Alfred Henry Lionel Leach, C.J.
1. The assessee in this case is a life Insurance Company, carrying on business at Masulipatam, having been incorporated in the year 1925. Under the provisions of Section 8 of the Indian Life Assurance Companies Act, 1912, a life assurance company is required once in every five years, or at such shorter intervals as may be prescribed by the instrument constituting the company or by its regulations or bye-laws, to cause an investigation to be made by an actuary into its financial condition, including a valuation of its liabilities. This company decided that the valuation should take place every four years. The first valuation was made in December, 1930, and was for the period ended 31st December, 1929. The next valuation took place in December, 1934, and this was for the four years ended 31st December, 1933. Under Section 22 of the Indian Income-tax Act, the principal officer of every company shall prepare, and, on or before the 15th day of June in each year, furnish to the Income-tax Officer, a return, in the prescribed form and verified in the prescribed manner, of the total income of the company, during the previous year. On 30th June, 1934, the Secretary of the company furnished the return contemplated by this section. It was 15 days late, but the Income-tax Officer accepted it and assessed the company to income-tax on the basis of the return. Rule 25 of the Income-tax Rules provides that in the case of life assurance companies incorporated in British India, whose profits are periodically ascertained by actuarial valuation, the income, profits and gains of the life assurance business shall be the average annual net profits disclosed by the last preceding valuation. This rule was framed under the provisions of Section 59 of the Act and has effect as if enacted in the Act.
2. The return which the secretary furnished to the Income-tax Officer on the 30th June, 1934, was based on the valuation for the period ended 31st December, 1929, and on this basis the income of the company for the account year 1933 was Rs. 8,294. The company paid the amount of the tax; but when the valuation for the four years ended 31st December, 1933, was published in December, 1934, it was found that the profits had greatly increased. If the assessment had been based on this return the amount of the income would have been Rs. 39,755 instead of Rs. 8,294. When this was discovered by the Income-tax Officer, he issued a notice under Section 34 of the Act, intimating his intention to assess the company, in respect of the year 1933 on the further sum of Rs. 31,461 (the difference between Rs. 39,755 and Rs. 8,294) on the ground that this was income which had escaped assessment. The company objected and asked the Commissioner of Income-tax to refer the matter to this Court under the provisions of Section 66(2). The Commissioner has accordingly referred the following question:
Whether the 'last preceding valuation' of the surplus of the company, for the purposes of the assessment to be made for the year of assessment 1934-1935 was in the circumstances of the case that covering the years 1926-1929 or that covering the years 1930-1933
3. The Income-tax Commissioner in his reference has expressed the opinion that the Income-tax Officer is entitled to reopen the assessment under Section 34, notwithstanding the wording of Rule 25. He contends that the expression 'the last preceding valuation' must be taken to mean the valuation covering the last valuation period terminating before the 1st of April of the year of assessment. This contention ignores the wording of Rule 25. The wording is perfectly clear and says that the income of a life assurance company shall be the average annual net profits disclosed by the last preceding valuation, that is the last preceding valuation at the time of the return. The return must be made by the 15th of June after the end of the year of account, unless the Income-tax Officer extends the time at the instance of the assessee. In this case the last preceding valuation when the return was submitted was the valuation made in December, 1930, for the period ended 31st December, 1929. As I have said, the words of the rule are perfectly clear and they must be given their plain meaning. Giving them their plain meaning, the return made in June, 1934, was made on the proper basis.
4. In these circumstances the income-tax authorities had no right to serve a notice under Section 34 of the Act, as no income had escaped assessment. The return had been made in accordance with the statute and the tax had been paid. In The Laxmi Insurance Co., Limited, Lahore v. The Commissioner of Income-tax I.L.R. (1931) Lah. 757, it was pointed out that Rule 25 is of a mandatory character and provides the only manner in which the income, profits and gains of life assurance companies can be ascertained and that it is not open to an Income-tax Officer to depart from its provisions. With this opinion we are in entire agreement. It follows that the answer to the reference is that the last preceding valuation of the surplus of the company for the purposes of the assessment for the year 1934-1935 was that covering the years 1926-1929. As the company has succeeded, it will be entitled to its costs which we fix at Rs. 250.