TaxTMI 
TaxTMI 
TaxTMI 
2024 (10) TMI 1781
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....eproduced as under: a) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the provisions for Claim Incurred But Not Reported (IBNR) and Claim Incurred But Not Enough Reported (IBNER) amounting to Rs. 155,10,59,561/- is allowable u/s 37(1) of the Income Tax Act, 1961 without appreciating the fact that the such provisions are in the nature of contingent liability?" b) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the re-insurance premium of Rs. 621,52,40,320/- paid to non-resident insurers towards ceding risk by virtue of the provisions of section 37(1) of the Income Tax Act, 1961, when the same was in violation of section 101A(7) r.w.s. 2(9) of the Insurance Act?" c) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred by upholding that the provisions of section 40(a)(i) of the Income Tax Act, 1961 would not be attracted in the case of payment of re- insurance premium to foreign insurers and consequently TDS does not require to deduct on such payments?" d) "Whether on the facts and in....
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.... in the circumstances of the case and in law the Ld. CIT(A) was justified in giving purposive interpretation of the provisions instead of literal interpretation of provisions, ignoring the fact that amendment brought by the Finance Act, 2020 in Rule 5 of first schedule is explicitly prospective in nature and will apply in relation to AY 2020-21 and subsequent assessment year? 2.1. Grounds taken by Revenue in ITA No.1835/MUM/2023 is reproduced as under: a) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the provisions for Claim Incurred But Not Reported (IBNR) and Claim Incurred But Not Enough Reported (IBNER) amounting to Rs. 330,3759,905/- is allowable u/s 37(1) of the Income Tax Act, 1961 without appreciating the fact that the such provisions are in the nature of contingent liability?" b) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the re-insurance premium of Rs 681,82,15,312/- paid to non-resident insurers towards ceding risk by virtue of the provisions of section 37(1) of the Income Tax Act, 1961, when the same was in violation of se....
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....sequent assessment year? 2.2. Grounds taken by assessee in ITA No.1815/MUM/2023 is reproduced as under: 1. The learned CIT(A) has, on the facts and circumstances of the case and in law, erred in confirming the action of the learned AO of not accepting the revised return of income filed by the Appellant, by holding that it was not a case of discovering of any omission or any wrong statement in the original return of income and thus, the revised return of income filed by the Appellant does not meet the conditions stipulated in section 139(5) of the Act. 2. The learned CIT(A) has, on the facts and circumstances of the case and in law, erred in confirming the action of the learned AO in treating provision of Rs 4,32,01,510 created by the Appellant towards Long Term Incentive Plan (LTIP) for employees as having been made towards bonus and in treating such liability as contingent in nature not allowable under section 37(1) of the Act. 3. Without prejudice to ground no. 2 above, the learned CIT(A) having held that the provision towards LTIP as being in the nature of provision for bonus not allowable under section 37(1) of the Act, ought to have held that the ....
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....nt expense recorded in the books of account over and above the rent paid, disallowed in the subject AY is not justified. 9. The learned CIT(A), on the facts and circumstances of the case and in law, ought to have held that the AO was not justified in levying interest of Rs 5,64,71,392 under section 234A of the Act as the Appellant had filed the original return of income on 25 November 2019 i.e., before the due date of filing of ROI under section 139(1) of the Act. 10. The learned CIT(A), on the facts and circumstances of the case and in law, ought to have himself held that the Appellant is entitled to credit of tax deducted at source amounting to Rs 1,10,542. 2.3. Grounds taken by assessee in ITA No.1816/MUM/2023 is reproduced as under: 1. The learned CIT(A) has, on the facts and circumstances of the case and in law, erred in confirming the action of the learned AO in treating provision of Rs 2,67,64,603 created by the Appellant towards Long Term Incentive Plan (LTIP) for employees as having been made towards bonus and in treating such liability as contingent in nature not allowable under section 37(1) of the Act. 2. Without prejudice to groun....
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....e allowed in respect of rent equalisation adjustment representing rent paid over and above the rent expense recorded in the books of account, then, ought to have held that no disallowance is called for in the relevant year (i.e AY 2016-17) where rent equalisation adjustment represented rent expense recorded in the books of account over and above the rent paid. 8. The learned CIT(A) has, on the facts and circumstances of the case and in law, erred in confirming the action of the learned AO of not allowing deduction of Rs 2,89,63,479 claimed by the Appellant on account of reversal of reserve for unexpired risk ('UEPR') made during the year out of the amount of UEPR disallowed in prior years. The learned CIT(A) erred in doing so by stating that the Appellant did not show before him that the aforesaid amount was offered to tax by the Appellant in which previous years, while no such opportunity was provided by the CIT(A) to the Appellant in this regard. 9. The learned CIT(A), on the facts and circumstances of the case and in law, ought to have held that the Appellant is entitled to brought forward losses as per the revised return of income filed for AY....
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....stration fees 50,42,700 4. Capital expenditure 15,55,434 Disallowance u/s 30 to 43B as per the Rule 5 of the First schedule. 5. Addition to the income on account of profit on sale of fixed assets 17,34,000 6. Reversal of expenses offered to tax in previous years 48,62,360 7. Reversal of performance bonus offered to tax in earlier years 12,77,261 8. Non granting of exemption of dividend income under section 10(34) of the Act 4,49,12,030 9. Non granting of exemption of income under section 10(15)(iv)(h) of the Act 73,76,19,768 10. Earlier year's unpaid provision of leave encashment paid in current year 57,02,122 11. Disallowance of depreciation under section 32 of the Act 22,55,20,305 5. Assessee went in appeal before the ld. CIT(A) who granted relief on certain issues against which revenue is in appeal before the Tribunal. 6. On the first issue in ground (a) relating to disallowance of provisions for claim Incurred But Not Reported (IBNR) and claim Incurred But Not Enough Reported (IBNER), ld. Assessing Officer during the scrutiny proceedings noted that assessee had debited an amount of Rs. 155,1....
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.... Rotork controls India private limited versus Commissioner of income tax 314 ITR 62 considered that if there is a present obligation with respect to the provision, and it arises out of events involving outflow of resources and can be based on reliable estimation of such obligation then the liability incurred by the assessee company is allowable He further held that the methodology to determine the liability is also certified by actuary in accordance with guidelines and norms issued by the Institute of actuaries of India and insurance regulatory and development authority of India. He further held that such provisioning relates to present obligation and involves outflow of resources. He further considered the provisioning made by the assessee in different years and actual utilization of such provision with respect to those financial years and then he found that the provision was made less than the actual amount incurred in settling those claims. He further held that the coordinate bench in case of DCIT vs. National Insurance co. Ltd. (2016) 72 taxmann.com 116 (Kolkata p Trib.) which has been affirmed by Hon'ble Calcutta High Court in ITA No. 76 of 2019 Therefore, he held that suc....
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....t identical issue arose in the case of DCIT vs. Export Credit Guarantee Corporation of India Ltd. in ITA No. 7657/Mum/ 2014, wherein the co- ordinate Bench vide order dated 11.10.2017 vide para No. 3.3 has allowed the identical claims The learned CIT(A) while deciding the issue has relied upon the decision co-ordinate Bench in DCIT us National Insurance Company Limited (supra) has held that the provisions made available the above claim are based on scientific calculation with a proper and rational and therefore, it could only be termed as ascertain liability. Though the above decision was rendered with respect to the computation of book profit under section 115JB of the Act, however, the learned CIT (A) applied it and allowed the claim of assessee for deduction under section 37(1) of the Act for the reason that the claim of the assessee is ascertained claim, supported by Actuarial valuation and also made on a scientific basis. To reach at this calculation, the learned CIT (A) obtained information for 6 different assessment years and found that the actual claim settled is always higher than the provisions made by the assessee. This it shows that the provisions made are not excessive....
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.... Officer made disallowance u/s 40(a)(i) of Rs. 621,52,40,320/- as no TDS was done. 10.1. On the above, ld. CIT(A) observed that the issue had been decided by the Coordinate Bench of ITAT, Mumbai in assessee's own case for A.Y.2015-16 in ITA No.1718/Mum/2020. Relevant part is reproduced as under :- "3. The ground Nos. 3 & 4 raised by the assessee are challenging the disallowance of re-insurance premium paid to non-resident reinsurers, who do not have a place of business/branch in India, u/s 37(1) of the Act. The alternative disallowance that was made by the Id. AO in this regard was u/s 40(a)(i) of the Act for payments made without deduction of tax at source. 3.1. We have heard rival submissions and perused the materials available on record. We find that assessee is in the business of general insurance. During the year, the assessee paid an amount of Rs. 6,81,13,22,176/- to non-resident companies (foreign reinsurers) as reinsurance premium. The assessee had not withheld tax on these outward remittances except one payment of Rs. 45,55,87,765/- made to Swiss Reinsurance Co. Ltd., The Id. AO observed that the remaining reinsurance premium paid in the sum of Rs ....
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....on 37(1) of the Act after 26/ 12/2014 could be brought into force? b) Whether reinsurance payment made would be in violation of provisions of Section 40(a)(i) of the Act? 3.10. This was the strong contention of the Revenue to deny the disallowance of reinsurance premium payment made to non-resident reinsurers in the instant case. We find that the aforesaid finding of Chennai Tribunal has been reversed by the Hon'ble Madras High Court in the case of Cholamandalam MS General Insurance Co Ltd vs. DCIT reported in 102 taxmann.com 292 dated 12/12/2018. It would be relevant to reproduce the questions raised before the Hon'ble Madras High Court as under- "2. The common legal issue arising in these appeals relates to disallowance of reinsurance premium ceded to non-resident reinsurers. The assessee have raised the following substantial questions of law for consideration :- (i) Whether the ITAT erred in deciding the validity of reinsurance ceded to the non-resident reinsurers when such issue was not even raised before it by either the Department or the Assessee? (ii) Whether the ITAT erred in holding that the IRDA (General Insurance Reins....
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....the impugned order and leave the issue open. Thus, we are required to examine as to whether in the facts and circumstances, the Tribunal was right in holding that payment of reinsurance premium to non- resident insurance companies is prohibited and to be disallowed under Section 37 of the Act. 15. As pointed out earlier, neither the Revenue, nor the assessee referred to Section 37 of the Act. Thus, the error committed by the Tribunal firstly is in exceeding the scope of the order of remand passed by the Division Bench of this Court in the earlier decision noted above. Secondly, the Tribunal has no jurisdiction to declare a transaction to be either prohibited or illegal occurring under a different statute over which, it has no control. In other words, the Income-tax Officer cannot declare a transaction as illegal under the provisions of the Insurance Act or the Regulations framed thereunder. The Income-tax Officer can examine as to whether any income accrued in the hands of the assessee is required to be taxed. In the instant case, neither the Assessing Officer, nor the Commissioner of Income-tax (Appeals)- II (for brevity-the CIT(A)II) has made any such endeavour, but the ....
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....he Central Government] under sub-section (2). (2) For the purposes of sub-section (1), [the Authority] may, by notification in the Official Gazette,- (a) specify the percentage of the sum assured on each policy to be re-insured and different percentages may be specified for different classes of insurance: Provided that no percentage so specified shall exceed thirty per cent. of the sum assured on such policy, and (b) also specify the proportions in which the said percentage shall be allocated among the Indian re-insurers. (3) Notwithstanding anything contained in sub-section (1), an insurer carrying on fire insurance business in India may, in lieu of re- insuring the percentage specified under sub-section (2) of the sum assured on each policy in respect of such business, re-insure with Indian re-insurers such amount out of the first surplus in respect of that business as he thinks fit, so however that, the aggregate amount of the premiums payable by him on such reinsurance in any year is not less than the said percentage of the premium income (without taking into account premiums on re-insurance ceded or accepted) in respect of such business duri....
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.... the only definition of -insurerll and if such a definition is applied, re-insurance with foreign companies is prohibited by law. The Tribunal held that the word other insurerll provided in Section 101A(7) of the Insurance Act enables the Indian insurer for reinsuring over and above the percentage fixed by the Regulatory Authority and the reinsurance may be either with Indian reinsurer or other insurer. It further held that by taking advantage of the term -other insurerll, the assessee claims that they can re-insure with non-resident reinsurance company ignoring the provisions of the Insurance Act. Il further proceeded to hold that the term other insurerll as provided in Section 101A(7) of the Insurance Act is only the insurer, which is defined in Section 2(9) of the Insurance Act and there cannot be any extended meaning, which can be given to the term other insurerll. Thus, it held an Indian insurer cannot have any reinsurance arrangement with reinsurance company other than the insurer, as defined in Section 2(9) of the Insurance Act. In our considered view, the conclusion of the Tribunal is not sustainable. We support such conclusion with the following reasons. 19. In ex....
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....all place their reinsurance business outside India with only those reinsurers who have over a period of the past five years counting from the year preceding for which the business has to be placed, enjoyed a rating of at least BBB (with Standard & Poor) or equivalent rating of any other international rating agency. Placements with other reinsurers shall require the approval of the Authority. Insurers may also place reinsurances with Lloyd's syndicates taking care to limit placements with individual syndicates to such shares as are commensurate with the capacity of the syndicate. (8) The Indian Reinsurer shall organise domestic pools for reinsurance surpluses in fire, marine hull and other classes in consultation with all insurers on basis, limits and terms which are fair to all insurers and assist in maintaining the retention of business within India as close to the level achieved for the year 1999- 2000 as possible. The arrangements so made shall be submitted to the Authority within three months of these regulations coming into force, for approval. (9) Surplus over and above the domestic reinsurance arrangements class wise can be placed by the insurer indepen....
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....whom, they can enter into a contract of re- insurance, as the Regulations place an embargo stating that such entity should have enjoyed the rating of at least BBB or equivalent rating of any other international rating agency. Thus, the reading of the Regulations will clearly show there is absolutely no prohibition for re- insurance with a foreign re-insurance company. 22. The observations made in the finding rendered by the Tribunal stating that the Regulations are inconsistent with the provisions of the Act are utterly perverse and to be outrightly rejected. In 2008, the Standing Committee on Finance proposed the amendment to the Insurance Laws and the Insurance Laws (Amendment) Bill, 2008 was introduced. The report of the Committee states that the General Insurance Corporation Re is the only national re-insurer operating in India and also has re- insurance business in international market and its share of international business is 44 per cent. The Chairman of the General Insurance Corporation (GIC), who is one of the respondents in these appeals, has deposed before the Standing Committee on Finance and would state that the legal position as of 2008, there was no bar on d....
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....mpany was a prohibited business. Further, the Tribunal fell in error in rendering such a finding without noticing the Re-insurance Regulations, which has been provided by the Insurance Regulatory and Development Authority of India. In the said Regulations, the highlights of the statement and objects for introduction of Chapter IVA to the Insurance Act in the amendment, in the year 1961, had been brought into after which, there is an order of Preference for Reinsurance Cessions. In the order of preference, the last among them is what can be offered to Indian insurers and overseas insurers. Thus, the regulations does not wholly prohibit any re- insurance with overseas reinsurance companies subject to the condition that the other priorities contained in Clauses 1, 2 and 3 of the regulations are exhausted. Furthermore, the Reserve Bank of India, Exchange Control Department, Central Office, Mumbai notified the Foreign Exchange Management (Insurance) Regulations, 2000. The major changes in the procedure as per the memorandum of Exchange Control Regulations relating to General Insurance in India (GIM) were summarised and the relevant Regulation, pertaining to re- insurance arrangement, is....
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....rson in terms of the definition under Section 2(9) of the Act. In the light of the above discussion, we are of the clear view that the Tribunal erred in coming to a conclusion that it is not the intention of the Parliament to authorize an Indian insurer to have re-insurance outside the country ignoring the provisions of Insurance Act referred above. The Tribunal had no jurisdiction to declare any provisions of the regulations to be inconsistent with the provisions of the Insurance Act. This was wholly outside the purview of the Tribunal. Thus, the Tribunal clearly exceeded its jurisdiction in stating that the assessees have engaged in a transaction, which is prohibited by law and therefore, not entitled for deduction under Section 37 of the Act. This has never been the case of the Revenue either before the Assessing Officer or before the CIT(A) or before the Tribunal, when they filed appeals challenging that portion of the order passed by the CIT(A), which was against the Revenue. 26. The Tribunal while upholding the order of the Assessing Officer did not assign any independent reasons. The discussion in the impugned order relates to the did not consider the correctness of....
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............... .................... ................... 3.24. Hence, the entire observations of the lower authorities had been duly addressed in the aforesaid findings by us. At the cost of repetition, we would like to reiterate the fact that there is absolutely no dispute that the foreign reinsurers does not have any place of business in India / permanent establishment in India/ branch established in India / Liaison office in India. Hence, any payment made by the assessee company to such foreign insurers would not be chargeable to tax in the hands of the foreign reinsurers in India in terms of Section 195(1) of the Act. Accordingly, as stated earlier, there would be no obligation on the part of the assessee, being a payer, to deduct tax at source and consequently there cannot be any disallowance u/s 40(a)(i) of the Act. Accordingly, assessee succeeds on this ground also. 3.25. Accordingly, in view of the aforesaid observations the ground Nos. 3 & 4 raised are allowed." 10.2. Ld. CIT (A) thus, following the decision of Coordinate Bench ITAT in assessee's own case (supra), allowed the ground so raised by the assessee. 11. We perused the abo....
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....ess provision of performance bonus offered to tax in earlier years while computing income from business and profession. He concluded that these claims of deduction are not allowable as per Rule 5 of the First Schedule to the Act and rejected the claim of the assessee. 17. Ld. CIT(A) observed that the issue had been decided by the Coordinate Bench of ITAT, Mumbai in assessee's own case for A.Y.2015- 16 in ITA No. 1718/Mum/2020. Relevant part is reproduced as under- "5(b) Ground No.6 is challenging the action of the Id. CIT(A) not excluding the reversal of expenses credited by the assessee to its profit and loss account which had been disallowed in the previous years 5(d). Ground No.8 is challenging the disallowance of deduction of bonus and leave encashment paid during the year under appeal which was disallowed in earlier years u's 43B of the Act 5.1 We find that all the aforesaid items from (b) to (e) above are to be granted deduction and excluded from the total income of the assessee it order to avoid double disallowance. The amendment brought in Finance Act. 2020 also impliedly concluded that there should be no double disallowance. In this re....
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....justifying the claim of deduction. The same reasoning that was given by us in ground No. 10 hereinabove would apply to these grounds also. Accordingly, the ground Nose to 9 raised by the assessee are allowed." 21.1. Ld. CIT(A) thus, following the decision of Coordinate Bench of ITAT in assessee's own case, allowed the ground raised by the assessee. 22. We perused the above orders and by taking note of factual position of there being no change in material facts and applicable law in the present case before us, we do not find any reason to interfere with the findings arrived at by the ld. CIT(A), following the decision of Coordinate Bench of ITAT, Mumbai in assessee's own case (supra). Accordingly, the ground (f) raised by the Revenue is dismissed. 23. For ground no. (i) on deduction not allowed u/s.43B of the Act in respect of leave encashment amount disallowed in earlier year but paid during the year ld. Assessing Officer noted that assessee claimed Rs. 57,02,122/- towards unpaid provision of leave encashment of previous years, but paid in this year while computing income from business and profession. He concluded that these disallowances are not allowable as per R....
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.... No.5, the revenue is aggrieved for CIT(A)'s action for exempting dividend income. 9 This issue is also covered by the order of the Hon'ble Bombay High Court in the case of General Insurance Corporation of India, 342 ITR 27. .................... ................... Respectfully following the above decision of Hon'ble Bombay High Court, we do not find any infirmity in the order of CIT(A) exempting the dividend income." 27.1. Ld. CIT(A) placed reliance on the decision of the Hon'ble jurisdictional High Court of Bombay in the case of General Insurance Corporation of India vs. DCIT [2011] 342 ITR 27 (Bom), wherein it is clearly held that exemptions u/s 10 of the Act will be available to general insurance company as well. Ld. CIT(A), thus following the decision of the Coordinate Bench of ITAT in assessee's own case, allowed the grounds raised by the assessee. 28. We perused the above orders and by taking note of factual position of there being no change in material facts and applicable law in the present case before us, we do not find any reason to interfere with the findings arrived at by the ld. CIT(A), following the decisi....
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....s.32 of the Income Tax Act. Hence, it had resulted in a situation that no depreciation at all was granted deduction to the assessee. This action was upheld by the ld. CIT(A). This, in our considered opinion, had resulted in gross injustice to the assessee. In any case, the depreciation computed u/s.32 of the Act is to be granted mandatorily to the assessee as per Explanation 5 to Section 32 of the Act. In our considered opinion, the effect of Rule 5, Clause „, a" of schedule-1 is that, if the insurance company has claimed a deduction for any expenditure / allowance or as debited in the ITA No.1718/Mum/2020 M/s. Tata AIG General Insurance Co. Ltd., 31 accounts to the profit and loss account by way of provision or reserve, which is not admissible as per the provisions of Section 30 to 43B of the Income Tax Act, the same shall be liable for disallowance. The natural corollary to this would be that deductions that are otherwise specified u/s.30 to 43B would become allowable under the provisions of the Act and the same would get allowed to insurance company. Hence, logically if book depreciation is not allowed to the assessee, then the depreciation computed as per Section 32 of th....
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....mending the Rule 5 of the first schedule to the Income Tax Act by inserting the proviso after Clause-C of Rule 5 to provide deduction of amounts previously disallowed u/s.43B in the year in which the same is actually paid. The Explanatory Memorandum to the Finance Bill 2020 explaining the provisions relating to direct tax amendments while proposing an amendment in Section 43B to insurance companies had stated as under :- "Section 44 of the Act provides that computation of profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or a co-operative society shall be computed in accordance with the rules contained in the First Schedule to the Act. Section 43B of the Act provides for allowance of certain deductions, irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by the assessee, only in the previous year in which such sum is actually paid. Rule 5 of the said Schedule provides for computation of profits and gains of other insurance business. It states that profits and gains of any business of ....
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....in the return of income even though the same is an item of legitimate expenditure in the P & L account. When the very same expenditure is actually paid by the assessee in different assessment year, the same should be logically and legally liable for deduction / allowance to the assessee in the year in which such payments are made. This alone ITA No.1718/Mum/2020 M/s. Tata AIG General Insurance Co. Ltd., 34 would address the clear intention of the legislature. Moreover these benefits are otherwise available to all other types of the assessee and there is no logical reason that an Insurance company alone should be deprived of the same. This would be more relevant from the point of discrimination of assessee. Considering the totality of these observations, it could be safely concluded that the amendment brought in Finance Act 2020 addressing this anomaly is merely curative in nature and hence has to be construed as clarificatory having retrospective effect as it was brought in to avoid unintended consequences and to avoid discrimination with other assessees. In this regard, we find that the reliance has been rightly placed by the ld. AR on the decision of the Hon'ble Supreme Court....
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....return of income within the prescribed time period u/s. 139(5) of the Act. As already noted above, assessee had filed its original return reporting a total loss of Rs.25,04,12,817/- which was increased by way of revision to Rs.70,17,29,580/- for the reasons as tabulated below: Reasons for revision Impact in revised ROI While filing the original ROI, the assessee erroneously disclosed profit on sale of investments under 'Income from Business and Profession'. In the revised return, the assessee excluded the same from the 'income form Business and Profession" and offered to tax under the head capital gains (i) Reduction of business income by Rs. 68,83,10,759 (ii) Increase in capital gains by Rs. 68,83,10,759 Erroneously claimed long term incentive plan as bonus and disallowed the same under S.43B of the Act Reduction of total amount disallowed under section 43B of the Act by Rs. 4,32,01,510 Erroneously calculated Reserve for unexpired risk (UEPR) in the original ROI Reduction of business income by Rs. 30,00,49,000 35.2. From the above table, it is noted that assessee filed the revised return upon discovering the following omissions/mistakes in th....
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....rule of consistency and therefore, assessee cannot be allowed to change its stand by resorting to filing of revised return u/s. 139(5). He thus, rejected the revision of return to treat profit of sale of investments as business income. 36.2. On the second reason for revision of return relating to long term incentive plan claimed as bonus and disallowed u/s.43B which resulted into reduction of total amount disallowed by Rs.4,32,01,510/-, assessee explained that this payment is made under incentive scheme with the intention of retaining employees and not rewarding them for their performance. According to the assessee, bonus is for services already rendered whereas payments under incentive scheme to employees is for them to continue their service in future with the assessee. Thus, payments made by assessee under long term incentive plan are covered u/s.37(1) and not u/s. 36(1)(ii). On the explanation so given by the assessee, ld. Assessing Officer observed that assessee did not submit any documentary evidence for this long-term incentive scheme, in absence of which the said arguments were not accepted. According to the ld. Assessing Officer, the said payment is inexplicably linked ....
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....ome is revised, it replaces the original return of income and hence ld. AO is duty bound to consider the revised return of income for the purpose of concluding the assessment proceedings. 38. For better reference, we extract the provisions contained in section 139(5) as under: "139(5) if any person, having furnished a return under sub section(1), or sub section (4) discovers any omission or any wrong statement therein, he may furnish a revised return at anytime before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. " 38.1. From the above, it is observed that a revised return may be filed by an assessee when, after filing the original return, assessee discovers any omission or wrong statement in the original return so filed. We take note of the reasons as tabulated above for which the original return filed by the assessee was revised resulting into increase in the total loss, reported in the said return which was filed within the prescribed time limit and is an undisputed fact. Assessee has adequately explained the reasons for the revision so undertaken, as narrated above. There are just....
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....ed return of income to be filed, were in fact incorrect treatment made in the computation in original return of income. 38.5. Further, ITAT Kolkata bench in the case of ITO vs Ramesh Kumar Rathi [2005] 143 Taxman 33 held that when the law permits the assessee to replace the original return by a revised return on detection of any mistake in the original return, there is no reason as to why the said revised return could not be accepted as in place of original return filed under section 139(1). 38.6. In addition to the above discussion, in the decision of Hon'ble Supreme Court in the case of Goetze India Pvt. Ltd. (supra), Hon'ble Court had held that "nothing impinges on the power of the appellate authorities to entertain such a claim of the assessee". Thus, without prejudice to the discussions made above as claimed by the assessee, the same could have been raised by the assessee for the first time before an appellate authority which otherwise assessee has taken a prudent approach of filing a revised return within the prescribed time limit u/s. 139(5) of the Act. Given the above, we wish to state that once a revised return of income is filed, the consequence is that it r....
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....e launched in FY 2015-16 1-4 2 Actuarial Valuation Report dated 20.05.2016 certifying Retention Scheme liability as on 31 March 2016 5-101 3 Computation of Income for AY 2014-15 along with relevant extract from return of income 11-17 4 Computation of Income for AY 2015-16 along with relevant extract from return of income 18-27 39.2. Since these evidences are crucial for the purpose of ascertaining the allowability of the claim made by the assessee which have not been gone through by the authorities below while making the assessment, we find it appropriate to remit the matter back to file of Jurisdictional Assessing Officer (JAO) to examine the same and call for any explanation so as to decide on the claim of the assessee in accordance with the provisions of the law. Accordingly, ground nos. 2 and 3 are allowed for statistical purposes. 40. In ground no.4, assessee has claimed allowance of exemption u/s. 10(38) of the Act in respect of long-term capital gains of Rs.10,80,66,252/- arising on sale of equity shares subjected to securities transaction tax (STT) which was part of one of the reasons for revision of return. Ld. AO has completed the asses....
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....egra since it has been dealt by the Coordinate Bench of ITAT, Mumbai in the case of General Insurance Corporation vs. ACIT in ITA No. 1080/Mum/2019, dated 30.03.2021 for AY 2011-12. In this order, reliance was placed on the decision of Hon'ble jurisdictional High Court of Bombay in the case of PCIT vs. New India Assurance Ltd. [254] taxmann.com 238 (Bom) which had dealt with communication dated 21.02.2006 of CBDT to the Chairman of IRDA. In the said order, Coordinate Bench also held that CBDT circular No.6/2016 dated 29.02.2016 where in it was stated in para 3(a) that if the assessee desires to treat the income arising from transfer of shares held for more than 12 months as capital gain eligible for exemption u/s. 10(38), the same shall not be disturbed by the Revenue. 42.1. Further, reliance was placed on the decision of the Hon'ble High Court of Delhi in the case of Oriental Insurance Ltd. vs. DCIT, 407 ITR 658 (Del) who had held that in view of strict restrictions imposed on insurance companies by the Insurance Act, 1938 and IRDAI regulations, it is not open for a company carrying on general insurance business to treat any part of its investments as stock in trade. Ac....
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....GIC (supra), relied upon by the Revenue also does not deal with the claim for exemption under Section 10(38) of the Act and would have no application to the present facts. The Revenue was unable to point out the manner in which the above decision of the Apex Court applies to the present facts. 7. Mr. Suresh Kumar, next submits that on an identical issue in GIC (supra). This Court has admitted the following question on 25th February, 2013 as substantial question of law as under :- "Whether on the facts and in the circumstance of the case and in law the Tribunal was justified in holding that profit on sale of investments are not liable to be taxed in the hands of the assessee in the year under appeal?" Therefore, he submits that the question as formulated be admitted. 8. The issue raised in the above question in GIC (supra) is not with regard to the exemption claimed under Section 10(38) of the Act as in the present proceedings. The question on which the above appeal has been admitted, is whether profits on sale of investments are liable to be (included) taxed in the hands of the assessee i.e. profits on sale of investments being liable to be tax. ....
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....Department of Revenue Central Board of Direct Taxes (TPL Division) Room No. 147B-II, North Block New Delhi, the 21st February, 2006 To, Shri C.S. Rao, Chairman Insurance Regulatory Development Authority (IRDA) Parishrama Bhawanam 5-9-58/B, Bashser Bagh Hyderabad-500 004. Subject: Profit/ Loss on sale/ redemption of investments - Income tax thereon. Sir, The undersigned is directed to refer to the write-up on the captioned subject submitted by you during the month to the Hon'ble Finance Minister and Secretary (Revenue). 2. It is clarified that the exemption available to any other assesses under any clause of section 10 of the Income-tax Act, 1961 [including clause (38) of section 10 regarding long-term capital gains] is also available to a person carrying on non-life insurance business subject to fulfilment of the conditions, if any, under a particular clause of section 10 under which exemption is sought. General insurance companies are, therefore, on par with other assessee who are entitled to or are eligible for exemption under section 10 of the Income-tax Act of long-term capital gains. Yours ....
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....345.642 5,932,354,089 1,395,646,668 1,387,782,261 840,446,133 1,364,006,262 1,459,685,410 3.13. Hence wherever the specific conditions stipulated u/s 10(38) of the Act were not complied with the assessee, we find that the assessee had duly offered the profits on sale of investments to tax in subsequent asst years as tabulated above, pursuant to the amendment in Rule 5(b) of First Schedule to the Act. The ld AR further argued that prior to amendment in Rule 5(b) of First Schedule to the Act from Asst Year 2011-12 (i.e upto Asst Year 2010-11), by drawing specific reference to the relevant page of the factual paper book, the assessee's claim was that entire profits on sale of investments were not subject to tax. Hence it could be seen that the above treatment of the assessee in respect of profit on sale of investments from Asst Year 2011-12 onwards clearly establishes beyond doubt that the amendment with effect from Asst Year 2011-12 to Rule 5(b) of the First Schedule to the Act, has in no way been nullified / rendered ineffective / rendered nugatory by the assessee's claim that it is entitled to the exemption under Section 10(38) o....
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....nation of the character of a particular investment in shares or other securities, whether the same is in the nature of a capital asset or stock-in-trade, is essentially a fact-specific determination and has led to a lot of uncertainty and litigation in the past. 2. Over the years, the courts have laid down different parameters to distinguish the shares held as investments from the shares held as stock-in- trade. The Central Board of Direct Taxes ('CBDT') has also, through Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations. 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/ securities transactions takes place....
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....by the Insurance Act, it is not open to a company carrying on general insurance business to treat any part of its investments as "stock-in-trade". Hence at any stretch of imagination, the investments held by the assessee engaged in insurance business, could be construed to have held as stock in trade. On this count, also, the observations of the lower authorities are dismissed. 3.15. We find that the learned Special Counsel for the Revenue argued vehemently by stating that the assessee had not made any claim of exemption u/s 10(38) of the Act and in the first round of proceedings, this tribunal had remanded the issue back to the file of ld CITA for fresh adjudication. We find both these arguments advanced by the ld Special Counsel for the Revenue to be factually incorrect. We find from perusal of computation of income, the assessee had indeed made a claim of exemption u/s 10(38) of the Act in respect of profit on sale of investments that were subjected to STT. If it was not claimed, then how the ld AO could have even resorted to deny the claim of exemption u/s 10(38) of the Act in the assessment. With regard to the first round of proceedings where this tribunal had remande....
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....n the case of Uco Bank vs. CIT [1999] 237 ITR 889 (SSC). "13.1 It is also important to note about the binding nature of CBDT circular on the Income-tax Authorities for which gainful guidance is taken from the decision of Hon'ble Supreme Court in the case of CIT v. Hero Cycles [1997] 228 ITR 463 (SC) wherein it was held that circulars bind the ITO but will not bind the appellate authority or the Tribunal or the Court or even the assessee. 13.2 In the case of UCO Bank [1999] 237 ITR 889 (SC), Hon'ble Supreme Court while dealing with the legal status of such circulars, observed thus (page 896): "Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Income-tax Act, which are binding on the authorities in the administration of the Act. Under section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own adva....
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.... cannot be said that the selection in this case was made within the aforesaid period. Admittedly, the return was filed on 29th October, 2004 and the case was selected for scrutiny on 6th July, 2005. It may be pointed out that Mrs. Gutgutia was, in fact, reiterating the views taken by the learned Tribunal which we also quoted above. By any process of reasoning, it was not open for the learned Tribunal to come to a finding that the department acted within the four corners of Circulars No. 9 and 10 issued by CBDT. The circulars were evidently violated. The circulars are binding upon the department under section 119 of the I.T. Act. 8. Mrs. Gutgutia, learned Advocate submitted that the circulars are not meant for the purpose of permitting the unscrupulous assessee from evading tax. Even assuming, that to be so, it cannot be said that the department, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is b....
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....les prescribes the limits for UEPR and any amount carried over in excess of such prescribed limits is required to be disallowed. In turn, Rule 6E lays down limits depending on the type of insurance business undertaken by the assessee. 46.1. For the sake of ready reference, Rule 6E is reproduced as under: "6E. Limits of reserve for unexpired risks. - In the computation of profits and gains of any business of insurance other than life insurance, the amount carried over to a reserve for unexpired risks including any amount carried over to any such additional reserve which is to be allowed as a deduction under clause (c) of rule 5 of the First Schedule, shall not exceed- (a)where the insurance business relates to fire insurance or engineering insurance and which provides insurance for terrorism risks, 100 per cent of the net premium income of such business of the previous year; (aa)where the insurance business relates to fire insurance or miscellaneous insurance other than the insurance business covered under clause (a), 50 per cent of the net premium income of such business of the previous year; (b)where the insurance business relates to....
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....F)=(D)-(C) (a) Fire (other than terrorism pool) Fire Insurance 64,97,42,000 50% 32,48,71,000 62,49,20,000 30,00,49,000 (b) Miscellaneous Insurance 18,80,77,07,000 50% 9,40,38,53,500 9,08,45,69,000 (c) Marine Insurance (others) 225.07.88,000 100% 2,25,07,88,000 63,60,27,000 (d) Terrorism Fire Engineering 6,20,26,000 100% 6,20,26,000 - 11,762 100% 11,762 Total 21,77,02,74,762 12,04,15,50,262 10,34,55,16,000 30,00,49,000 Less: Credited to Profit and loss in AY 2016-17 (14,45,27,567) Amount to be disallowed 15,55,21,433 48. Ld. Assessing Officer has disregarded these computations merely on the basis of claim being filed in the revised return and the said revised return having been rejected. Considering the facts on record and detailed submissions made before us, we are in agreement with the same to note that fire and engineering insurance which provides for terrorism risk as well as marine insurance require 100% of the net premium whereas for all other insurance businesses covered by clause AA requ....
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....(ROI)/ Computation of income (COI), amount of Rs 2,53,10,3000 is shown as a disallowance. Rs 5,89,41,500 claimed as allowance pertains to immediately preceding year, viz., AY 2014-15. 2016-17 (Original return of Income (ROI)) 30,00,49,000 14,45,27,567 In the ROI/ COI, net amount of Rs 15,55,21,433 (i.e., INR 30,00,49,000 less Rs 14,45,27,567) is shown as a disallowance Rs 14,45,27,567 claimed as allowance pertains to immediately preceding year AY 2015-16. 2016-17 (Revised ROI) Nil 14,45,27,567 In the revised ROI/ COI. TAGIC adopted aggregate basis approach for making disallowance. On account of which, there was no disallowance made in the revised ROI/ COI Rs 14,45,27,567 claimed as allowance pertains to immediately preceding year AY 2015-16. 2017-18 (Original ROI) 55,34,79,269 20,43,53,682 Aggregate basis approach followed in original ROI/ COI for making disallowance. Bifurcation of Rs 20,43,53,682 claimed as allowance is: - Rs 17,53,90,203 pertained to immediately preceding year AY 2016-17; and -Ba....
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....dingly adjudicated upon. 54. Ground no.9 and 11 are consequential in nature and therefore not adjudicated upon. 55. Ground no.3 raised by the assessee is towards not allowing deduction u/s.80JJAA, since assessee had not filed Form No.10DA along with the original return of income. Assessee had claimed a deduction of Rs.73,71,615/- u/s. 80JJAA in its revised return of income for which Form No. 10DA was filed on 29.11.2018, i.e., after the due date of original return of income but before filing of the revised return. According to the assessee, section 80JJAA r.w.r. 19AB of the Rules do not lay down that Form No. 10DA is to be filed with the original return only, for which the due date is prescribed u/s. 139(1) of the Act. It simply says that the form is to be filed along with the return of income. 55.1. In the present case, assessee claims that where Form No. 10DA is filed along with the revised return as per section 139(5), the requirement of section 80JJAA is fulfilled and therefore the deduction is to be allowed. In support of its claim, assessee placed reliance on the decision of the Coordinate Bench of ITAT, Hyderabad in the case of DCIT vs. Delhi MSW Solutions Ltd. in I....
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....the actual rent payments made by the Assessee is higher by Rs. 60,24,723 vis-à-vis the amount of rent expenditure recorded in the P&L A/c. Since this amount has already been disallowed in the earlier years, the Assessee has claimed a deduction of Rs. 60,24,723 during the captioned year and hence, the same should not be disallowed. Further, as the expenditure has been incurred during the relevant year and is for the purpose of the business of the Assessee, the same is allowable as per section 37 of the Act. The Assessee further submits that merely because, the same was not debited to the P&L A/c in the relevant year, is not relevant in view of the facts explained above. Further, as it is a trite law, that entries in the books of account does not determine the treatment of an expenditure for the purpose of computing income under the provision of the Act. Reference is made to the decision of the Apex Court in the case of Kedarnath Jute Mfg. Co. Ltd v. CIT [1971] 82 ITR 363 (SC). 57.3. Further, in relation to section 44 of the Act read with First Schedule, reliance is placed on the Assessee's own decision for AY 2015- 16 (ITA No. 1718/Mum/2020) by the co-ordinate bench wh....