Facts of the Case

The assessee, M/s Max Life Insurance Co. Ltd, is engaged in the business of life insurance. For the relevant assessment years 2015-16 and 2016-17, the assessee filed its return of income declaring taxable income which was later enhanced during assessment proceedings.

During the year under consideration, the assessee had invested in redeemable non-convertible bonds/debentures issued by public sector companies such as Rural Electrification Corporation Ltd., India Infrastructure Finance Company Ltd., Indian Railway Finance Corporation Ltd., and Housing and Urban Development Corporation Ltd.

The assessee earned interest income from these investments. However, exemption under Section 10(15)(iv)(h) in respect of such interest income was not claimed before the Assessing Officer or before the Commissioner of Income Tax (Appeals).

Subsequently, during appellate proceedings before the Income Tax Appellate Tribunal (ITAT), the assessee raised an additional ground seeking exemption for such interest income.

 

Issues Involved

  1. Whether the assessee can raise an additional claim before the ITAT which was not claimed in the return of income or during assessment proceedings.
  2. Whether interest income earned from investments in PSU bonds/debentures is eligible for exemption under Section 10(15)(iv)(h) of the Income Tax Act.
  3. Whether the computation of income of a life insurance company should be governed exclusively by Section 44 read with the First Schedule, overriding other provisions of the Act.

 

Petitioner’s Arguments

  • The claim for exemption under Section 10(15)(iv)(h) was omitted due to oversight and should be allowed to be raised before the Tribunal.
  • The Tribunal has wide powers under Section 254 of the Income Tax Act to entertain additional grounds if the relevant facts are already on record.
  • Judicial precedents allow taxpayers to raise additional legal claims before appellate authorities, even if such claims were not made earlier.
  • The investments and related interest income were already reflected in the audited financial statements and therefore the relevant facts were available on record.

 

Respondent’s Arguments

  • The assessee had failed to claim the exemption in the return of income or during assessment proceedings.
  • The additional ground should not be admitted since the claim was not originally raised.
  • The decision of the Supreme Court relied upon by the assessee permits additional grounds only where all necessary facts have already been examined by lower authorities.

 

Court Order / Findings

  • The Tribunal possesses wide powers under Section 254 to consider additional grounds raised by the assessee.
  • As held by the Supreme Court in National Thermal Power Co. Ltd. v. CIT (229 ITR 383), the Tribunal can consider a question of law arising from the facts on record even if it was not raised earlier.
  • Since the facts relating to the investments in PSU bonds and the resulting interest income were already available in the records, the additional ground could be admitted.

However, the Tribunal observed that the eligibility of exemption under Section 10(15)(iv)(h) requires verification. Accordingly:

  • The matter was set aside to the file of the Assessing Officer for examination of the claim in accordance with law.
  • If the claim satisfies the conditions prescribed under the Act, the exemption should be allowed.

 

Important Clarification

  • Additional legal claims can be raised before appellate authorities, including the ITAT, even if such claims were not made in the return of income or during assessment proceedings.
  • The only requirement is that relevant facts must already exist on record.

 Sections Involved

  • Section 254 – Powers of the Appellate Tribunal
  • Section 10(15)(iv)(h) – Exemption on interest income from specified securities
  • Section 44 – Special provisions for computation of income of insurance business
  • Section 80G – Deduction for donations
  • Rule 2 of First Schedule – Computation of profits of life insurance business

Link to download the order -  https://itat.gov.in/public/files/upload/1735715535-pwvyyH-1-TO.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.