Insurance income computation: a mere transfer between accounts does not by itself create gross external incomings for tax purposes.

For insurance income computation, a mere transfer from a premium deposit account to a revenue account does not, by itself, make the amount gross external incomings of the previous year. The record must show that the receipt was actually received, ceased to be a liability, or was appropriated as the assessee's own money in the relevant accounting year. An internal book adjustment alone is insufficient to change the character of the receipt under the insurance computation rules. On that basis, the amount was not treated as taxable gross external incomings merely because it was transferred to the revenue account, and the issue was resolved in favour of the assessee.

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Issues: Whether the amount transferred from premium deposit account to revenue account constituted the gross external incomings of the previous year for life insurance business.

Analysis: The amount had originally been received in earlier years and the record did not show when it was physically received, when it ceased to be a liability, or when it was appropriated as the assessee's own money. The mere transfer from one account to another in the relevant accounting period was treated as no more than an internal accounting adjustment. On that footing, the transfer did not by itself convert the amount into gross external incomings of the preceding year under rule 2(a) of the insurance computation rules. The broader contention that all amounts become gross incomings merely upon transfer to revenue account was rejected.

Conclusion: The amount was not taxable as gross external incomings merely because it was transferred to the revenue account, and the question was answered in favour of the assessee and against the revenue.

Final Conclusion: A mere book transfer from premium deposit account to revenue account does not, without a finding that the assessee treated the amount as its own in the relevant previous year, establish gross external incomings for insurance income computation.

Ratio Decidendi: For insurance business computation, a mere internal transfer of a receipt to the revenue account does not by itself make it a gross external incoming of the previous year; the character of the receipt must be shown to have changed in the relevant accounting year.

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