COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA versus CALCUTTA HOSPITAL AND NURSING HOME BENEFITS ASSOCIATION

Citation: [1965] 3 S.C.R. 632 · Decided: 02-04-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Case Partly allowed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

COMMISSIONER OF INCOME-TAX, 
WEST BENGAL, CALCUTTA 
v. 
CALCUTTA HOSPITAL AND NURSING 
HOME BENEFITS ASSOCIATION 
April 2, 1965 
[K. SUBBA RAO, J. C. SHAH AND S. M. S!KRI, JJ.] 
Indian Income Tax Act 1922, s. 2(6C); Rule 6 to. the Schedule-
Profits of mutual insurance business whether can be included in 
income-Reserve for income tax whether taxable . 
The respondent Association was a mutual insurance concern car-
rying on miscellaneous insurance business. The objects of the Associa-
tion included provision of help anywhere in the world in respect of 
expenses of accommodation and treatment 
in nursing homes for 
members and their dependents. The members were reqmred to pay a 
monthly premium. In the 
assessments for 
the 
assessment years 
1949-50 to 1953-54 the Income-tax Officer taxed the reserves for 
payment of income-tax which had been debited to the profit and loss 
account. The Appellate Assistant Commissioner as well as the Appel-
late Tribunal upheld the Income-tax Officer's order. The questions 
arising in the proceedings were; (1) whether the balance of profits 
of a mutual insurance concern were included in the deHnition of the 
word 'income' and if so (2) whether reserves for income-tax could 
be taxed. At the instance of the respondent a reference was made 
to the High Court. That Court held that the surplus, miscalled profit, 
arising to the company from the miscellaneous insurance transactions 
of mutual character was not asse~'Sable under the Indian Income-tax 
Act and that in any event, the assessee was entitled to deduct the 
reserves. The Revenue appealed to this Court with certificate. 
HELD: (i) In s. 2(6CJ, the Legislature has evinced a clear inten-
tion to include the balance of profits under r. 6 within the meaning 
of the word 'income' in s. 3 of the Indian Income Tax Act, and ac-
cordingly such balance of profits is taxable. [639B-C] 
Ayrshire Employers Mutual Insurance Association Ltd. v. Com-
missioner of Inland Revenue, 27 T.C. 331, distinguished. 
"Profits" in r. 6 cannot be said to mean "taxable profits". Rule 
6 refers to 'balance of profits' as disclosed in the accounts submitted 
to the Superintendent of Insurance. The Superintendent of Insurance 
is not concerned with taxable profits. What he is concerned with is 
the balance of profits under the Insurance Act. [638E-Fl 
Nor can the term 'profits' in r. 6 be interpreted in the narrow sense 
of including only profits from investments and other activities of a 
mutual insurance company, Rule 6 deals with "balance of profits". as 
a composite thing. It is impossible to dissect this composite thing. 
[639A-B] 
Bombay Mutual Life Assurance Society Ltd. v. Commissioner of 
Income-tax, Bombay City, 20 I.T.-R 189, affirmed. 
(ii) The Insurance Act makes detailed provisions to en,~ure the 
true valuation of assets and the determmcl10n of the true balance 
of profits" of an insurance business and r. 6 should be construed in ' 
the light of this background. [639G-H] 
> 632 
A 
B 
0 
D 
E 
F 
G 
B 
C. I. T. V. CAL. HOSP. & NURSING HOME BENEFIT ASSN. (Sikri, J.) 
633 
A 
Pandy an Insurance Company Ltd. Madurai v. The Commissioner 
cj Income-tax, Madras, _[1965] 1 S.C.R. 367, referred to. 
Examining r. 6 in the light of this background, the intention of 
the ru1e seems to be that the, balance of profits as disclosed by the 
accounts submitted to the Superintendent of Insurance and accepted 
by him would be binciing on the Income Tax Officer, exoept that lhe 
B 
Income Tax Officer would be entitled to exclude expenditure other 
than expenditure permissible under the provisions of s. 10 of the Act. 
In the pres-=nt case it v...-as common ground bet\\~een the parties 
that the reserves which were added to the balance of profits were 
not expenditure, The High Court rightly held that the reserve for 
income tax could not be taed. [639H-640B] 
c 
CIVIL APPELLATE JURISDICTION: 
Civ~l Appeals Nos. 206 
to 
210 of 1964. 
Appeals from the judgment and orders dated September 26, 
1961 of the Calcutta High Court in Income-tax Reference No. 24 
of 1957. 
D 
Niren De, Additional Solicitor-General, Ganapathy Iyer and 
E 
F 
a 
H 
R. N. Sachthey, for the appellants. 
Sampat Iyengar, B.R.L. Iyengar and D. N. Gupta, for the res-
pondents. 
The Judgment of the Court was delivued by 
Sikri, J. These appeals by certificate 
granted by the High 
Court of Calcutta under s. 66(A)(2) of the Indian Income Tax Act, 
1922, are directed against t:1e judgment of the said H

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