Environment Relief Fund collections are not income and section 43B disallowance does not apply to insurer-held remittances.

Contribution collected by an insurer under the statutory scheme of the Public Liability Insurance Act, 1991 for remittance to the Environment Relief Fund was treated as a current liability and not as income. The insurer acted only as a collector and remitter on behalf of the insured, and the amount was not routed through the profit and loss account. As the collection never became the assessee's receipt, section 43B of the Income-tax Act had no application, and the amount was also not a cess for the purpose considered by the lower authority. The disallowance under section 43B was therefore deleted.

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Issues: Whether contribution collected towards Environment Relief Fund could be disallowed under section 43B of the Income-tax Act, 1961, and whether such collection formed part of the assessee's income.

Analysis: The contribution was collected by the insurer under the statutory scheme of the Public Liability Insurance Act, 1991 and was required to be remitted to the prescribed Relief Fund when the Government provided the mechanism for deposit. The amount was not routed through the profit and loss account but was shown as a current liability. The liability was only to act as a collector and remitter of the amount on behalf of the insured, so the collection was not income of the assessee. In the absence of the amount being treated as the assessee's receipt, section 43B had no application. The amount was also not a cess within the meaning adopted by the lower authority.

Conclusion: The disallowance under section 43B was not sustainable and the addition was deleted in favour of the assessee.

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