General insurance computation follows the special statutory scheme; unexpired risk reserve, investment write-off and premium amortisation were sustained.

For a general insurance business, income computation must follow the special statutory scheme under section 44 and the First Schedule, so reserve for unexpired risk was not required to be added back to book profit under section 115JB. The Tribunal also accepted that an investment write-off could not be disallowed merely on a general adjustment basis, and that amortisation of premium on purchase of investments remained allowable in line with the insurance accounting framework. On identical facts in the later year, the same treatment was applied. The Revenue appeals were dismissed, and the assessee's claims were sustained.

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Issues: (i) Whether the reserve for unexpired risk created in the course of general insurance business was required to be added back while computing book profit under section 115JB. (ii) Whether the amount written off towards investments was an allowable deduction in the assessment of a general insurance company. (iii) Whether amortisation of premium paid on purchase of investments was allowable as a deduction. (iv) Whether the same treatment continued for the corresponding ground in the later assessment year on identical facts.

Issue (i): Whether the reserve for unexpired risk created in the course of general insurance business was required to be added back while computing book profit under section 115JB.

Analysis: The reserve for unexpired risk was created in accordance with the special statutory scheme governing general insurance business. The computation of income for such business is controlled by section 44 of the Income-tax Act, 1961 read with Rule 5 of the First Schedule and Rule 6E of the Income-tax Rules, 1962. The reserve represented premium attributable to future accounting periods and was not treated as a reserve of the kind contemplated by Explanation 1 to section 115JB(2). The Tribunal followed its earlier decision in the assessee's own case and held that such reserve did not require addition to book profit.

Conclusion: The issue was decided in favour of the assessee, and the reserve for unexpired risk was held not to be addable while computing book profit under section 115JB.

Issue (ii): Whether the amount written off towards investments was an allowable deduction in the assessment of a general insurance company.

Analysis: The assessee was carrying on general insurance business, and its assessment had to be made under the special regime applicable to such business. The Tribunal noted that Rule 5 of the First Schedule permits only specified adjustments and there is no specific authority to disallow a sum merely because it is written off out of investments. Relying on the earlier order in the assessee's own case and the settled position that the Assessing Officer has no general power to recast the accounts of a general insurance company beyond the statutory scheme, the Tribunal upheld the deletion of the disallowance.

Conclusion: The issue was decided in favour of the assessee, and the investment written off was held allowable.

Issue (iii): Whether amortisation of premium paid on purchase of investments was allowable as a deduction.

Analysis: The Tribunal again applied the special computation provisions governing insurance business. It accepted that premium paid on securities was amortised over the period of holding and that such treatment was consistent with the nature of the business and the accounting scheme applicable to general insurance companies. Since the Revenue could not distinguish the case from the assessee's earlier years, the Tribunal followed the earlier order and approved the deletion of the disallowance.

Conclusion: The issue was decided in favour of the assessee, and amortisation of premium on investments was held allowable.

Issue (iv): Whether the identical book-profit adjustment raised in the later assessment year was to be sustained.

Analysis: The later year involved the same question on the same statutory and factual footing as the earlier year. The Tribunal adopted the same reasoning and outcome as for the corresponding book-profit issue, with no separate distinction shown by the Revenue.

Conclusion: The issue was decided in favour of the assessee, and the adjustment was deleted on the same reasoning.

Final Conclusion: Both revenue appeals were dismissed, and the assessee's claims on book-profit adjustment, investment write-off, and amortisation of premium were sustained under the special provisions applicable to general insurance business.

Ratio Decidendi: In the case of a general insurance company, book-profit adjustments and income computation must conform to the special statutory scheme, and items not specifically required to be added back under that scheme cannot be disallowed or included by applying a general power of adjustment.

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