TaxTMI 
TaxTMI 
2026 (7) TMI 1487
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....sessment Year 2012-13 has been treated as the lead year and the decision rendered therein shall apply mutatis mutandis to the remaining assessment years. The Relevant grounds raised by the Revenue in AY 2012-13 are reproduced as under:- i. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 14,32,97,149/- made by the Assessing Officer, without appreciating that as per Regulation 9 of the Insurance Regulatory and Development Authority (General Insurance - Reinsurance) Regulations, 2000, an insurer may place reinsurance outside India only up to 10% of the total reinsurance premium ceded outside India to any one non-resident reinsurer, unless specific prior approval of the IRDA is obtained for exceeding the said limit." ii. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee did not produce any formal or written approval from the IRDA, as required under Regulation 3(9) of the IRDA (General Insurance - Reinsurance) Regulations, 2000, for ceding reinsurance premium in excess of the prescribed limit." iii. Whether on the facts and....
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....ions on merits. However, having allowed the appeals on merits, he did not adjudicate the legal ground challenging the validity of reassessment. Aggrieved by the relief granted, the Revenue is in appeal before us, whereas the assessee has filed Cross Objections challenging the non-adjudication of the jurisdictional grounds. Ground Nos. 1 & 2 - Disallowance of Reinsurance Premium 4. The first issue relates to deletion of disallowance of Rs. 14,32,97,149/- representing reinsurance premium ceded to a foreign reinsurer. The Assessing Officer observed that during the relevant previous year the assessee had ceded reinsurance premium aggregating to Rs. 128.62 crores outside India. Out of the said amount, a sum of Rs. 27.19 crores had been placed with Insurance Australia Group (IAG), a single non-resident reinsurer. According to the Assessing Officer, Regulation 9 of the Insurance Regulatory and Development Authority (General Insurance- Reinsurance) Regulations, 2000 permitted placement of reinsurance with any one foreign reinsurer only up to ten per cent of the total premium ceded outside India unless prior approval of the Insurance Regulatory and Development Authority of India (IRDA....
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....ble IRDAI Regulations so as to warrant disallowance under the provisions governing computation of income from insurance business. 4.5 Section 44 of the Act provides a special mechanism for computation of profits and gains of insurance business. It constitutes a complete code in itself and mandates that taxable profits of an insurance company are to be computed in accordance with the First Schedule to the Act. Consequently, while computing taxable income of an insurer, the Assessing Officer cannot travel beyond the statutory framework governing insurance business unless a specific violation having tax consequences is established. Rule 5 of the First Schedule requires the accounts of a general insurance company to be prepared in accordance with the Insurance Act, the IRDA Act and the Regulations framed thereunder. Therefore, if there is a clear and established violation of the applicable regulatory framework, appropriate consequences may undoubtedly follow. Equally, however, where the sectoral regulator itself has accepted the conduct of the insurer and has not found any regulatory infraction, it would be impermissible for the Assessing Officer to infer a breach on the basis of....
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....ission was taken on record but all was not well with that submission and therefore advisory was given to the insurance company to comply with IRDA regulations on reinsurance. Thus, no fault can be found with the AO on making disallowance of premium paid on ceded re-insurance outside of India to a single reinsurer in excess of 10% of total premium paid on re-insurance ceded. 5.3.2. However, the appellant submitted a letter dated 23.12.2019 issued by IRDA addressed to the ACIT in compliance with notice u/s. 133(6) wherein it was clearly mentioned that there was not objection by IRDA for SBI General to enter into reinsurance arrangement in excess of 10% with one or more re-insurers. Whereas, no cognizance was given to this letter in assessment proceedings. On further enquiry into the dates, it was found that the assessment order was passed on 23.12.2019 and IRDA's letter dated as 23.12.2019 but modified as 24.12.2019 must have been received by the AO after passing of the assessment order. The date 23.12.2019 in this letter was apparently modified with a handwritten marking as 24.12.2019. In any case this letter under the signature of Executive Director of IRDA must have reach....
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....y because a formal order employing a particular expression was not issued. Significantly, the Revenue has not brought any material on record to demonstrate that the IRDAI had ever rejected the assessee's request or had initiated any proceedings alleging violation of the Reinsurance Regulations. In the absence of any such material, the disallowance rests entirely upon inference rather than established fact. 4.9 The learned CIT(A), in our considered opinion, has appreciated the regulatory correspondence in its proper perspective and has rightly concluded that the assessee had substantially complied with the requirements of the applicable Regulations. We find ourselves in complete agreement with the reasoning adopted by the first appellate authority. 4.10 We, therefore, see no infirmity in the order of the learned CIT(A) deleting the disallowance of Rs. 14,32,97,149/-. Ground Nos.1 and 2 raised by the Revenue are accordingly dismissed. Ground Nos. 3 & 4 - Depreciation on Computer Software 5. Ground Nos. 3 and 4 of the Revenue's appeal assail the deletion of disallowance of depreciation amounting to Rs. 5,49,25,318/- made by the Assessing Officer by restricting depr....
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.... such softwares would fall under the category of licenses classified as intangible assets in Part B of I-T Depreciation Schedule with applicable depreciation rate of 25%. On the other hand, the appellant submits that computer software was included alongwith computers with depreciation rate of 60%, w.e.f. 01.04.2023. Besides this, the appellant made a lot of pleas and gave reasonings in his submissions reproduced as above under para 6.2 of this order. I am in agreement with the submission of the appellant. In rules of construction and interpretation one should not deviate from the obvious wording of the provisions. In this case computer software is included in the category of computers by giving the nomenclature as "computers including computer software" qualifying for 60% depreciation rate (during the present FY). Whereas, the wording of computer software is absent within the meaning of license in Part B of I-T Depreciation Schedule. In the hierarchy of interpretations the obvious wording should be given first preference over other forms of interpretations. Secondly, a license is a form of intangible asset having independent existence for its utilization. While exploiting the licen....
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....wer must emerge from the language employed by the statute itself. The depreciation schedule classifies the relevant block of assets as "Computers including Computer Software." The expression employed by the rule-making authority is explicit and unambiguous. The Schedule does not distinguish between operating software and application software, nor does it prescribe that the software should necessarily be embedded in the hardware or acquired simultaneously with the computer system. Had such a distinction been intended, the rulemaking authority could have expressly incorporated it. The Tribunal cannot read into the provision a limitation which the legislature itself has consciously omitted. The interpretation canvassed by the Revenue proceeds on the assumption that every software licence necessarily constitutes an intangible asset because the purchaser merely acquires a limited right to use the software. Attractive though the argument may appear at first blush, it overlooks the commercial and functional character of modern computer software. In contemporary business environments, software is ordinarily supplied through licence agreements. Such licensing mechanism is merely the legal m....
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....or acquisition of computer software used in the course of its business. Such software squarely answers the description of "computer software" occurring in Appendix-I.The expression "licences" appearing in Explanation 3(b) to section 32(1)(ii) occurs in the company of know-how, patents, copyrights, trademarks, franchises and other commercial rights of similar nature. Applying the well-settled principle of ejusdem generis, the licences contemplated therein are licences constituting independent commercial or intellectual property rights capable of being exploited as business assets in their own right. A software licence obtained merely to enable the user to operate computer software cannot automatically be equated with such independent commercial rights. 5.7 This understanding also accords with the consistent judicial view that computer software constitutes a distinct class of depreciable asset entitled to depreciation under the specific entry relating to computers. The Special Bench of the Tribunal in Amway India Enterprises v. DCIT (114 TTJ 476) held that computer software is eligible for depreciation at the rate prescribed for computers. Similar principles have been reiterated b....
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.... submitted that the issues involved in Assessment Years 2013-14 and 2014-15 are identical in facts as well as in law. No distinguishing feature in the factual matrix or the applicable statutory provisions has been brought to our notice. Since the controversy involved in those assessment years is identical, our conclusions recorded hereinabove for Assessment Year 2012-13 shall apply mutatis mutandis to Assessment Years 2013-14 and 2014-15 as well. Consequently, the corresponding grounds raised by the Revenue in those years also fail, and the Cross Objections filed by the assessee for those assessment years are similarly disposed of without adjudication. 8. In the result, (i) the appeals filed by the Revenue for Assessment Years 2012-13, 2013-14 and 2014-15 are dismissed; and (ii) the Cross Objections filed by the assessee for the aforesaid assessment years are disposed of in the terms indicated above. Order pronounced in the open Court on 10/07/2026. ============= Document 1 inderi à¤à¤¾à¤°à¤¤à¥€à¤¯ बीमा विनियामक और विकास पà¥à¤°à¤¾....