suresh ITR-1075.1998.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX REFERENCE NO.1075 OF 1998 Commissioner of Income tax, Bombay City III, Bombay Applicant Vs. New India Assurance Co. Ltd. Respondent Mr. Suresh Kumar with Ms Samiksha Kanani for Applicant. Mr. F.V. Irani with Mr. Rajesh Poojary i/by Mulla & Mulla & C.B. & Caroe for Respondent. CORAM: S.C. DHARMADHIKARI & SMT. VIBHA KANKANWADI, JJ. DATE : AUGUST 29, 2017 P.C: 1. This income tax reference at instance of Revenue, though not on Board, on request, it is taken up for hearing. following question of law has been referred for opinion and answer by this Court: Whether, on facts and in circumstances of Page 1 of 7 ::: Uploaded on - 11/09/2017 ::: Downloaded on - 12/09/2017 09:15:17 ::: suresh ITR-1075.1998.doc case, Tribunal was justified in holding that assessee, which is general insurance company, was entitled to relief admissible under section 35B of Income tax Act, 1961, having particular regard to provisions of section 44 of Income tax Act, read with rule 5 of First Schedule to that Act? 2. statement of case and pertaining to Assessment Years 1975 76 and 1976 77 & 1977 78 discloses that for three assessment years under consideration deduction under Section 35B of Income Tax Act, 1961 ( I.T. Act, 1961 for short), in respect of expenditure which was incurred by assessee company in insurance business, was subject matter or issue before Tribunal. assessee's claim was for weighted deduction under Section 35B of Income Tax Act, 1961. assessee was having large number of branches outside India and therefore in respect of business done by those branches assessee was engaged in export of insurance services outside India. It was accordingly entitled to weighted deduction under Section 35B in respect of expenditure incurred in connection with such insurance services. This claim was rejected by Income Tax Officer and Page 2 of 7 ::: Uploaded on - 11/09/2017 ::: Downloaded on - 12/09/2017 09:15:17 ::: suresh ITR-1075.1998.doc by First Appellate Authority. Thereafter, matter was carried to Tribunal and Tribunal found that relief under Section 35B was permissible to insurance company carrying on general insurance business and whose income had to be computed under Section 44 r/w Rule 5(a) of First Schedule to I.T. Act, 1961. There is decision of this Court reported in (1969) 71 I.T.R. 761 {Commissioner of Income Tax, Bombay City II, Bombay Vs. New India Assurance Co. Ltd.} but what it found was that there was second question as well and after that question was restored for consideration of Tribunal, it appeared that there has been amendment brought to statute. It is in such circumstances and on account of scheme of New Income Tax Act that question, as reproduced above, arose for consideration. That is how it was referred to this Court. 3. We have heard Mr. Suresh Kumar, appearing on behalf of Revenue and Mr. Irani, appearing on behalf of assessee. Page 3 of 7 ::: Uploaded on - 11/09/2017 ::: Downloaded on - 12/09/2017 09:15:17 ::: suresh ITR-1075.1998.doc 4. Reliance was placed by Mr. Suresh Kumar on Judgment of Hon'ble Supreme Court in case of Commissioner of Income Tax v. Hero Cycles Pvt. Ltd. and another, reported in Vol 228 I.T.R. 463 (SC). 5. In that decision, Hon'ble Supreme Court considered scope of Section 44 of I.T. Act, 1961. Hon'ble Supreme Court in answering such question held as under: question in this case relates to scope of Section 44 of Income Tax Act, 1961. Section states: "Section 44. Notwithstanding anything to contrary contained in provisions of this Act relating to computation of income chargeable under head 'Interest on securities', 'Income from house property', 'Capital gains' or 'Income from other sources', or in section 199 or in sections 28 to 43B, profits and gains of any business of insurance, including any such business carried on by mutual insurance company or by co operative society, shall be computed in accordance with rules contained in First Schedule." plain reading of section will go to show that notwithstanding other provisions of Page 4 of 7 ::: Uploaded on - 11/09/2017 ::: Downloaded on - 12/09/2017 09:15:17 ::: suresh ITR-1075.1998.doc Income tax Act, in particular, provisions of sections 28 to 43B, profits and gains of any business of insurance shall be computed in accordance with rules contained in First Schedule. This is non obstante clause and rules have been specially made for computation of profits and gains of insurance business. rules are contained in First Schedule to Act. There is rule for computation of profits of life insurance business (rule 2). Another rule has been framed (rule 5) for computation of profits and gains of other insurance business. This means that profits and gains of insurance business (whether life insurance or general insurance) can only be assessed in manner laid down in rules contained in First Schedule and not in any other manner. Mrs. Ramachandran, learned counsel appearing for assessee, has contended that section 44 speaks of section 28 to section 43B . It does not specifically mention section 35B. Therefore, assessee was entitled to benefit of section 35B. Section 35B was inserted in Act by way of amendment. When original Act was passed section 35B was not in statute book. contention of Mrs. Ramachandran is that when section 35B was inserted, it was not specifically mentioned that section 35B will not apply to insurance companies. Therefore, benefit of section 35B will have to be given to insurance company. We are unable to accept this contention for two reasons. First, when Act speaks of section 28 to section 43B, then each one of sections from section 28 to section 43B will be included. newly inserted section 35B was not specifically mentioned because it was not necessary to do so, just as it was not necessary to specifically mention section 35B in section 29, which Page 5 of 7 ::: Uploaded on - 11/09/2017 ::: Downloaded on - 12/09/2017 09:15:17 ::: suresh ITR-1075.1998.doc lays down that computation of profits and gains of business or profession shall be computed in accordance with provisions contained in sections 30 to 43C. Moreover, when Act specifically says that profits and gains of insurance business shall be computed in accordance with rules contained in First Schedule then such computation has to be made according to that rule and not any other rule. We are unable to accept contention of Mrs. Ramachandran that benefit of section 35B should also be given to any insurance company. 6. Mr. Suresh Kumar would submit that this Judgment of Hon'ble Supreme Court squarely answers question referred in favour of Revenue. 7. Mr. Irani, appearing for assessee, would submit that such Judgment has been pronounced by Hon'ble Supreme Court and dealing with very question referred for our opinion. He was unable to point out anything contrary to opinion expressed by Hon'ble Supreme Court and which binds us. He could not also point out from statutory provisions that position is altered in any manner. Page 6 of 7 ::: Uploaded on - 11/09/2017 ::: Downloaded on - 12/09/2017 09:15:17 ::: suresh ITR-1075.1998.doc 8. In such circumstances, we answer question referred in favour of Revenue and against assessee. reference stands disposed of accordingly. No costs. (SMT. VIBHA KANKANWADI, J.) (S.C. DHARMADHIKARI, J.) Page 7 of 7 ::: Uploaded on - 11/09/2017 ::: Downloaded on - 12/09/2017 09:15:17 ::: TheCommissionerofIncome-tax, BombayCityIII,Bombay v. TheNewIndiaAssuranceCo.Ltd