ICICI Prudential Life Insurance Company Limited has announced its decision to challenge an income tax order issued by the Assistant Commissioner of Income Tax, Maharashtra, which demands ₹328.42 crore for the Assessment Year (AY) 2023-24.

The company, in its official statement on March 28, 2025, stated that it intends to appeal against the order before the Commissioner (Appeals) within the prescribed timeframe.

Breakdown of the Tax Demand

The total tax demand of ₹328.42 crore includes:

• ₹265.49 crore in tax

• ₹62.92 crore in interest

• No penalty has been imposed

ICICI Prudential Life has expressed concerns over the grounds on which the tax authorities have based their assessment.

Key Issues Raised in the Tax Order

The Income Tax Department has cited several issues leading to the demand:

1. Reclassification of Transfers Between Shareholders’ and Policyholders’ Accounts

   • The order treats transfers from the shareholders’ account to the policyholders’ account as taxable income.

2. Denial of Exemptions Under Section 10

   • Certain incomes that the company considered tax-exempt under Section 10 of the Income Tax Act have been disallowed by tax authorities.

3. Disallowance of Expenses Under Section 14A Read with Rule 8D

   • The tax authorities have applied disallowance under Section 14A in relation to exempt income, which affects the overall tax liability of the company.

4. Taxation of Shareholders’ Income as ‘Other Sources’

   • The income reported under the shareholders’ account has been taxed under ‘income from other sources’ instead of the company’s standard classification.

5. Disallowance of Marketing & Advertising Expenses

   • Certain marketing and advertising expenses incurred by ICICI Prudential Life have been excluded while calculating the taxable surplus in the policyholders’ account.

ICICI Prudential Life's Response

ICICI Prudential Life maintains that these issues have been previously addressed in multiple legal rulings by:

• Income Tax Appellate Tribunal, Mumbai

• Commissioner of Income Tax (Appeals)

• Various courts in prior years

The company remains confident that its position will be upheld in the appeal process.

Industry Experts Weigh In

Legal and tax experts have noted that similar cases in the insurance sector have seen favorable rulings for companies. Several large insurance firms have successfully challenged tax orders involving Section 10 exemptions and Section 14A disallowances in past legal battles.

What Happens Next?

ICICI Prudential Life will now:

1. File an appeal before the Commissioner of Income Tax (Appeals).

2. Present legal precedents supporting its claims.

3. Continue operating without financial impact until a final ruling is made.

The outcome of this case could set a precedent for similar tax disputes involving insurance companies and the classification of shareholder-policyholder transactions.

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