INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER (Assessment Year: 2006-07)

M/s. The Oriental Insurance Co. Ltd, Vs. The ACIT, A 25/27, Asaf Ali Road, New Delhi- Circle-16(1), 110003 New Delhi (Appellant) (Respondent)

PAN: AAACT0627R Assessee by : Shri Tarandeep Singh, Adv Revenue by: Shri Mahesh Kumar, CIT (DR)

Date of Hearing 19/05/2025 Date of pronouncement 14/08/2025 O R D E R PER M. BALAGANESH, A. M.:

1. The appeal in ITA No.2492/Del/2017 for AY 2006-07, arises out of the ld. Commissioner of Income Tax (Appeals)-22, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 09/09-10/CIT(A)-222, New Delhi dated 01.03.2017 against the order of assessment passed u/s 143(3) of the Income- tax Act, 1961 (hereinafter referred to as „the Act‟) dated 03.12.2007 by the Assessing Officer, ACIT, Circle-16 (1), New Delhi (hereinafter referred to as „ld.

AO‟).

2. Ground Nos. 1 and 1.1 raised by the assessee are challenging the addition of ₹615,70,93,758/- made on account of profit on sale/ redemption of investment and by denying the benefit of exemption u/s 10(38) of the Act.

3. We have heard the rival submissions and perused the material available on record. The return of income for assessment year 2006-07 was filed by the assessee on 30.11.2006 declaring total loss of ₹184,74,38,210/- under normal provisions of the Act and the book loss of ₹238,43,07,539/- u/s 115JB of the Act. During the relevant previous year, the assessee derived income from the business of general insurance, purchase and sale of securities. The assessee is also authorized to conduct non life insurance business. The assessee is also recognized as Public Financial Institution as prescribed u/s 4A of the Companies Act, 1956 within the meaning of Section 45 I (c)(ii) of Reserve Bank of India Act, 1934. The assessee being an insurance company, its income arising out of Insurance business is to be computed mandatory in terms of specific statutory provisions contained under section 44 of the Act read with provisions contained in Part B of First Schedule to the Act.

4. The assessee had shown a sum of ₹615,70,93,758/- as profit on sale of investment for the year ended 31.03.2006 and credited the same to the profit and loss and revenue accounts for the year ended on 31.03.2006. The ld AO show caused the assessee as to why this sum be not treated as its business income other than from general insurance business on which the provision contained u/s 44 of the Act were applicable. The ld AO also observed that for assessment year 2004-05, the profit on sale of investment in assessee‟s own case was held to be taxable by the ld AO, which stood confirmed by the ld CIT(A). Similar treatment was sought to be given by the ld AO in the year under consideration also and accordingly the sum of ₹615,70,93,758/- was added to the total income after denying the claim of exemption u/s 10(38) of the Act.

5. We find this is a legacy issue being carried over from earlier years. The Hon‟ble Jurisdictional High Court in assessee‟s own case for AY 2005-06 reported in 407 ITR 658 (Del) vide order dated 30.08.2017 had addressed the very same issue. The questions raised before the Hon‟ble Delhi High Court was as under: –

 Whether the ITAT was correct in law in holding that the income earned on sale/ redemption of investment is chargeable to tax?

6. The Hon‟ble High Court observed as under:-

“30. Since the Assessee's case with respect to the addition of profits earned on sale/redemption of investments essentially rests on Circular No. 528, this circular requires to be examined in some detail. Before reference is made to the said Circular, the background requires to be traced.

31. As already noticed, Section 44 of the Act is specific to 'Insurance Business'. It states that, notwithstanding anything to the contrary contained in the Act relating to the computation of income chargeable under different heads