Insurer's statutory fund contribution was not disallowed under section 43B where it was treated as a current liability, not income.

The contribution collected by an insurer toward the Environmental Relief Fund under the Public Liability Insurance Act, 1991 was held not to attract disallowance under section 43B of the Income-tax Act because it was collected on behalf of the statutory fund, did not accrue as the insurer's income, and was not credited to the profit and loss account. The amount was shown as a current liability, and under the special insurance-company computation scheme only items debited to profit and loss can be added back. The absence of a prescribed remittance mechanism and period until later also supported the view that earlier non-payment could not be faulted. The addition was deleted.

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Issues: Whether the contribution collected by the insurer towards Environmental Relief Fund under the Public Liability Insurance Act, 1991 could be disallowed under section 43B of the Income-tax Act, 1961 when the amount was not credited to the profit and loss account and the statutory mechanism for remittance was prescribed only later.

Analysis: The contribution was collected from policyholders and was payable to the statutory fund, with the insurer acting only as a channel or custodian. The amount never accrued as income of the assessee and was not routed through the profit and loss account. In the absence of a prescribed mechanism and period for remittance until later, the assessee could not be faulted for non-payment earlier. The levy was also not treated as a cess so as to attract section 43B on that basis. Under the special scheme for insurance companies, only items debited to the profit and loss account can be added back, and this amount was shown as a current liability.

Conclusion: The contribution was not liable to disallowance under section 43B and the addition was deleted.

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