Law:

Section:

Income-tax Act (XI of 1922)---- Ss.4(3)(xii), 10(7) & First Schedule, R.2(b)--Assessee, an Insurance Company though not engaged in life insurance business, whose profits and gains had been computed in accordance with the provisions of First Schedule to the Income-tax Act, 1922, sought examination under S.4(3)(xii) in respect of income of house property- -Held, in computing profits and gains of the insurance business the categorisation of heads as made in SA and the manner of determining the taxable income as set out in Ss. 7, 8, 9 & 10 of the Income-tax, Act, 1922 would be irrelevant. So far as the business of life insurance is concerned, the ordinary methods of computing profits and gains have been done away with by section 10(7) of the Act and special rules for' that purpose have been prescribed. The rules set out in the First Schedule to the Income-tax Act completely, exhaustively and to the exclusion of every other provision not expressly incorporated, govern the computation of profits and gains of the insurance business. Thus, in computing profits and gains of the insurance business the categorisation of heads as made in section 6 and the manner of determining the taxable income under the different heads as set out in sections 7, 8, 9 and 10 are irrelevant. No doubt, the rules laid down in the First Schedule would lead to only notional or artificial results but then that is how the Act states that the income of a person engaged in the said business should be worked out for the purpose of taxation. Now, clause (xii) of section 4(3), in terms refers only to such incomes as are chargeable under the head "Income from property". This clause would, therefore, only be attracted where the income of an assessee is being calculated in accordance with the provisions of section 9. Consequently, where the income of an assessee is not being calculated in accordance with section 9, the said clause would not apply. On a plain construction of the clause it is not possible to extend the exemption created by it to a case where the income is to be calculated not under the head "Income from property" but on a notional or artificial basis on account of the peculiar…

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