CPT V24P7-Art1 (Content).pmd - Taxmann

DIRECT TAX LAWS
INTRODUCTION
660
TAXATION
OF INSURANCE
BUSINESS IN INDIA
AMIT KUMAR NIKHIL MISHRA
1. Historically, the insurance industry has been
one of the foremost benefactors of any economy
and its people. The insurance industry plays
a pivotal role in economies by absorbing
economic, personal as well as political tremors,
thereby justifying its presence as one of the
pioneering industries for the good of economy.
The Prime Minister of India has been sagacious
in his remarks that the insurance sector would
be the next field of investment other than
private equity which would bring enormous
foreign investments into India and take us out
of the present economic slowdown.
This suggests the importance of not only the
significance of insurance business in driving
investment into our economy but it also perhaps
connotes the revenue that can be generated
from taxing this booming industry.
August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 40
However, technically speaking, the insurance
industry has left many jurists of taxation puzzled
as to the method of taxation to be applied to
such industries. This is because the true profits
of the insurance business cannot be fairly arrived
at by following the ordinary methods of
accounting 1 , as there is no recognized business
method of ascertaining the profits derived from
the insurance businesses. 2
However, with the passage of time, the Courts
and the Legislature have made significant efforts
in trying to rationalize, codify and clarify the
modes, methods, procedures as well as the
rates of taxation on the insurance businesses
while keeping in mind the privileged position
it has in the economy and adapting to the
needs of the insurance businesses so as to
ensure complete public welfare arising from
the participation of these businesses in the
economy.