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TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 841
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....stances of the case and in law, the Ld.CIT(A) has erred in deleting disallowance of Rs. 8,31,169/- made by the AO on account of guest house expenses. 5. The appellant craves leave to add, alter, amend or vary from the above grounds of appeal at or before the time of hearing." 1.2. The grounds of appeal of the assessee read as follows. "1. That on the facts and in law, the CIT(A) erred in upholding the addition to total income of Rs. 4,57,60,43,000/- on account of profit on sale/redemption of investments. 2. That on the facts and in law, the CIT(A) erred in upholding the disallowance made by AO on account of provision made for Orphan claims of Rs. 7,07,78,528/-. 3. That on the facts and in law, the CIT(A) erred in confirming the disallowance of Rs. 7,47,40,000/- made by AO on account of diminution in the value of investments. 4. That on the facts and in law, the CIT(A) erred in confirming the disallowance of Rs. 3,03,24,184/- out of depreciation claimed by the appellant. 5. That on facts and in law the AO while computing the book profits for the purpose of S.115JB at Rs. 9,05,14,34,065/- erred in making following additions/disallowances: (a) Profit on sale of investments Rs....
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....vestments. That view was supported by two decisions of the Tribunal in the case of the assessee in Oriental General Insurance Co.Ltd. case (supra) and Oriental Insurance Co.Ltd. vs. ACIT (2010) 40 SOT 19 (Delhi) (URO). On the other hand, the Ld.Counsel has relied on the decision of Pune Bench of the Tribunal in the case of Bajaj Allianz General Insurance Co.Ltd. vs. ACIT (ITA 1447/Pune/2007, dt. 31.8.2009). In this case it has been held that after deletion of Rule 5(b) of the First Schedule, no clause was introduced to prescribe the method of taxation of such income. Therefore, the revenue has no right to tax such income in the absence of any enabling provision. This decision was followed in the case of General Insurance Corpn. Of India Ltd. Vs. ACIT (2010) 35 SOT 161 (Mum) for AY 2002-03 to 2004-05 dt. 22.10.2009, a copy of which has been placed before us. The decision was also followed in the case of DCIT vs. Royal Sundaram Alliance Insurance Co.Ltd. by the D Bench of Chennai Tribunal (ITA nos. 847 to 849/Mad/2008, dt. 5.3.2010), for AY 2002-03 to 2004-05 a copy of which has been placed on record. Having considered these decisions, we are of the view that the decision of the Trib....
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....f this strongly justified the disallowance. 38. We have gone through the records and considered rival contentions, following our own order for AY 1997-98 and 1998-99 the issue has been decided against the assessee. We hold that the claim of assessee is clearly contingent in nature and cannot be allowed as deduction. The order of the CIT(A) on this issue for AY 2000-2001 is confirmed." 5.1. Respectfully following the same we dismiss this ground of the assessee. 6. Ground no.3 is on the issue of disallowance made by the AO on account of diminution in the value of investments. 6.1. This issue had been adjudicated by the Delhi "E" Bench of the Tribunal for the AY 2003-04, vide order dt. 16.10.2009 wherein at page 21 paras 22 to 32 it has held as follows. "22. As per ground nos. 6 and 7, the assessee has challenged the decision of the Ld. CIT(A) in confirming the disallowance of Rs. 7,42,06,000/- on account of provision made by the assesee for diminution in the value of investments. It contended that the provision was made on the basis of guidelines issued by the Insurance Regulatory and Development Authority, (IRDA) to the book profits of the assesee u/s 115 JB of the 1. T .Act. ....
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....ss income of the assesee. 27. We have carefully perused the orders of the lower authorities, material placed on record and rival submissions. The AO made the addition for the reason that "the assessee company had created a provision of Rs. 19,28,Ol,OOO/- as against immediate preceding year Of Rs. 11,85,95,OOO/- Since the assessee company has already booked the losses on the share transaction the provision that was created in the previous year on account of diminution in the value of investment should have been offered as income which the assesee company while pretending to do so has not actually done. 28. In the light of the above facts it is crystal clear that the assesee has made further provision in the diminution of investments and the same is disallowed being an unascertained liability and added back to income of the assesee company. 29. The Id.CIT(A) was of the considered view that the above stated claim of the assessee for an unascertained liability was rightly disallowed by the AO. She, therefore, confirmed the disallowance of Rs. 7,42,06,000/- on account of provision in the diminution of investment. She also held that the provision for diminution in the value of investme....
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....wed to be reduced from the income of the assessee. 31. It is further observed that clause 79 of Finance (N02) Bill, 2009 seeks to amend rule 5 of the First Schedule of the Income Tax Act w.e.f. 1.04.2011 by inserting clause (b) which provides that adjustment shall be made by way of deduction in respect of any amount either written off or provided in the accounts to meet diminution in or loss on realization of investments in accordance with the regulations prescribed by Insurance Regulatory and Development Authority. 32. Thus, it is very clear that the deduction for the amount provided by the assessee in its relevant accounts to meet diminution in or loss on realization of investments cannot be allowed for the period prior to 01.04.2011 as per the existing provisions of the Act. The claim of the assessee has, thus, been rightly rejected by the AO. The addition has, therefore, rightly been made by the AO and the decision of the Ld. CIT(A) on this issue requires no interference on our part. This ground of appeal is rejected." 6.2. Consistent with the view taken therein we dismiss this ground of the assessee. 7. Ground no.5 is regarding computation of book profits. The assessee has....
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....de by the Assessing Officer. 5. The learned counsel for the assessee filed copies of the orders dated 29-9- 2004 of the Tribunal involving assessment years 1990-91 to 1995-96. The revenue sought approval of the COD to file appeal against this order, which the COD has not permitted. Our attention was drawn to p.56 of the paper book. The learned counsel further relied upon the order dated 6-6-2008 of the Tribunal in assessment year 1998-99 wherein the Tribunal following its earlier order has again decided the issue in favour of the assessee. 6. The learned Departmental Representative on the other hand strongly supported the impugned orders. 7. We have gone through the records and find that the issue is decided in favour of the assessee. The operative part of the Tribunal's order dated 29-9- 2004 reported as Dy. CIT v. Oriental General Insurance Co. Ltd. [2005] 143 Taxman 15(Delhi) (Mag.), which deals with this issue in para 19 is reproduced as below: "19. We have carefully considered the rival submissions. In this appeal, we are concerned with the assessment year 199 -91 i.e., after the omission of sub-rule (b).of rule 5 of First Schedule to Income-tax Act, 1961 with effect f....
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....nditure' nor an 'allowance'. We find support in this view from the judgment of Hon'ble Supreme Court in the case of General Insurance Corporation of India vs, CIT [1999] 156 CTR (SC) 425: [1999] 240 ITR 139(SC). In that judgment Hon'ble Supreme Court held that 'spending' in the sense of' 'paying out or away' of money is the primary meaning of 'expenditure'. 'Expenditure' is what is paid out or away and is something which is gone irretrievably. In that case, Hon'ble Supreme Court held that certain amounts set apart which is treated to be an expenditure for the purpose of Insurance Act, 1938 cannot be treated so for the purpose of rule 5(a) of the First Schedule for the reason that the amount set apart did not fall to be considered as an expenditure in the ordinary meaning of the expression. As we hold the view that write off of investments claimed by the assessee represents, 'loss' and not 'expenditure' nor' allowance' we hold that the Assessing Officer erred in adding back the same in the computation of assessee's income chargeable to tax and similarly the CIT(A) erred in confirming the same. As....
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....standing anything to the contrary contained within the provisions of the Income-tax Act relating to computation of income chargeable under different heads, other than the income to be computed under the head "Profits and gains of business or profession". For computation of profits and gains of business or profession the mandate to the Assessing Officer is to compute the said income in accordance with the provisions of sections 28 to 438 of the Act. In the case of the computation of profits and gain of any business of insurance, the same shall be done in accordance with the rules prescribed in First Schedule of the Act, meaning thereby sections 28 to 438 shall not apply. No other provision pertaining to computation of income will become relevant. According to the learned counsel, two presumptions that follow on a combined reading of sections 14, 14A and 44 and rule 5 of the First Schedule are : (a)That no head-wise bifurcation is called for. The income, inter alia, of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the 'annual accounts as furnished to the Controller of Insurance under the Insurance Act, 1938. The said balance ....
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....ction 44 creates special application of these provisions in the cases of insurance companies. We therefore, agree with the assessee and delete the disallowance made by the Assessing Officer which is based on the application of section l4A of the Act as according to us, it is not permissible to the AO to travel beyond S.44 and First Schedule of I.T.Act." 15.1. Consistent with the view taken therein, we dismiss this ground of Revenue. 16. Ground no.4 is against deletion of disallowance with regard to guest house expenses. This issue also is covered by the decision of the Tribunal in the assessee's own case for the AY 2000-2001, 2001-2002 wherein at paras 9 to 12 the Tribunal has held as follows. "9. The next common dispute in both the appeals relates to the action of the C!T(A) for disallowing 50 per cent of the guest house expenses. The assessee company maintains 16 guest houses and transit houses out of which several guest houses are owned by the assessee company. The assessee did not give details of expenditure on repairs and maintenance of own guest houses and rented guest house. The Assessing Officer disallowed 50 per cent of these expense. The assessee has also not furnished....