2019 (9) TMI 452 - HC - Income Tax

High Court examines MAT treatment of unexpired risk reserve under Income Tax Act

The High Court of Calcutta considered whether the amount created for unexpired risk constitutes a reserve under Explanation 1(b) of Section 115JB of the ... MAT applicability - amount created for unexpired risk - amortization of specific items of expenditure - HELD THAT:- Appeal admitted on the following substantial questions of law:- (i) Whether on the facts and in the circumstances of the case the amount created for unexpired risk is a reserve under Explanation 1(b) of Section 115JB of the Income Tax Act, 1961 and is a part of the book profit for the purpose of determining the Minimum Alternate Tax (MAT) ? (ii) Whether the proposed question with regard to amortization is a pure question of fact as we have observed in our judgment and order made today Principal Commissioner of Income Tax-2, Kolkata v. National Insurance Co. Ltd. [2019 (9) TMI 445 - CALCUTTA HIGH COURT] Issues:1. Whether the amount created for unexpired risk is a reserve under Explanation 1(b) of Section 115JB of the Income Tax Act, 1961 and is part of the book profit for determining Minimum Alternate Tax (MAT)Rs.2. Whether the question regarding amortization is a pure question of fact as observed in a previous judgmentRs.Issue 1:The High Court of Calcutta admitted an intended appeal under Section 260A of the Income Tax Act, 1961, based on substantial questions of law. The first issue addressed whether the amount created for unexpired risk qualifies as a reserve under Explanation 1(b) of Section 115JB and forms part of the book profit for determining Minimum Alternate Tax (MAT). The court directed the appellant to file informal paper books by a specified date and listed the appeal for a hearing on a later date. The stay application related to the case was also disposed of during these proceedings.Issue 2:The second issue in question pertained to whether the proposed question concerning amortization was a pure question of fact, as indicated in a judgment from a previous case (ITAT 245 of 2017). The court highlighted the relevance of this aspect and its connection to the current case, emphasizing the need for a clear determination on the nature of the amortization issue. The representation of the respondent by learned counsel led to the dispensation of the issuance and service of notice of appeal, streamlining the procedural aspects of the case for further consideration.This detailed analysis of the judgment from the High Court of Calcutta provides a comprehensive overview of the issues involved, the legal context surrounding them, and the procedural steps taken during the proceedings.