first schedule has to be invoked to arrive at profit. Therefore, in our opinion both policyholder s and shareholder s account has to be consolidated for purpose of arriving at deficit or surplus. Comparison of Forms-I under Insurance Act and IRDA Regulations. 33. Whether Assessing Officer s action in adopting Form-I prescribed under IRDA Regulations same as that of actuarial valuation made in accordance with Insurance Act 1938. Even though Insurance Act 1938 also refers to Form-I, there is substantial difference in formats. Both AO and CIT (A) has given 23 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs credence to Form I without understanding that old form-I prescribed under Insurance Act 1938 is entirely different from new Form-I prescribed under IRDA Regulations. 35. department is asked to explain what surplus is shown under Form I i.e. at column (a) above. Regulation 8 as shown above has Column (a) surplus shown under Form I . In Col.(e) one has to represent sum transferred from shareholder s fund during inter valuation period. Item (g) refers to total surplus after taking into account items (a) to (f). Under Col.(a) surplus shown in Form I is deficit as per Form AR-A in policyholder s deficit account in this year. This corresponds actuarial valuation surplus or deficit referred to under Insurance Act, 1938. This amount also tallies with Form I prescribed under Regulation 4. IRDA Regulations however, after arriving at surplus or deficit in Form I also prescribes separate statement again as Form I with details of (a) to (f) under Regulation 8. As can be seen from these two forms, there is variation in amounts are presented, as these forms serve different purposes. Form I which was prescribed under Regulations 8 is after arriving at distribution surplus under Regulations 6. Regulations 6, 7 and 8 are as under: Thus as can be seen from above Regulations, Form I under Regulation 8 represent total surplus for purpose of distribution of bonuses/ dividends to policy holders and does not represent surplus or deficit of actuarial valuation for purposes of balance sheet. This amount is 24 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs represented in Form I prepared under Regulation 4 for purpose of financial accounts. Reconciliation of amounts:- 36. As seen from orders of authorities, Total surplus prepared under Regulation 8 was taken as basis ignoring Form- I of Regulation 4. While accepting department argument that for purposes of Life insurance business act provides for surplus of valuation to be taxed at lesser rate, we cannot accept argument that surplus is Total surplus including Transfers from share holder s account. Basically transfers are tax neutral as credit in one account gets cancelled by debit in other account when accounts are consolidated. What Rule.2 prescribed was only average surplus arrived by adjusting surplus disclosed in actuarial valuation made with regard to Insurance Act, 1938 in respect of inter valuation period. Assessee in course of assessment proceedings has furnished general balance sheet in Form-A. 38. statement furnished is in accordance with Insurance Act, 1938, therefore, it cannot be stated that assessee returned income is not in accordance with Insurance Act, 1938. There is no basis for AO to take Form-I total surplus as surplus of Life insurance business ignoring transfer from shareholder s account. 39. It is also on record that assessee followed IRDA recommendations and accordingly prepared actuarial valuation report including surplus or 25 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs deficit. However, Rule-2 prescribes only actuarial valuation in accordance with Insurance Act, 1938. Therefore, AO is duty bound to insist on actuarial valuation in accordance with Insurance Act, 1938, so as to bring to tax surplus or deficit. What we notice is that AO, ignoring Rule-2, has relied on actuarial valuation report prescribed under IRDA recommendations under Regulation 8 that too at Total surplus , which is at variance with Insurance Act, 1938. Since no amendment was brought to Rule-2 to incorporate IRDA recommendations, we are of opinion that action of AO in relying on IRDA Regulations is not according to law. Assessee had submitted its accounts as stated above, which are in accordance with Insurance Act, 1938. Instead of examining these statements, just because assessee has shown total surplus in accounts in similarly named Form-I( under Regulation 8), AO wants to tax amount which is after taking into account transfer of assets by way of fresh capital from shareholder s account. This in way is taxing fresh capital infused into business indirectly which cannot be done as this is not business surplus but infusion of capital directly. 40. What assessee has done in reconciling IRDA format with that of old Insurance Form is correct and accordingly loss disclosed in computation of income is according to actuarial surplus/deficit under Insurance Act, 1938 prescribed under Rule 2 of first schedule part-A. In view of this, we are of opinion that insistence by AO to bring to tax entire amount shown under new Regulations 26 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs including transfer from shareholder s account is not correct. Instead of AO in taking surplus at Regulation 8(1)(a) which is actuarial surplus / deficit for year took amount as disclosed at Regulation 8 (1) (f) (total surplus after transfer from Shareholder s account) which is not at all correct. Conclusion:- 42. In view of above, looking at issue in any way what we notice is that computation made by assessee is in accordance with Rule-2 of Insurance Act 1938 according to which only AO can base his computation. This also corresponds to way incomes were assessed in earlier years ie. correct method as per Rule 2 and Sec 44 of IT ACT. In view of discussion above and after analyzing Forms, Regulations and Provisions we have no hesitation to hold that assessee working of actuarial surplus/ deficit is in accordance with Rule 2 of First Schedule. Therefore, assessee grounds on this issue are allowed and AO is directed to modify order accordingly . This decision has been followed by Tribunal in case of HDFC Standard Life Insurance Co. Ltd. (supra). Thus, following same judicial precedence which would apply on facts of present case also, we decide issues raised vide ground no. 1&2 in department s appeal in favour of assessee and against Department. 9. Similarly, with regard to issue raised in ground No.3 also, same is also covered by same decision as incorporated above and accordingly, respectfully following 27 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs same, we uphold order of CIT(A) and dismissed ground raised by Department. 10. Lastly, with regard to ground No.4, that is, disallowing exemption under section 10(34) with regard to dividend income earned, we find that Ld. CIT(A) after relying upon various decisions held that section 14A is not applicable to Life Insurance Company. Tribunal has reiterated same view in above cases that provisions of section 14A will not apply to Insurance companies, whose income are strictly assessable in terms of Rules of Insurance Act. Thus, respectfully following same, we affirm order of CIT (A) and dismissed ground raised by revenue. Accordingly, grounds raised by revenue are dismissed. 11. In result, appeal of revenue stands dismissed. 12. Now, we shall take-up Cross Objection No.56/Mum/2013 filed by assessee, wherein, following grounds have been raised:- On facts and in circumstances of case learned Deputy Commissioner of Income-tax 2(3) [ DCIT ]; 1. erred in disregarding net deficit of rs.448,811,261 declared in return of income filed by Appellant and adopting, instead, surplus amounting to Rs.580,428,000 as per Form I. 2. erred in not allowing deduction from actuarial surplus for amount of bonus to policyholders of Rs.110,800,000. Without prejudice to this, where deduction is not allowed in year 1, learned DCIT erred 28 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs in not allowing deduction for amount of bonus to policyholders in year 2. 3. erred in adding back to actuarial surplus deficit amounting of Rs.40,348,000 in relation pension scheme, income from which qualifies for exemption under section 10(23AAB) of act. 4. erred in not allowing deduction from actuarial surplus, for amount of transfer from linked fund (lapsed policies) of Rs.42,400,000. Appellant craves, to consider each of above grounds of cross objection without prejudice to each other and craves leave to add, alter, delete or modify all or any of above grounds of cross objection . 13. At outset, it has been submitted that, ground No.2 and 4 are not pressed accordingly; same are dismissed as not pressed. 14. So far as issues raised in Ground No. 1 & 3 are concerned, it has been admitted that, same are covered in favour of assessee and against Department by aforesaid decisions of ITAT Mumbai Bench in case of ICICI Prudential Life Insurance Co. Ltd (supra) and HDFC Standard Life Insurance Co. Ltd. (supra). Thus, respectfully following same, ground No.1 & 3 is treated as allowed. 15. In result, Cross Objection filed by assessee stands partly allowed. 29 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs 16. It has been admitted by both parties that grounds for other assessment years viz. AY 2002-03, 2003-04, 2004-05, 2005-06, 2007-08 & 2008-09 in revenue s appeals are identical and arising out of similar set of facts, therefore, aforesaid finding following earlier decisions of Tribunal in case of ICICI Prudential Life Insurance Co. Ltd (supra) and HDFC Standard Life Insurance Co. Ltd. (supra) will apply mutatis mutandis. For sake ready reference, grounds raised by revenue for above impugned years are reproduced here under:- AY 2002-03:- 1. order of CIT(A) is opposed to law and facts of case. 2. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directing AO to reduce capital contribution of Rs.25.25 crores from shareholder s account to policy holder s account while computing income u/s 44 read with First Schedule of I T Act. 3. On facts and in circumstances of case and in law, Ld. CIT(A) erred in holding that surplus disclosed in Actuarial Report in Form I can be changed by way of adjustments. 4. For these and other grounds that may be urged at time of hearing, decision of CIT(A) may be set aside and that of AO restored . AY 2003-04:- 1. order of CIT(A) is opposed to law and facts of case. 2. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directing AO to reduce capital contribution of Rs.42.88 crores from shareholder s account to policy holder s account while computing income u/s 44 read with First Schedule of I T Act. 30 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs 3. On facts and in circumstances of case and in law, Ld. CIT(A) erred in holding that surplus disclosed in Actuarial Report in Form I can be changed by way of adjustments. 4. For these and other grounds that may be urged at time of hearing, decision of CIT(A) may be set aside and that of AO restored . AY 2004-05:- 1. order of CIT(A) is opposed to law and facts of case. 2. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directing AO to reduce capital contribution of Rs.63.06 crores from shareholder s account to policy holder s account while computing income u/s 44 read with First Schedule of I T Act. 3. On facts and in circumstances of case and in law, Ld. CIT(A) erred in holding that surplus disclosed in Actuarial Report in Form I can be changed by way of adjustments. 4. For these and other grounds that may be urged at time of hearing, decision of CIT(A) may be set aside and that of AO restored . AY 2005-06:- 1. order of CIT(A) is opposed to law and facts of case. 2. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directing AO to reduce capital contribution of Rs.49.59 crores from shareholder s account to policy holder s account while computing income u/s 44 read with First Schedule of I T Act. 3. On facts and in circumstances of case and in law, Ld. CIT(A) erred in holding that surplus disclosed in Actuarial Report in Form I can be changed by way of adjustments. 31 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs 4. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directing AO to reduce dividend of Rs.12,76,207/- from surplus as per Form I as dividend is exempt u/s 10(34) without appreciating that income of assessee was computed u/s 44 read with First Schedule of I T Act in which dividend was not included hence there is no question of its exclusion. 5. For these and other grounds that may be urged at time of hearing, decision of CIT(A) may be set aside and that of AO restored . AY 2007-08:- 1. order of CIT(A) is opposed to law and facts of case. 2. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directing AO to reduce capital contribution of Rs.87.07 crores from shareholder s account to policy holder s account while computing income u/s 44 read with First Schedule of I T Act. 3. On facts and in circumstances of case and in law, Ld. CIT(A) erred in holding that surplus disclosed in Actuarial Report in Form I can be changed by way of adjustments. 4. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directing AO to reduce dividend of Rs.43.44 crores from surplus of Rs.134.55 crores reflected in Form I without appreciating that no such provision for reduction has been provided u/s 44 of I T Act, r.w. 1st Schedule of I T Act. 5. On facts and in circumstances of case and in law, Ld. CIT(A) erred in directed AO to reduce dividend of Rs.27.65 lacs from surplus as per Form I as dividend ix exempt u/s 10(34) without appreciating that income of assessee was computed u/s 44 read with First Schedule of 32 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs I T act in which dividend was not included hence there is no question of its exclusion. 6. For these and other grounds that may be urged at time of hearing, decision of CIT(A) may be set aside and that of AO restored . AY 2008-09:- On facts and in circumstances of case and in law, learned CIT(A) has erred in allowing relief to assessee to extent impugned in grounds enumerated below: 1(a) On facts and circumstances of case and in law, CIT(A) erred in holding that surplus disclosed in Actuarial Report in Form I can be changed by way of adjustments. 1(b) On facts and in circumstances of case and in law, CIT(A) erred in not adopting Actuarial surplus amount to Rs.79,36,44,000/- as per Form I, as income of assessee in terms of section 44 r.w.r. 2 of First Schedule of I.T. Act, 1961. 2(a) On facts and in circumstances of case and in law, CIT(A) erred in directing AO to reduce amount of opening surplus from surplus reflected in Form I without appreciating that no such provision for reduction has been provided u/s 44 of I.T. Act r.w. First Schedule of I.T. Act. 2(b) On facts and in circumstances of case and in law, CIT(A) erred in directing AO to reduce capital contribution from shareholders account to policy holders account while computing income u/s 44 r.w.r First Schedule of I.T. Act. 3. On facts and in circumstances of case and in law, CIT(A) erred in directed AO to reduce exempt income u/s 10(23AAB) and u/s 10(34) while computing income of insurance business of assessee u/s 44. 33 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs 4. For these and other grounds that may be urged at time of hearing, decision of CIT(A) may be set aside and that of AO restored . Accordingly, in view of our decision as given above for AY 2006-07, all appeals filed by revenue are dismissed. 17. As far as Cross Objections for various other years are concerned, grounds raised are almost similar to AY 2006-07. Like in AY 2006-07, assessee has not pressed following grounds of appeal in cross objections raised in various assessment years:- i) AY 2002-03 Ground No.3 Not pressed ii) AY 2003-04 Ground No.3 Not pressed iii) AY 2004-05 Ground No.3 Not pressed iv) AY 2005-06 Ground No.2 Not pressed v) AY 2007-08 Ground No.2 Not pressed vi) AY 2008-09 Ground No.1 &2 Not pressed 18. As regards validity of reopening challenged under section 147, as taken in assessment years 2002-03, 2003-04 & 2004-95, it has been contended that since all issues have been allowed on merits, therefore, issue of validity of reopening should be kept open and academic. We agree with such contention and hold that issues relating to validity of reopening u/s 147 have been rendered academic and accordingly same are dismissed as in-fructuous. Lastly, as regards other grounds, same are covered by decisions of Tribunal in case of ICICI Prudential Life Insurance Co. Ltd (supra) and HDFC Standard Life Insurance 34 TATA AIG LIFE INSURANCE CO. LTD ITA 1039/Mum/2011 CO No. 56/Mum/2013 And 06 other Group appeals and COs Co. Ltd (supra). Thus, following same, we allow ground no.2 for AYs 2002-03, 2003-04 & 2004-05 and Ground No. for AY 2005-06 & 2007-08 as allowed and Ground No.4 for AY 2003-04, 2004-05, Ground No.3 for AY 2005-06 and 2007-08 are treated as allowed. 19. In result, all appeals of revenue are dismissed and Cross objections are partly allowed. Order pronounced in open court on 21st September, 2016. Sd/- Sd/- (R C SHARMA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 21st September, 2016. Copy to:- 1) Appellant. 2) Respondent. 3) CIT (Appeal) 6, Mumbai. 4) CIT -2, Mumbai 5) D.R. H Bench, Mumbai. 6) Copy to Guard File. By Order / / True Copy / / Dy. /Asstt. Registrar I.T.A.T., Mumbai Chavan, Sr.PS Addl. CIT 2(3), Mumbai v. Tata Aig Life Insurance Co. Ltd