TaxTMI 
TaxTMI 
2024 (1) TMI 1464
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....f tax as per section 111A and / or section 112 of the Income Tax Act. 3. That on facts and in law the CIT(A) erred in upholding a disallowance of Rs. 37,54,602/- out of the total depreciation allowance of Rs. 1,29,46,903/- claimed by the appellant under section 32 of the Act. 3.1 That on facts and in law the AO/CIT(A) erred in making/upholding the above disallowance without considering the fact that unlike earlier years assessments/ appeals all necessary details relevant to depreciation allowance claim for AY 2014-15 were on record. 4. That on facts and in law the CIT(A) erred in upholding a disallowance of Rs 1,87,82,355/-being Provision made for Standard Assets. 5. That on facts and in law the CIT(A)/AO erred in computing income of the Appellant under section 115JB of the Act without appreciating that provisions of Section 115JB are not applicable. 6. That without prejudice, on facts and in law the CIT(A) erred in upholding an addition of Rs. 1,87,82,355/ on account of Provisions for Standard Assets to the taxable Book Profits computed as per provisions of section 115JB of the Act. 7. That on facts and in law the order of assessment u/s 143(3) passed by th....
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....lved in ground No.3 of both the appeals have been considered and remanded to the file of the AO in following manners in assessee's own case for AY 2016-17 in ITA No.6444/Del/2019. "8. Issue raised vide ground No.3 have been considered by the Co-ordinate Bench at para 6.2 of its order for A.Y.2013-14 (supra) and at para-6.3 followed the order for A.Y.2011-12 and concluded as under:- "Ld. DR has not pointed and distinguishing the facts so the ground is decided in favour of the assessee and issue restored to the file of Ld. AO to decide afresh as directed for A.Y.2010-11 to 2011-12. 9. Respectfully following the same we direct accordingly." 9. By following the principle of consistency, we remand the issued involved in ground No.3 of both the appeals to the file of AO to decided afresh as directed for AY 2010-11 to 2011-12. Accordingly, ground No.3 of the assessee is partly allowed for statistical purposes. 10. Ground No.4 is regarding upholding of disallowance being provision made for standard assets. The Co-ordinate Bench of the Tribunal in Assessee's own case for AY 2010-11 in ITA No.4535/Del/2016 deleted the similar disallowance in following manners: "11.0 We have care....
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....ting to the computation of total income stand excluded and the process of computation of the total income of the assessee requires firstly, picking up the figure of profit disclosed by the Profit and Loss Account and then making adjustments as per clauses (a) and (c) of Rule 5. Section 44 read with Rule 5 of the First Schedule makes the figure of profit disclosed by the Profit and Loss account drawn as per the Insurance Act as absolute and binding. Only the adjustments specified in clauses (a) and (c) can be given effect to while computing the total income. The above legal position is now well settled, in case of assessee itself by the Hon'ble Apex Court in its judgment reported in 291 ITR 370(SC) as under: "13. Insurance companies in view of the provisions of the said Act, however, are dealt with also under the 1961 Act differently. Section 44 thereof, as noticed hereinbefore, begins with a non obstante clause. The jurisdiction of the Income-tax Officer in passing the orders of assessment is limited. Keeping in view the fact that the business carried out by the assesse is not governed by the ordinary principles applicable to business computation as laid down in section 10 of th....
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....of a minimum of 0.40 per cent of the value of the asset." 11.4 The assessee has not denied the fact that Standard Assets do not disclose any problem and are not NPA. However, the prudential norms adopt a conservative view and mandate recognition of general provision in the books of accounts. "Provision made for Standard Asset" is therefore a reserve created for Contingent Loss and is not "expenditure". 11.5 The moot issue now to be deliberated upon is whether Rule 5 prescribes for an adjustment by adding back the provision made for standard assets? 11.6 Clearly, clauses (b) and (c) of Rule 5 are not relevant. Rule 5(b) is applicable w.e.f. from AY 2011-12. Even otherwise, Rule 5(b) prescribes for an adjustment on account of profit or loss vis a vis investments. Rule 5(c) again is not relevant as it deals with reserve for unexpired risk. Rule 5(a) being relevant mandates an adjustment as under: "(a) subject to the other provisions of this rule, any expenditure or allowance including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed which is not admissible under the pro....
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....rily prescribed in the Act, for example Depreciation Allowance u/s 32 and Investment Allowance u/s 32A. 11.9 Now let's deliberate upon the second part of Rule 5(a) which prescribes for an adjustment on account of "provision for any tax, dividend, reserve or any other provision as may be prescribed which is not admissible under the provisions of sections 30 to 43B". Although in the instant case the amount debited to profit and loss account is termed as "Provision for Doubtful Assets", however in substance it is a "Reserve" and not a "Provision". The difference between the two is now well settled. In case of State Bank of Patiala v. CIT reported in 219 ITR 706(SC) it was held by the Hon'ble Apex Court that: "A fair reading of the above decisions would go to show that if the transfer of amount is made ad hoc, when there is no known or anticipated liability, such fund will only be treated as reserve. In this case, substantial amounts were set apart as reserves. No amount of bad debts was actually written off or adjusted against the amount claimed as reserves. No claim for any deduction by way of bad debts were made during the relevant assessment years. The assessee never appropri....