LIFE INSURANCE CORPORATION LTD. versus COMMISSIONER OF INCOME-TAX, DELHI & RAJASTHAN

Citation: [1964] 5 S.C.R. 880 · Decided: 09-12-1963 · Supreme Court of India · Bench: A.K. SARKAR · Disposal: Appeal(s) allowed
Cited by 1 judgment(s) · see the full citation network in Lexace
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

880 
SUPREME COURT REPORTS 
[1964] 
1963 
issued. There can be little doubt that if a decision 
--
of a quasi-judicial Tribunal is challenged before the 
Sri Rama Vilas High Court under Art. 226 and it is shown that the 
Service (P) Ltd. said decision is based on irrelevant considerations 
v. 
or on considerations which are invalid in law, a writ 
C. 
will undoubtedly be issued under Art. 226. But 
Chandrasekaran the order passed by the Appellate Tribunal in the 
& Ors. 
present case does not suffer from any suchdnfirmity . 
. --
Therefore, we are satisfied that the decision in the 
Ga1endragadkar case of ex parte Grant on which Mr. Pathak relies, 
1' 
does not assist his case. 
The result is, the appeal fails and is dismissed 
with costs. 
Appeal dismissed. 
1963 
LIFE INSURANCE CORPORATION LTD. 
December 9 
v. 
COMMISSIONER OF INCOME-TAX, DELHI & 
RAJASTHAN 
(A.K. SARKAR, M. HIDAYATULLAH AND 
J.C. SHAH, JJ.) 
Income Tax Act (XI of 1922), .s. i0(7) and Schedule rr. 2(b) and 
3(b)-Direction for readjustment by income tax ojficer-·lf o/ficer has 
potver. 
The appellant tran~ferred a certain amonnt from its Consolida-
ted Revenue Account to the Investment Reserve Fund which it 
was entitled to do; By this transfer the appellant's surplus on 
which tax has to be assessed was reduced. The Income-tax Officer 
directed the appellant to reduce the transfer by a certain amount. 
The appellant challenged this direction. 
Held: (per Sarkar and Shah, JJ.) The assessment of the 
profits of an insurance business is bys. 10(7) of the Act completely 
governed by the rules in the Schedule to the Act and there is no 
general power in the Income-tax Officer to correct any error apart 
from these rules. 
Of these rules, rr. 2(b) and 3(b) were relevant 
to the present case. 
-~ 
' 
t 
( 
5 S.C.R. 
SUPREME COURT REPORTS 
881 
Under r. 2(b) of the Schedule the Income-tax Officer had no 
1963 
power to change the figures in the account of the assessee while 
r. 3(b) only compelled the Income-tax Officer to allow certain Life Insurance 
deductions and to include certain amounts in making the assess- C 
. Ltd 
ment. None of these rules warranted the adjustment of accounts orporatwn 
· 
made by the Income-tax Officer. Neither was it justified by the 
V; 
proviso to r. 3(b). 
Commissioner 
(Per Hidayatullah J.),(i}Thelncome-taxAct contemplates that of Income-tax, 
the assessment of insurance companies should be carried out not 
Delhi & 
according to the ordinary principles applicable to business con-
Raja.'than 
cerns as laid down in s. l 0 of the Income-tax Act. 
(ii) If the Income-tax Officer doubts the accounts his powers 
are defined by the provi~o to r. 3(h). The proviso requires him to 
consult the Controller of Insurance. The proviso negatives the 
existence of a separate general power. Action has to be taken in 
the manner laid down in the proviso or not at all. 
(iii) In the present case the Income-tax Officer did not follow 
the proviso at all and therefore the impugned adjustment was 
improperly made. 
CIVIL APPELLATE JURISDICTION : Civil Appeals 
No. 678-680 of 1962. 
Appeal from the judgment dated March 2, 1960 
of the Punjab High Court (Circuit Bench) at Delhi 
in Income-tax Reference No. 6-D of 1957. 
M.C. Setalvad, Bishan Narain, 
R.J. Ko/ah and 
K.L. Hathi, for the appellant. 
Gopal Singh and R.N. Sachthey, for the respon-
dents. 
JJecember 9, 1963. 
The Judgment of A.K. 
Sarkar, and J.C. Shah, JJ. was delivered by Sarkar, J. 
M. Hidayatullah, J. delivered a separate opinion. 
SARKAR, J.-We think that these appeals should 
Sarkar J. 
be allowed. 
The appeals relate to the assessment to income-
tax of the income of the life insurance business of the 
Bharat Insurance Co. Ltd. now merged in the Life 
Insurance Corporation Ltd. 
The assessment years 
concerned are 1952-53, 1953-54 and 1954-55. The 
Income-tax Act, 1922 makes special provision for 
assessment of the income of insurance business. 
The Income-tax Officer in making the assessment 
orders made some adjustments in the accounts which 
l/SCI/64-56 
882 
SUPREME COURT REPORTS 
[1964] 
I 
the appellant contends, he has no power to do under 
these provisions. The question in these appeals is 
Life Insurance whether he had the power to make these- adjust-
Corporation Ltd. ments. 
. 
1963 
y, 
Sub-section (7) of s. l 0 of the Act makes the 
Commissioner special provision for the assessment of the income 
of Income-tax, of insurance business and that is in these terms: 
Delhi
Excerpt shown. Read the full judgment & AI analysis in Lexace.