TaxTMI 
TaxTMI 
2026 (3) TMI 791
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.... 144B date of order 29.09.2022 for A.Y. 2020-21. 2. Since all the appeals pertain to the same assessee, involving similar issues arising out of a similar factual matrix, these appeals were heard together as a matter of convenience and are being decided by way of this consolidated order. With the consent of the parties, the appeal for the A.Y. 2018-19, assessee's appeal ITA No. 1450/Mum/2024 and revenue's appeal ITA No. 2403/Mum/2024 are treated as a lead case, and the decision rendered therein shall apply mutatis mutandis to other appeals before us. ITA No.1450/Mum/2024 (Assessee's appeal, AY 2018-19) 3. The assessee has taken the following grounds: "1. The learned CIT(A) has, on the facts and circumstances of the case and in law, erred in not allowing deduction to the extent of Rs 2,81,64,694 out of the total deduction of Rs 37,59,52,195 claimed by the Appellant on account of reversal of reserve for unexpired risk ('UEPR') made during the year under consideration, by holding that the reversal of Rs 2,81,64,694 pertaining to the UEPR disallowed in the previous year other than the immediately preceding year, which in the instant case is AY 2015-16, is not a....
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....(34) in respect of dividend. 4. Not allowing deduction of provision of expenses reversed in A.Y. 2017-18 which were already disallowed in earlier years. 5. Disallowance of deduction of expenses which were disallowed in the previous year. 6. Disallowance of deduction for leave encashment. 7. Disallowance of deduction of rent equalization adjustment. 8. Disallowance of depreciation. 9. Disallowance of co-insurance administration fees." 5. The brief facts of the case are that the assessee is engaged in general insurance business pursuant to the license issued by the Insurance Regulatory and Development Authority of India (IRDAI). The assessee's case was taken on scrutiny and the addition was made under different heads. The aggrieved assessee filed an appeal before the Ld. CIT(A). Ld. CIT(A) partly allowed the appeal of the assessee. Being aggrieved both assessee and revenue challenged the order of the Ld. CIT(A). ITA No.1450/Mum/2024, Assessee's appeal. 6. Ground No.1 the assessee has challenged the addition for not allowing deduction to the extent of Rs. 2,81,64,694/- out of total deduction of Rs. 37,59,52,195/- claimed b....
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....pect, Rule 6E provides Tonount carried over such reserve or additional reserve which allowed as a deduction under this rule in respect of any previous year shall hot be included in the total income for the assessment year relevant id the immediately next succeeding previous year in the revenue account relating to which the amount aforesaid is credited". While drawing the conclusion for the grounds so raised by the assessee, the rule is interpreted by applying the purpose of interpretation, so as to avoid absurdity, for which we are in agreement with the submission made by the assessee that when Rule 6E was inserted in the statute, the insurance policies were only for a period of one year and, therefore, the reversal of the provision for UEPR would always be in the immediately next year and, accordingly, the same was provided in the rules. However, with the development in the insurance business and change in regulation, now insurance policies are permitted to cover span more than one year. In such a case, the reversal of the provision for UEPR would happen in more than one year depending upon the life of the policies. From the perusal of Rule 6E, the intention of the legislature is ....
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.... that where the assessee chooses to treat income arising from transfer of shares held for more than twelve months as capital gains eligible for exemption under section 10(38), the same shall not be disputed by the revenue. 10. On verification of the fact we find that the factual position of the impugned appeal being no change in material facts and applicable law in the order of the Coordinate Bench of ITAT, Mumbai. We respectfully following the order of the Coordinate Bench of ITAT Mumbai at the order of the Hon'ble High Court of Bombay. Accordingly, Ground No.2 of the assessee is allowed. 11. Ground No. 3 has been raised by the assessee, contending that the Ld. CIT(A) erred in upholding the action of the Ld. AO in taxing the profit arising from the sale of investments as business income instead of capital gains. It is submitted that this issue stands squarely covered by the decision of the ITAT, Mumbai in the assessee's own case in ITA No. 1834 & 1835/Mum/2023, order dated 30.10.2024. Further, Ground No. 3 is inextricably linked with the observations and findings recorded in Ground No. 2. The grievance of the assessee is that the Ld. AO wrongly treated the profit on s....
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....l 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, totone 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 advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorized a....
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....inding 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's 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 bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under Article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the LT. Act. (emphasis supplied by us by underline). 14. Considering the facts on record, perusal of the impugned order, submissions made by the Ld. Counsel and the department, CBDT....
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.... ground no.6 and 7 in respect of deduction of rent equalisation adjustment claimed by the assessee. In this respect, assessee submitted that in accordance to the applicable Accounting Standards, lease expenditure, i.e. rent expense is recognised in profit and loss account on a straight-line basis over the terms of lease, for example, if rent for three years is 9,000, 10,000 and 11,000 each for the relevant years, in the profit and loss account Rs. 10,000 would be recognised in all the three years. However, from an income-tax perspective, the same is allowable only to the extent the lease expenditure (i.e., rent) which has been actually incurred (i.e. Rs. 9000/-in the first year, Rs 10,000 in the second year and Rs 11,000 in the third year, in the above example. Therefore, there is a reduction from the profit as per the P&L A/c in the computation of income in the earlier year and an additional claim in the later year. However, over the term of the lease, the rent expense recognised in the P&L A/c and the claim made as per the actual payment of the rent is equalised and, hence, the treatment from an income-tax perspective is nothing but a timing difference. 57.1. For the pre....
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....it and loss account should be allowed as a tax-deductible expenditure under the provisions of the Act in AY 2016-17. Hence, the disallowance made by the assessee in AY 2016-17 on account of rent expenditure recognised in P&L A/c being higher than the actual rent paid, should also be held as not called for, and the rent expenditure recorded in the P&L A/c should be allowed as a tax deductible expenditure in AY 2016-17. 59. On the given set of facts as narrated above, whereby actual rent payment made by the assessee which is higher by Rs. 60,20,723/- as against rent expenditure recorded in profit and loss account which has already been disallowed in the earlier years, is to be allowed. From the accounting perspective, the said amount has not been debited in the profit and loss account in the relevant year. However, income chargeable to tax under the Act is not based on entries in the book of accounts, to determine the treatment of expenditure for the purpose of computing income under the provisions of the Act. This issue has been addressed by the Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Company vs. CIT [1971] 82 ITR 1863 (SC). Further, following ....
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....of the Act. The assessee contends that the return of income was filed on 28.11.2018, i.e., before the due date of 30th November 2018, and therefore, no interest under section 234A is leviable up to the date of filing of return under section 139(1) of the Act. Considering the submissions of the assessee, we deem it appropriate to restore this issue to the file of the Ld. AO for the limited purpose of verification and recomputation. The Ld. AO shall examine the date of filing of the return and recompute the interest U/s 234A, if any, in accordance with law. Accordingly, this ground is allowed for statistical purposes. The levy of interest under section 234B & 234D are consequential in nature and shall be recomputed, if required, in accordance with the outcome of the assessment. Hence, Ground Nos. 6, 7 & 8 are treated as consequential and disposed of accordingly. 20. In the result, the appeal of the assessee bearing ITA No.1450/Mum/2024 is allowed. ITA No.2403/Mum/2024, (Revenue's Appeal, AY 2018-19) 21. Ground no.1: The Ld. CIT(A) deleted the addition related to the provision for Claim Incurred But Not Reported (IBNR) and Claim Incurred But Not Enough Reported (IBNER).....
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....on 40(a)(ia) of the Act. The revenue contended that the assessee had failed to deduct tax at source on reinsurance premium paid to non-resident insurers towards cession of risk. It was alleged that such payment was in contravention of section 101A(7) read with section 2(9) of the Insurance Act. On this basis, the Ld. AO disallowed an amount of Rs. 5,48,12,97,423/- under section 37(1) of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) adjudicated the issue at page 33, paragraphs 7.5 to 7.6 of the appellate order. The relevant paragraphs are reproduced below: "7.5 Similar issue was also there for AY 2016-17 and AY 2017-18, where the Ld CIT(A) following the said decision of Hon'ble ITAT has decided the issue in favor of the Appellant. 7.6 Respectfully following the decision of Hon'ble ITAT in assessee's own case and the CIT(A) orders for the previous years, the grounds of Appeal No. 2 & 3 are 7.6 allowed. Accordingly, ground no.2 and 3 of the revenues are dismissed." 25. We have considered the rival submissions and perused the material available on record. We find that the Ld. CIT(A) has adjudicated the iss....
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....eration of the order of the Ld. CIT(A), we find that the issue has already been duly examined and decided by the Coordinate Bench of the ITAT, Mumbai in ITA No. 1834/Mum/2023, order dated 30.10.2024, in favour of the assessee. The Ld. DR was unable to point out any distinguishing facts or bring on record any contrary decision so as to warrant a different view from that taken by the Coordinate Bench and relied upon by the Ld. CIT(A). Accordingly, we hold that the disallowance of Rs. 68,56,976/- is unsustainable in law. We find no infirmity in the order of the learned CIT(A) and, therefore, Ground No. 5 of the revenue's appeal stands dismissed. 28. This Ground No.6 pertains to the allowability of deduction of expenses in respect of which tax was not deducted at source in the earlier years, but the requisite TDS was duly deducted and paid during the year under consideration. It is observed that an amount of Rs. 16,12,500/- was disallowed in the earlier years under section 40(a)(ia) of the Act on account of failure to deduct tax at source. The said disallowance was rightly made in those years in accordance with the provisions of section 40(a)(ia) of the Act. However, during the i....
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....the above, we do not find any infirmity in the observations or findings of the Ld. CIT(A). Accordingly, Ground No. 9 raised by the revenue stands dismissed. 31. Ground No.10: this ground is pursuant to claim of deduction of tax in depreciation u/sec. 32 of the Act and as per the Ld. DR the Ld. CIT(A) wrongly allowed the provision of 32 and claim of depreciation amount of Rs. 26,29,81,011/-. The Ld. CIT(A) had considered the said provision and accordingly impugned appellate order page no.92 para 16.4 to 16.5 had considered and the appeal of the assessee was allowed. The relevant paragraphs are reproduced as below:- "16.4 Similar issue was also there for AY 2016-17 and AY 2017-18, where the Ld CIT(A) following the said decision of Hon'ble ITAT, has decided the issue in favor of the Appellant. 16.5 Respectfully following the decision of Hon'ble ITAT in Assessee's own case and the CIT(A) orders for the previous years, the ground of appeal no. 16 is allowed." The Ld. DR was unable to place on record any contrary judicial precedent to rebut the submissions advanced on behalf of the assessee. We find that the issue has already been examined and adjud....
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....ord any contrary judicial precedent to rebut the submissions advanced on behalf of the assessee. We find that the issue has already been examined and adjudicated by the Coordinate Bench of the ITAT, Mumbai, in the assessee's own case in ITA No. 3535 & 1702/Mum/2011 vide order dated 20/11/2015 & ITA Nos. 5394/Mum/2025, vide order dated 23.12.2025. The Ld CIT(A) has followed the said binding precedent. In view of the above, we do not find any infirmity in the observations or findings of the Ld. CIT(A). Accordingly, Ground No. 13 raised by the revenue stands dismissed. 33. Ground No. 14: The Ld. AR submitted that this ground pertains to the alleged denial of applicability of section 14A of the Act. However, it was contended that the Department has misconceived the issue, as no such matter arises either from the assessment order or from the impugned order passed by the learned CIT(A). The Ld. DR fairly accepted this factual position. In view of the above, Ground No. 14 raised by the revenue, being misconceived and not arising out of the impugned order, stands dismissed. 34. Ground No.15: The denial of exemption related to 10(15(iv)(H) amount of Rs. 56,20,83,736/-. The Ld....