TaxTMI 
TaxTMI 
2020 (10) TMI 1167
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....sment year 2009-10. The appeal was admitted by a bench of this Court vide order dated 17.03.2014 on the following substantial question of law: (i) Whether on the facts and in the circumstances of the case, the Tribunal is correct in holding that the assessee is entitled to disclose revenue from certain activities spread over the period of insurance policies for Income Tax purpose rather than recognizing the entire amount in the year in which the invoices in respect of fee was raised on insurance companies? (ii) Whether on the facts and in the circumstances of the case, the Tribunal is correct in holding that the assessee is allowed to change the method of accounting in the assessment year under reference in respect of TPA ....
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....sessee filed its return of income on 30.09.2009 declaring total income of Rs. 9,20,45,514/- and revised return on 30.09.2009 declaring an income of Rs. 2,82,19,530/-. The return of income was processed under Section 143(1) of the Act and the case was selected for scrutiny under Computer Aided Scrutiny Selection (CASS). Thereupon notices under Section143(2) and 142(1) of the Act were issued. The Assessing Officer by an order dated 30.12.2011 inter alia held that an amount of Rs. 16,48,34,975/- was mentioned under the head of 'unearned income'. It was further held that business of a third party agent is insurance business as third party agent makes payments to the hospital / individuals policy holders. Therefore, Accounting Standard -....
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....e order dated 11.01.2013 passed by it in respect of Assessment Year 2007-08 in case of assessee that assessee has rightly followed Accounting Standard -9 on revenue recognition on a pro rata basis / term of policy. It was further held that the activity of the assessee is not in the nature of insurance business. In the result, the appeal preferred by the revenue was dismissed. In the aforesaid factual background, the revenue has approached this court. 4. Learned counsel for the revenue submitted that the assessee is following mercantile system of accounting and under the aforesaid system the income accrues once invoices are raised and the assessee cannot postpone the recognition of income under the aforesaid system of accounting. It is al....
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....gued that the principle of taxation that right person has to be taxed at right time and on right event, in other words, on occurrence when taxable activity which occurs by virtue of transaction taking place and in relation to profit pertaining to transaction is generated, the taxable event occurs, which cannot be postponed. It is also argued that the assessee has not given any reasons for change of accounting system. 5. On the other hand, learned counsel for the assessee submitted that the first substantial question of law framed by this court in fact, is a question of fact and concurrent findings of fact have been recorded by the Commissioner of Income Tax (Appeals) as well as by the Income Tax Appellate Tribunal and the aforesaid findi....
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....all be subject to provisions of sub-Section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. The Supreme Court in the case of Bilahari Investments P. Ltd., supra has held as under: Every assessee is entitled to arrange its affairs and follow the method of accounting which the Department has earlier accepted. It is only in those cases where the Department records a finding that the method adopted by the assessee results in distortion or profits that the Department can insist on substitution of the existing method. 7. The assessee in the instant case has changed invoice method to proportionate completion method. Till 31.03.2007, the assessee used to recognize re....
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....essing Officer to change the method adopted by the assessee and to determine the income on estimate basis. For the aforementioned reasons, the substantial questions of law No.1, 2 and 4 are answered against the revenue and in favour of the assessee. 8. Now we may advert to the third substantial question of law. The assessee is a third party agent and is governed by the provisions of the Insurance Regulatory and Development Authority of India (Third Party Administrators - Health Services) Regulations, 2016. Regulation 2(1)(m) defines the expression 'third party administrator to mean a company registered with the authority and engaged by an insurer, for a fee or remuneration, by whatever name called and as may be mentioned in the agree....