TaxTMI 
TaxTMI 
2018 (1) TMI 231
X X X X Extracts X X X X
X X X X Extracts X X X X
....14 A.Y 2007-08 ( by the revenue). 4. The only issue is to be decided as to whether the CIT-A was justified in holding that Reserve for unexpired risk created as per requirement by law of a sum of Rs. 87,78,52,000/- not to be added in computing book profit u/s. 115JB of the Act, as per clause ( c ) to Explanation 1 of section 115JB(2) of the Act, in the facts and circumstances of the case. 5. The ld.DR relied on the order of the AO. 6. In reply, before us the ld.AR submits that the issue in hand is squarely covered in favour of assessee and against the revenue by the order dt. 5-08-2016 in assessee's own case for the A.Ys 2005-06, 07-08 and '08-09. A copy of such order placed on record. He referred to para 11.4 of such order and argued that the reserve created for unexpired risk need not be added back for the purpose of computation of book profits u/s. 115JB of the Act. 7. Heard rival submissions and perused the material on record. We find that the issue in hand is squarely covered by the order dt. 05-08-2016 in assessee's own case, which has rightly pointed out by the ld.AR of the assessee, wherein the Tribunal had held that reserve created for unexpired risk need not be added....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich does not relate to the current accounting period. It must be appreciated that as per the Mercantile System of accounting, it is only that Income/Expenditure which relate to the current accounting period, should find places in 'the Revenue/Profit & Loss Account of the year. Hence it was submitted that in case of an Insurance Company (carrying on General Insurance Business), the creation of "Reserve for Unexpired Risk" cannot be considered to be similar to those "Reserves" which have been referred to in Clause (b) of Explanation (l) to Section 115JB(2). It may also be appreciated that the "Reserve for Unexpired Risk" can. in any case, not be considered as any provision made for meeting liabilities, other than ascertained liabilities as referred to in Clause ( c) of Explanation (1) to Section 115JB(2). On the basis of the above facts it may kindly be appreciated that there has not been requirement to add back any sum in relation to the "Reserve for Unexpired Risk" while computing "Book Profit" u/s.115JB(2) for the Assessment Year 2008-09. Accordingly, the assessee submitted that the "Reserve for Unexpired Risks" not being of the nature as specified in clause (b) or Explanat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erve created for Unexpired RiSK, was not in accordance with the relevant provisions of the Income-tax Act. 1961 and accordingly deleted the addition. 11.2. Aggrieved, the revenue is in appeal before us on the following ground:- "4. The CIT(A) erred 011 the facts of the case and in law in holding the sum of Rs. 1694500000 being the reserve created for unexpired risk should be considered as reserve for computing the Book Profit under section 115JB of the Income-tax Act." 11.3 The ld.DR vehemently relied on the order of the ld.AO. In response to this, the ld. AR vehemently relied on the order of the ld. CITA. 11.4 We have heard the rival submissions. We find that the ld. CITA had dealt this issue very elaborately and had given proper finding that the reserve created for unexpired risk need not be added back for the purpose of computation of book profits u/s. 115JB of the Act. The revenue was not able to controvert the findings of the ld. CITA before us. Hence we find no infirmity in the order passed by the ld. CITA in this regard. Accordingly, the Ground No. 4 raised by the revenue for Asst Year 2008-09 is dismissed. " 8. In view of above, we are of the view that CIT-A was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee also submits that the Id AO had the power to add back only that expenditure or allowance or a provision which was not admissible under the provisions of sections 30 to 43B. The appellant had brought to the attention of the id AO of the facts and the decision of the Hon'ble Supreme Court reported in 240 ITR 139 (SC). However, while making the assessment the Id AO had not considered the assessee's reference made to the decision of the Hon'ble Supreme Court as reported in 240 ITR 139 (SC) and he disallowed the sum of Rs. 4,22,26,000/-. The assessee further submitted that as per the facts and the decision of the Hon'ble Supreme Court in the case of CIT v. Oriental Fire & General Insurance Co. Ltd. [2007] 291 ITR 371(SC) any amount having been written off, cannot be considered as an expenditure or allowance which could be added back as per the provisions of section 44 read with Rule 5 of the First Schedule. Without prejudice to the submission made hereinabove, the assessee submitted that as per the provisions of section 4 read with Rule 5 of the First Schedule all the incomes of the assessee were to be considered as assessable under the head "Profits and gains of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the ld CITA had deleted the disallowance by observing as under:- "23. I have carefully considered the observations of the Assessing Officer in [he assessment order and submissions of the appellant and both the decisions referred to above of Hon'ble Supreme Court and the copies of the Appellate Orders for the Assessment Years 2000-01,2002-03 and 2004-05 of the CIT(A)- VI, Kolkata. The Authorised Representative further submitted that the transactions in investments being a part of business of the assessee, the writing off of investments should be considered as deductible for the purpose of computing the business income of assessee. Since the assessee has been carrying on the General Insurance business and consequently its assessment is required to be made in accordance with the provisions of section 44 read with the Rule 5 of the First Schedule to the Income-tax Act. 1961, the Assessing Officer is empowered to make additions/disallowances only in accordance with the above-mentioned Rule 5. Any sum which has been written off cannot be considered as either "expense" or "allowance" or "provision". 24. It is observed that in the above-referred Rule 5 of the First Schedule....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly covered in favour of assessee by ITAT order dt. 05- 08-2016 in assessee's own case supra and referred to para 8 of such order. 19. Heard rival submissions and perused the material on record. We find that the issue in hand is squarely covered in favour of assessee by such order dt. 05-08-2016 in assessee's own case, as rightly pointed out by the ld.AR of the assessee. We find that this Tribunal in assessee's own case supra deleted the said disallowance on the ground that the CIT-A has given relief to assessee by placing his reliance on the decisions of the Hon'ble Supreme Court in the cases of General Insurance Corporation of India Vs. CIT reported in (1999) 240 ITR 139(SC) and CIT Vs. Oriental Fire & General Insurance Co. Ltd reported in (2007) 291 ITR 370(SC), wherein it was held that the AO had no general power to make any adjustment in the accounts of a general insurance company. We further find that the revenue was not able to controvert the detailed findings of the CIT-A. Relevant portion of such order dt. 05-08-2016 supra is reproduced herein below:- 8. Disallowance of Amortisation of Premium paid on Purchase of Investments The brief facts of this issue is that the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....specific provision in the Act for disallowance of premium paid on investments, the ld AO should not have made the disallowance of Rs. 6,02,18,000/- as per Rule 5 of the 1st Schedule to the Income Tax Act, 1961. Accordingly, the assessee submitted that the ld AO should have held that premium paid on investments by the assessee could not be disallowed and his action in making the disallowance should be considered as unjustified. It was also submitted that the transactions in investments being a part of the business of the assessee, the amortization of premium paid on investments should be considered as deductible for the purpose of computing the business income of the assessee. It was submitted further that this was the first year in which such disallowance has been made. The assessee buys the Government Securities on Premium. The premium amount is amortised and is being charged to profit & loss account on prorata basis depending on the number of years when the securities will be paid back. The purchasing of the securities at premium is compulsory as per the guidelines of the Government of India and there is no choice with assessee for not to buy the same. The assessee distributes th....