ZENITH ASSURANCE CO LTD Vs. COMMISSIONER OF INCOME TAX BOMBAY CITY
LAWS(BOM)-1954-3-12
HIGH COURT OF BOMBAY
Decided on March 24,1954

ZENITH ASSURANCE CO. LTD. Appellant
VERSUS
COMMISSIONER OF INCOME-TAX, BOMBAY CITY Respondents

JUDGEMENT

- (1.)THE assessee is an insurance company doing life insurance and also general insurance in the nature of marine, fire and other insurance, and the question that arises is the mode of computing the losses incurred by the company in its life insurance business.
(2.)NOW, the profits and gains of a life insurance business have to be computed not in the manner laid down in the Income-tax Act but in the manner laid down in the rules contained in the Schedule to the Act, and what falls for construction in this reference is rule 2. Rule 2 (a) provides that the profits and gains of life insurance business shall be taken to be either the gross external incomings of the preceding year from that business less the management expenses of that year, and sub-clause (b) of the rule provides for profits and gains to be computed after making certain deductions by taking the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation made, for the last inter-valuation period ending before the year for which the assessment is to be made, and the rule ends by saying "whichever is the greater. "
(3.)NOW, the position is that if the deficit was calculated under rule 2 (a) for the assessment years 1947-48, 1948-49, 1949-50 and 1950-51, the deficit disclosed was much larger than the deficit disclosed if the computation was made under rule 2 (b), and the contention of the department was that they were entitled to compute the losses under rule 2 (b) at their option, whereas the contention of the assessee was that on a true construction of rule 2 it was incumbent upon the department to calculate the losses in the manner laid down in rule 2 (a ). The Tribunal upheld the contention of the department with regard to the assessment years 1948-49, 1949-50 and 1950-51 but upheld the contention of the assessee with regard to 1947-48 on a different ground with which we shall deal later.


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