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2024 (7) TMI 1556
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....nience. It is admitted position that facts as well as issues are quite identical in all the years and our adjudication in any one year shall equally apply to the other years also. We take up the assesse appeal in ITA No.1085/Chny/2017 for assessment year 2013-14 as lead year. 2. The learned counsel for the assesse, at the outset submitted that there was a delay of 61 days in filing the appeal of the assesse in ITA No.639/Chny/2020, the condonation of which has been sought by counsel for the assesse. We also find that there is delay in filing of appeals by Revenue in the following ITA Nos.:- 1. ITA No. 1670/Chny/2019 - 3 days delay 2. ITA No. 1671/Chny/2019 - 3 days delay 3. ITA No. 426/Chny/2021 - 377 days delay 4. ITA No. 128/CHNY/2023 - 24 days delay 5. ITA No. 129/Chny/2023 - 33 days delay 6. ITA No. 130/Chny/2023 - 16 days delay 7. ITA No. 1571/Chny/2017 - 8 days delay However, upon considering the petition / affidavit filed by the assesse as well as Revenue for condonation of delay, the Bench deem it fit to condone the delay keeping in view the sufficient cause shown for the period of delay, we condone the de....
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....T(A) failed to appreciate that in respect of investments for which amortization of premium has been claimed: (a) related interest is offered to income; (b) the amortization of premium is directly linked to the interest - therefore the expenses are revenue in nature, 6. The CIT(A) erred in not appreciating the fact that the amortization of premium paid on purchase of securities was made as per the guidelines of the regulations of the Insurance Regulatory Authority of India (IRDA) and that such amortization cannot be added in the absence of a specific provision to disallow the same. 7. The CIT(A) failed to appreciate that the amortization of premium paid on purchase of securities is neither an expense nor an allowance that can be disallowed under Rule 5 of First Schedule of Act and that the CIT(A) (as per the provisions of Section 44 of the Act) has the power to disallow only the expenses which are not admissible under the provisions of section 30 to 43B of the Act. 8. The Appellant submits while ascertaining the Book Profits: a) The CIT(A) failed to appreciate that the amount debited as Reserve for Unexpired Risk (URR) cannot be treated as a "rese....
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....mium ceded by the Appellant to non-resident reinsurers (NRRs) u/s 40(a)(i) of the Act. At the outset, the learned counsel for the assesse submitted that an identical ground has been raised by the Revenue in assesses own case for the assessment year 2007-08 and the co-ordinate Bench of this Tribunal in ITA No.1692/Chny/2011 dated 28.06.2023 has considered the issue at length as per directions of the Hon'ble High Court of Madras, since the assesse preferred an appeal before the Hon'ble High Court, in favour of the assesse and dismissed the ground raised by the revenue by following the earlier decision of the Tribunal in ITA Nos.1673, 1688, 1689, 1691/Chny/2011 dated 26.08.2022 in assesses own case for assessment years 2003-04 to 2006-07 and 2008-09 to 2010-11. The Learned Sr. Standing Counsel for the Revenue also fairly agreed that this issue is covered in favour of the assesse by the decision of this Tribunal in assessee's own case for earlier assessment years. 6. We find that an identical issue has been dealt with by the co-ordinate Bench of this Tribunal in assessee's own case in ITA No.1692/Chny/2011 dated 28.06.2023 by following the earlier decision of the Tribunal in ITA Nos....
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....e assessee being in general insurance business as part of their strategy has taken reinsurance policy with reinsurance companies. Further, every insurance company in India has to place their reinsurance program 45 days prior to commencement of financial year before the IRDAI in terms of para 3.4 of IRDAI (General insurance, Reinsurance) Regulation, 2000, and within 30 days of commencement of the financial year, every insurance company has to file reinsurance treaty slips with IRDAI in terms of para 3.5 of IRDAI (General insurance, Reinsurance) Regulation, 2000. As per IRDAI Regulation, 2000, the insurance companies in India have to mandatorily reinsure with the Indian reinsurer being General Insurance Corporation (GIC). However, over and above specified percentage of reinsurance, general insurance companies in India can have their reinsurance arrangement with foreign reinsurer in terms of para 3.7 of said regulations. In this case, there is no dispute with regard to fact that the assessee has complied with provisions of Insurance Act, 1938 and regulations made there under by the IRDAI. In fact, the Assessing Officer has accepted fact that the assessee has complied with reinsurance ....
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....by following various case laws discussed hereinabove, we are of the considered view that reinsurance premium ceded to non-resident reinsurer is not taxable in India under the Income Tax Act, 1961 or under DTAA between India and respective countries where NRRs are tax residents and thus, on impugned payments the assessee is not liable to deduct TDS u/s. 195 of the Income Tax Act, 1961. Consequently, payments made to NRR cannot be disallowed u/s. 40(a)(i) of the Act, 1961. Hence, we direct the Assessing Officer to delete additions made towards disallowance of reinsurance premium ceded to NRRs u/s 40(a)(i) of the Act. 7. In this view of the matter and consistent with view taken by the coordinate Bench in the assessee's own case, we are inclined to uphold the findings of the Ld.CIT(A) and direct the AO to delete the disallowance of reinsurance premium paid to NRRs u/s. 40(a)(i) of the Act, for failure to deduct TDS u/s. 195 of the Act." 7. In view of the above, respectfully following the said decision of the co-ordinate Bench of this Tribunal, we set aside order of the Ld.CIT(A) in restricting the claim of the assessee to 15% of payment made to NRRs of other countries and d....
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....08.2018. Accordingly, we see no reason to interfere with the order of the CIT(A) for the assessment years 2013-14, 2014- 15, 2015-16, 2016-17, 2017-18, 2018-19 & 2019-20 on the issue of disallowance towards amortization of premium paid on purchase of securities. Therefore, the ground raised by the assessee on this issue of amortization of premium paid on purchase of securities for the assessment years 2013-14, 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 & 2019-20 is dismissed. 10. The next common issue that came up for our consideration in the appeals of the assessee for the assessment years 2014- 15, 2015-16, 2016-17, 2017-18, 2018-19 & 2019-20 is disallowance of provision for IBNR and IBNER. 11. The learned counsel for the assessee submitted that during the relevant assessment years, the assessee has made provision for claims incurred, but were not reported (IBNR) and claims incurred, which were not enough reported (IBENR) and such provision has been made for all unsettled claims on the basis of claim lodged by insured persons. According to the learned counsel, date of damage/loss was considered for recognizing the claim in a ....
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....age occurred to the insured property. But, the actual liability to make the payment arises on the date on which the loss or damage was assessed and the amount was determined. In this case, the accident or loss was reported to the assessee but the actual loss or compensation was not determined during the assessment year 2009-10. Therefore, as rightly submitted by the according to the Ld. Sr. Standing Counsel for the Revenue, the liability to make the payment accrues to the assessee only in the year in which the loss or damage was ascertained and compensation payable to insured person is determined. Admittedly, the compensation payable to insured person was not determined during the assessment year 2009-10. Therefore, this Tribunal is of the considered opinion that merely because the incident happened during the year which is the basis for making claim, that cannot be a reason for allowing the compensation payable by the assessee for the assessment year 2009-10. In other words, the compensation payable by the assessee has to be allowed in the year in which the amount of compensation was determined. Since the amount was not determined during the year under consideration, this Tribunal....
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....the orders of the Assessing Officer on this issue dismissed the claim of the assessee, against which the assessee came in appeal for AYs 2014-15 to 2016-17 and 2018-19. The learned counsel for the assessee submitted that there was no disallowance of provision for IBNR and IBNER claim for the assessment years 2017-18 & 2019-20. 15.1 For this issue of provision towards IBNR and IBNER claim, the assessee has raised the following ground which reads as under:- "8. The Appellant submits while ascertaining the Book Profits: (a)The CIT(A) failed to appreciate that the amount debited as Reserve for unexpired Risk (URR) cannot be treated as a "reserve" as contemplated in Clause (b) to Explanation to Section 115JB of the Act and the carry forward of Reserve for Unexpired Risk cannot be restricted only to the extent of the premium proportionate to the risk period of subsequent year." The grounds raised by the assessee in other assessment years is identically worded and facts and circumstances are exactly similar and hence, we take up the facts for consideration from assessment year 2013-14 in ITA No. 1085/Chny/2017 and will decide the issue which will apply to other yea....
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....ported. The assessee before the Assessing Officer explained this by filing the evidences that the same is based on actuarial valuation and relevant text of the letter reproduced by the Assessing Officer is being reproduced for the sake of clarity as under:- "The provision for IBNR and IBNER made by the assessee for the relevant assessment year are based on actuarial valuation by an independent actuary. The valuation is worked based on an approved statistical model (approved by the Actuarial Society of India and IRDA) which takes into account various factors including (a) claims report, (b) claims paid; and (c) claims outstanding details from the Company for the past seven years. The Actuary, using the data furnished by the assessee based on the statistical model approved by Actuarial Society and IRDA, calculates the ultimate loss that will fall on the company under each portfolio (viz. Fire, Marine Cargo, Marine Hull,etc.) and on the so calculated amount reduces the Claims actually paid and also the Claims Outstanding accounted by the assessee to arrive at the shortfall on the ultimate loss. This shortfall will be certified by the Actuary to be the IBNR/IBNER to be account....
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....trend and upon the number of articles produced. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation ; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognised. The principle is that if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and the facts show that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37." The ratio of the above decision is applicable to the facts of the appellant. It is further seen that similar claims have been accepted in earlier as well as subsequent assessment years. In view of the above and respectfully following the above decision, the claim of the appellant is allowed. Accordingly, this ground is allowed." 10.3.4....
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.... the amendment culled above in the Act, the issue has to be decided by the Tribunal, however, due to inadvertence, the Tribunal has observed in Paragraph No.56 of the Order that Section 115JB is not applicable to the insurance companies and therefore, held that there is no infirmity in the order passed by the CIT (Appeals)." 15.7 Now, before us, the learned counsel for the assessee argued and admitted that the assessee is an insurance company and it has not disputing applicability of provisions of section 115JB of the Act to it post-amendment to the Finance Act, 2013- 14 i.e AY 2013-14 onwards. He also stated that the Assessing Officer has adjudicated this issue, but the CIT(A) again relying on the earlier year order of the CIT(A) i.e for assessment year 2003-04, allowed the claim of the assessee on merits, but has not adjudicated the issue whether this provision is allowable, while computing book profit u/s. 115JB of the Act and has not also determined whether liability is ascertained or unascertained in term of provisions of Explanation 1(c) to section 115JB of the Act. 15.8 The Ld.Senior Standing Counsel for the Revenue has also fairly agreed that this issue is neither adj....
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....as regards to provision created for reserve for unexpired risk. The learned counsel for the assessee submitted that no disallowance was made by the Assessing Officer for the assessment years 2017-18 & 2019-20. The addition was made by the Assessing Officer and confirmed by Ld.CIT(A) except assessment years 2017-18 & 2019-20, while computing book profit u/s. 115JB of the Act by observing that unexpired risk cannot be treated as reserve as contemplated under clause (b) to Explanation 1 to section 115JB of the Act. For this, the assessee has raised following ground 8(b):- 8(b) The CIT(A) erred in not appreciating the fact that the aforesaid change in the accounting treatment of URR would result in 'change in accounting policy' adopted by the Appellant and such changes are not in line with provisions of Section 115JB of the Act." 16.1 The Assessing Officer while framing assessment added reserve for unexpired risk by observing that reason for unexpired risk is nothing but solvency margin created as per guidelines laid down under IRDA Rules as well as Insurance Act and hence, this reserve created is nothing but, amount set aside for making unascertained liabilities. T....
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....rned counsel for the assessee that earlier there was no decision available on the issue of reserve for unexpired risk, but now, the ITAT., Kolkata Benches of this Tribunal in the case of DCIT Vs National Insurance Co. Ltd. in ITA No.983/Kol/2012 has categorically held that reserve created for unexpired risk need not be added back for the purpose of computation of book profit u/s. 115JB of the Act. The Assessing Officer, while doing fresh adjudication can consider the decision of ITAT., Kolkata Benches of this Tribunal in the case of DCIT Vs National Insurance Co. Ltd. in ITA No.983/Kol/2012 and then decide the issue in accordance with law. 16.5 In term of above, the impugned orders of the Assessing Officer and CIT(A) are set aside for the assessment years 2014- 15 to 2016-17 & 2018-19 raised by the assessee and that of the Revenue for the assessment year 2013-14 on the issue of creation of reserve for unexpired risk and matter is remitted back to the file of the Assessing Officer to decide the issue afresh as per law, after considering entire facts of this case. In the result, appeals filed by the assessee for the assessment years 2014-15 to 2016-17 & 2018-19 and that of the Rev....
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....r the assessment year 2013-14. In the result, the ground raised by the Revenue for assessment year 2013-14 on the issue of disallowance by invoking the provisions of section 14A read with Rule 8D of Income Tax Rules, 1962 while computing book profit u/s. 115JB of the Act is dismissed. 18. The next common issue that came up for our consideration from the Revenue appeals for the assessment years 2014-15 to 2016-17 and 2018-19. The Assessing Officer has made disallowance for assessment years 2014-15 to 2016-17 and 2018-19. However, for assessment years 2017-18 & 2019-20, no disallowance was made by the Assessing Officer u/s. 14A read with Rule 8D of the Income Tax Rules, 1962. 18.1 During the previous year relevant to assessment years under consideration, the assessee has earned exempt income, and made suomotu disallowance voluntarily towards expenditure relatable to exempt income u/s. 14A. The Assessing Officer has disallowed expenditure relatable to exempt income u/s. 14A of the Act by invoking Rule 8D of Income Tax Rules, 1962, as substantial amount of investments in equities and mutual funds have been made by the assessee and part of remuneration and other expenses attributa....
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....n'ble High Court of Delhi and hold that no interference can be made to the assesse's income by provisions of section 14A. Accordingly, the grounds of appeal raised by the Revenue for AY 2014-15 to 2016-17 and 2018-19 are therefore dismissed and thus, the Ld.AO is directed to delete additions made. 19. The next issue that came up for our consideration from the assessee appeal for the assessment year 2017-18 is disallowance of Rs. 17.25 crores u/s.36(1)(va). The Ld.AO disallowed a sum of Rs. 17,25,27,756/- on account of failure to deposit Employees' contribution to PF before due date as specified under the Act. On appeal, the Ld. CIT(A) confirmed the disallowance of Employee's Contribution made by the Assessing Officer, as said late payments are not covered u/s. 43B and by following the latest decision of the Hon'ble Supreme Court in the case of M/s.Checkmate Services dated 12.01.2022. Aggrieved by the order of Ld.CIT(A), the assessee is in further appeal before us. 19.1 Heard both sides and perused materials available on record. Since the Ld.CIT(A) has followed binding judicial precedent in the case of M/s.Checkmate Services dated 12.01.2022 by the Hon'ble Supreme Cour....
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....ance Insurance Company Ltd. In TCA No.41 of 2019, held that assessee is not liable to deduct tax at source, qua, payments made to overseas surveyors. The Ld.Sr. Standing Counsel has fairly agreed that the issue is decided against the Revenue. 20.1 Heard rival submissions and perused materials available on record. It emerges from record that assessee is not paying any commission to insurance companies and such commission was deducted by respective insurance companies themselves from reinsurance premium. Therefore, when the assessee is not making payment, the assessee is not liable to deduct tax. We find that the Ld.CIT(A) has rightly allowed the claim of the assesseeby following the decision of this Tribunal in assessee's own case for assessment year 2007-08 to 2013-14. Further, the order of the Tribunal dated 28.08.2018 on the issue of commission paid for receipt of re-insurance premium in assessee's own case was affirmed by the Hon'ble High Court of Madras in TCA No.323 of 2019 dated 14.06.2019. Thus, respectfully following the said judgement, we confirm the order of the CIT(A) on this issue and reject the grounds raised by the Revenue in assessment years 2014-15 to 2019- 20. ....
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....ame up for our consideration from the Revenue appeals for the assessment years 2014-15 to 2019-20 is in regard to disallowance of amount paid to motor car dealers towards infra payment u/s. 37 of the Act amounting to Rs. 63.94 crores for assessment year 2014-15. 22.1 The learned counsel for the assessee, at the outset submitted that this issue of payment made to motor car dealers by the assessee towards infra payment u/s. 37(1) of the Act is also covered in favour of the assessee by the earlier decision of this Tribunal dated 28.08.2018 in assessee's own case for the assessment year 2013-14, which was affirmed by the Hon'ble High Court of Madras in TCA No.339 to 342 of 2019 vide order dated 21.06.2019 and a copy of which is placed on record as Annexure-4 at pages 174 to 181 of the paper book filed by the assessee. The Ld. Senior Standing Counsel fairly agreed that the issue is decided against the Revenue. 22.2 Heard rival submissions and perused materials placed on record. In the judgement of the Hon'ble High Court of Madras dated 21.06.2019, it was observed that the addition was made as sequel to information received from the service tax department whose own enquires had not....