TaxTMI 
TaxTMI 
2025 (3) TMI 2077
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....or AY 2012-13 i.e. department appeal against the order of the Ld.CIT(A) dated 29.12.2023 which is taken as the lead case for all the aforesaid assessment years [as well as issue in respect of book-profit u/s.115JB of the Act post amendment AY 2012-13] and the decision of which will be followed mutatis mutandis for the issues permeating in the assessment years shown above. 3. Grounds of appeal raised by the Revenue in ITA No. 470/Chny/2024 for AY 2012-13 are as under: 1. The order of the learned Commissioner of Income Tax (Appeals) in ITA No. ITBA/APL/S/250/2023-24/159204840(1)dated 29/12/2023 for the Assessment year 2014-15 is erroneous in law, facts and circumstances of the case. 2. The learned Commissioner of Income Tax (Appeals) erred in deleting the disallowance made in respect of reinsurance premium to non-resident reinsurers (NRRI) without deducting tax at source without appreciating that as per sub section 2 of 195 the assessee was required to make an application to the AO for non deduction which was not done. 3. The learned CIT(A) has erred in allowing the depreciation @60% on UPS by treating them as part of computer, without appreciating that ....
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....t allow any specific exemption for computation and taxation of book profits to insurance companies. 10. The appellant craves leave to add or amend any ground of appeal before it is finally disposed off. 4. Ground No.1 is general in nature and hence, doesn't require any adjudication, therefore, we move to Ground No.2, which is the Issue 1: i.e. Disallowance in respect of reinsurance premium paid to Non-Resident Reinsurers ('NRRIs'): Assessment Year Appeal by Ground No. AY 2011-12 Department(ITA No. 1438/2024) Ground no. 2 AY 2012-13 Department(ITA No. 470/ 2024) Ground no. 2 AY 2016-17 Department (ITA No. 1462/2024) Ground no. 10 AY 2017-18 Department (ITA No. 1463/2024) Ground no. 2 AY 2018-19 Department (ITA No. 1339/2024) Ground no. 3 4.1 Ground No.2 pertains to the disallowance of reinsurance premium paid to Non-Resident Re-insurers (NRRIs) for non-deduction of withholding tax under Section 40(a)(i) of the Act. The AO noticed that the assessee has made payments towards reinsurance ceded to the NRRIs during the current year, as detailed hereunder;- Category of re-insurance premium paid Countries wi....
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....11/Chny/2020 for AY 2014-15 dated 26.08.2022 was pleased to allow the grounds of appeal and directed deletion of the disallowance made by the AO. 4.4 Aggrieved by the aforesaid action of the Ld.CIT(A), the Revenue is before us. 4.5 We have heard both the parties and perused the records. We note that the issue raised by the Revenue is no longer res integra; and in this regard, it is noted that similar issue had come up before this Tribunal in the assessee's own case for AY 2014-15, wherein, this Tribunal after discussing the issue threadbare and after considering host off case laws on the subject, decided in favour of the assessee as under: 11. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The assessee is an insurance company engaged in the business in General insurance in terms of IRDAI regulations and Insurance Act, 1938. The business of the assessee is regulated by IRDAI through various regulations. All the insurance companies which are carrying on insurance business in India have to necessarily comply with provisions of the Insurance Act, 1938 as amended and rules there under. The contract of....
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....the Hon'ble High Court has remanded the issue back to the Tribunal and directed the Tribunal to decide the issue on three points:- i) Whether the Assessing Officer was right in disallowing reinsurance premium u/s.40(a)(i) of the Act; ii) Whether the CIT(A) was right in rejecting partially the appeal filed by the assessee; & iii) Whether the CIT(A) was justified in restricting claim of the assessee to 15% instead of confirming order passed by the Assessing Officer. The Hon'ble High Court of Madras also observed that the Tribunal shall decide above questions alone and nothing more and decision shall be taken based on the available material and the assessee & the Revenue are not entitled to place any fresh materials before the Tribunal so as to enable the Tribunal to take decision. Therefore, from the above, it is very clear that controversy with regard non-compliance with provisions of Insurance Act, 1938 and regulations made there under by the IRDA is put to rest by the Hon'ble High Court and the Tribunal does not have power to examine legality or otherwise of payment made by the assessee to non-resident reinsurance companies. Therefore, i....
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....ncome-tax authority, if payment is not chargeable to tax or smaller amount is chargeable to tax. If no such application is filed, then tax has to be withheld on whole of such sum. The sum and substance of observations of the Assessing Officer is that income of NRRI is taxable in India and thus, the assessee is liable to deduct tax at source u/s.195 of the Act. Since, the assessee has failed to deduct TDS u/s.195 of the Income Tax Act, 1961, the Assessing Officer has disallowed reinsurance premium ceded to NRRI u/s.40(a)(i) of the Income Tax Act, 1961. 13. We have given our thoughtful consideration to the reasons given by the Assessing Officer in light of arguments advanced by the learned counsel for the assessee as well as ld. Sr. standing counsel for the department and we ourselves do not subscribe to the reasons given by the Assessing Officer for simple reason that provisions of section 195 of the Act will be applicable only in a case where income is actually chargeable to tax in India. In order that there is obligation to deduct TDS, the revenue must establish that income was chargeable to tax in India both in terms of Act as well as in terms of relevant DTAA. If the re....
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....sing Officer regarding taxability of reinsurance premium ceded to NRRI in India is absolutely contrary to facts and also well settled law. Further, only activity in reinsurance contract is bearing of risk and activity of indemnifying an Indian insurance company by foreign reinsurer takes place overseas and hence, foreign re-insurers bears risk abroad. Therefore, reinsurance premium paid to NRRI cannot be said to accrue or arise in India. Insofar as observations of the Assessing Officer with regard to reinsurance contracts were signed in India is not relevant as held by the Hon'ble Supreme Court in the case of Ishikawajima Harima Heavy Industries Ltd. Vs. DIT (2007) 288 ITR 408 (SC), where it was observed that contract signed in India is of no material consequence, since all activities in connection with off shore supply were outside India and therefore, cannot be deemed to have accrued or arose in India. Further, income may accrue not at place where asset or property is located or where insurer is resident, but where risk is borne. In the present case, the risk is borne where the non-resident reinsurer resides or where he has funds to make good loss. Therefore, insurance premiu....
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....cision of the co-ordinate Bench of Mumbai Tribunal in the case of ADIT Vs.AON Global Insurance Service Ltd. in ITA Nos.5184 to 5186/Mum/2009 dated 30.11.2015, where it has been held that insurance broker is an independent broker and not an agent. Therefore, in our considered view reinsurance premium paid to NRRI, where India is having DTAA with other countries without specific exclusion and reinsurance premium paid to NRRI where there is no DTAA with other countries through resident brokers, no income is chargeable to tax in India in the hands of nonresident reinsurers and consequently, no disallowance can be made u/s.40(a)(i) of the Income Tax Act, 1961. Further, the NRR do not have any business connection in India in any form whatsoever, irrespective of fact whether reinsurance payments are made directly or through resident brokers or non-resident brokers. The NRR being non-resident reinsurance company is expressly prohibited to carry on business in India under the Insurance Act, 1938. Therefore, NRR cannot be said to have any business in India. The reinsurance arrangements between Indian insurer and NRRI are on principal to principal basis and in such scenario; there is no quest....
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....nies have PE in India. It is the allegation of the Assessing Officer that reinsurer had fixed place of PE or an agency PE or service PE in India. Most of the DTAAs define PE to mean fixed place of business, through which business of the enterprises is wholly and partly carried on and includes branch, office, factory, workshop etc. In the case of foreign reinsurers to whom the assessee has remitted reinsurance premium during the subject assessment years do not have any fixed place of PE in India and thus, question of fixed place of PE in India within the meaning of Article 5 of the DTAA does not arise. In fact, the assessee has obtained declaration from foreign reinsurers which are part of paper book filed by the assessee. Thus, in our considered view there is not fixed place of PE of NRRs. 17. The Assessing Officer alleged that there is agency PE of NRRI in India on the basis of availing services of reinsurance brokers. During the subject assessment years, the assessee has remitted reinsurance premium through non-resident brokers outside India. In order to attract agency PE, the Revenue has to establish that person act on behalf of NRRI in India and such person is economic....
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....ined by the Hon'ble Supreme Court in the case of M/s. G.E.India Technology Centre Pvt.Ltd., 327 ITR 456 (SC), where it was held that application to deduct TDS arises only if income of non-resident is chargeable to tax in India. The Hon'ble Supreme Court has held that expression 'chargeable' under the provisions u/s.195(1) of the Act says that remittance has got to be treated as receipt, whole or part of which is liable to tax in India, if tax is not assessable there is no question of tax at source being deducted. In our considered view, the basis for the Assessing Officer to take support from section 195(2) on the issue of non filing of application to income tax authority to allege that the assessee is liable to deduct TDS on impugned payment is incorrect. 4.6 Since the Revenue couldn't point out any change in facts or law, respectfully following the decision of this Tribunal in the assessee's own case for AY 2014-15 (supra), we hold that re-insurance premium ceded to 'NRRIs' can't be disallowed u/s.40(a)(i) of the Act, consequently, the Ld.CIT(A) rightly held that payments made to NRRIs can't be disallowed. Therefore, the Ld CIT(A) directed the AO to delete the addition....
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....arlier decision in TCA No.41 of 2019 etc. cases by a common judgment dated 18.1.2019 [CIT, Larger Taxpayer Unit, Chennai Vs. M/s.Royal Sundaram Alliance Insurance Company Limited]. 5.5 Thus, the Ld.CIT(A) rightly allowed the depreciation claimed by the assessee on UPS @60%. Therefore, we confirm the order of the Ld.CIT(A) and dismiss the grounds of appeal of the Revenue. 6. Ground No.4 / Issue 3: Disallowance under section 14A of the Act Assessment Year Appeal by Ground No. AY 2011-12 Assessee (ITA No. 1282/2024) Ground no. 1 to 5 AY 2012-13 Department (ITA No. 470/ 2024) Ground no. 4 AY 2016-17 Assessee (ITA No. 1283/2024) Ground no. 1 to 5 AY 2017-18 Assessee (ITA No. 1284/2024) Ground no. 1 to 5 AY 2018-19 Assessee (ITA No. 1285/2024) Ground no. 1 to 5 6.1 Brief facts as noted by the AO for AY 2012-13 are that the assessee has earned dividend income of Rs. 30,51,684/- and Rs. 18,77,918/- towards tax free income - IRFS and claimed the same as exempt. The AO asked the assessee to disclose the expenditure incurred for earning the exempt income for which the assessee brought to his notice that on its own it has disallowe....
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....nsurance company, the AO had to resort to section 44 and the prescribed rules and could not have applied section 28 to 43B, since the same were excluded from the purview of Section 44. This necessarily includes the exception provision enshrined under section 144 of the Act. Therefore in our view, the AO could not have travelled beyond Section 44 in the first schedule of the Act" 5. It is thus clear that Section 14A of Income Tax Act, 1956 stands excluded while computing the Income Tax of an Insurance Company, in view of the non-obstante clause contained in Section 44 of Income Tax Act, 1956, the questions of law stand decided against the assessee. 6.6 In the light of the aforesaid binding decision of the Hon'ble Madras High Court, we hold that sec.14A of the Act stands excluded while computing the Income Tax on General Insurance Companies in view of the non-obstante clause contained in sec.44 of the Act. Hence, this ground of the Revenue stands dismissed. 7. Ground No.5 / Issue 4: Disallowance of provision for Claims Incurred But Not Reported('IBNR') and Incurred But Not Enough Reported ('IBNER'). Assessment Year Appeal by Ground No. AY 2011-12 Departm....
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....ggrieved by the aforesaid action of the Ld.CIT(A), the Revenue is before us and pointed out that this Tribunal has held against the assessee in the assessee's own case for AY 2014-15 wherein the Tribunal has remanded the issue back to the file of the AO to verify the actual utilization towards IBNR & IBNER. 7.5 We have heard both the parties and perused the records. We note that the assessee company had claimed deduction from the profits on account of IBNR & IBNER by making a provision of Rs. 71,63,000/- which was disallowed by the AO on the ground that provisions made in this regard are unascertainable and that IRDA guidelines can't be a deciding factor for computation of income under the Act. On appeal, the Ld.CIT(A) has allowed the claim of the assessee by holding as under: 3.4.21 I have carefully considered the submissions of the Appellant as well as the Judgements relied on by the Appellant. The Assessing Officer considered the IBNR & IBNER provision made as unascertained liability because ultimately the settlement of claim happens when the claims are settled later. According to the Appellant, the provisions of IBNR & IBNER are made based on the happening of the ac....
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....e by deviating from earlier view, and held in favor of assessee as under: 13.0 The next issue raised by the revenue vide ITA Nos. 493, 494, 495 & 496 /Chny/2018, AYs: 2011-12, 2012-13, 2013-14, 2014-15 is regarding disallowance of provisions for claims incurred but not reported (IBNR) and incurred but not enough reported (IBNER). Brief factual matrix of the controversy at hand is that in the assessee's line of business claims arise qua insurance policies sold by it to its customers. With a view to factor in its liabilities arising on account of claims, the assessee creates provisions qua claims incurred but which have not been reported and claims incurred but which have not been enough reported. The only difference between the two being quantity of claims made. The assessee had been claiming by way of provisions the impugned claims. It is an undisputed fact on records that the impugned provisions are required to be created by the assessee in compliance to the directions of the parent body of insurance sector being insurance regulatory development authority(IRDA). It is also an undisputed facts on record that the respective claims for IBNR and IBNER in respect of the assess....
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.... On the other hand, the Ld. Sr. Standing Counsel for the Revenue submitted that the assessee has created provision in anticipation of settlement of claims that were not ascertained. What is reported to the assessee is damage/ loss caused to the insured persons. According to the Sr. Standing Counsel, the assessee is yet to assess loss and determine amount to be compensated. Therefore, it is unascertained liability and same cannot be allowed as deduction. The Sr. Standing Counsel further submitted that this issue is covered by the decision of the ITAT., Chennai in assessee's own case for earlier assessment years, where the Tribunal has held that provision made for IBNR and IBNER is not deductible, because merely incident happened during the year which is basis for making claim, that cannot be a reason for allowing compensation payable by the assessee in the subsequent financial years. 13. After hearing both the parties and going through material records, we find that an identical issue has been considered by the Tribunal in assessee's own case in ITA Nos. 2107/Chny/2008 &Ors. vide order dated 28.08.2018 for relevant assessment years and after considering relevant facts held ....
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....ears 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20 and reject grounds taken by the assessee. Further, the assessee has also pleaded that with respect to AY 2017-18, the amount disallowable with respect to provisions for IBNR and IBNER claims cannot exceed Rs. 1250.89 crores being the amount debited to the revenue accounts of the assessee. The assessee submitted that the additional amount of Rs. 1582.58 crores being the amount not debited to the profit & loss account be deleted. We are in conformity with the views of the assessee that amount of monies, as provisions, not debited to the profit & loss account cannot be a part of the disallowance. Accordingly, the AO is directed to recalculate the disallowance with respect to provisions for IBNR and IBNER claims and restrict it to the extent of the amounts debited to profit & loss account as per law during the assessment year 2017-18. Accordingly, the grounds of appeal raised by the assessee on this issue for AYs 2014-15 to 2016-17 and 2018-19 & 2019-20 are dismissed and that of the AY 2017-18 is treated as allowed for statistical purposes.....". 13.2 The Ld. Counsel for the assessee vehemently opposed the arguments of Ld. The ....
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....ers of the lower authorities. We have also considered the order of the coordinate bench in assessee's own case as well other decision of coordinate benches involving similar issues. First ground of appeal is related to the provisions for claim Incurred but Not Reported (IBNR) and claim Incurred But Not Enough Reported (IBNER) amounting to Rs. 148,43,01,915/- held to be liable under section 37(1) of the Act by the learned Commissioner of income-tax (Appeals). 010. 011. Fact shows that the assessee has debited the above sum to the profit and loss account and claimed as allowable. The Assessing Officer questioned the same and assessee submitted that the above claims are incurred on account of the contractual obligations between the insurance company and the insurer. Assessee, insurance company, has an obligation to settle claims incurred. Such settlement of claim involve time so cannot be finally settled during the financial year. Above provision are created as per the guidelines prescribed by the IRDA, the method of provisioning a scientific calculation, it is ascertained liability under section 37(1) of the Act. Therefore, it is an allowable expense. The learned Assessing Officer he....
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....d are not reported in the balance sheet of the insurance company and therefore, such claims are classified as claims incurred but not reported. Certain times such claims are reported, however they were not adequately reported. These are called claims incurred but not enough reported. The assessee made the provisions on the basis of the guidelines provided by insurance regulator and development authority of India. The claims made and provided for, are certified by the Actuary in accordance with the guidelines and norms issued by the Institute of Actuaries of India (IAI) and Insurance Regulatory and Development Authority (IRDA). As according to the assessee, the claims have been approved by Actuary, therefore, the assessee has incurred loss / expenses during the year, and hence, it is allowable under section 37(1) of the Income-tax Act. The Assessing Officer considered the same as unascertained liability because ultimately the settlement of claim happens then, only according to him such claims are settled. We find that the assessee is a General Insurance Company and is covered by the guidelines issued by IRDA. The Insurance Companies are required to settle the claims of insured on th....
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.... appeal is dismissed...." It is noted that the Hon'ble Coordinate Bench has considered the ratios laid down by Hon'ble Coordinate Bench of Kolkata Tribunal as well as the decision of Hon'ble Calcutta High Court. 13.4 Further we have noted that Hon'ble Delhi High Court order in the case of Care Health Insurance Limited (164 taxmann.com 53) observed as under:- ".......................... 19. Upon due consideration of the principles enunciated in the aforenoted decisions, we come to the firm conclusion that it would be wholly incorrect to understand IBNR provisioning to be a contingent liability. We, in this regard, bear in consideration the precepts of reasonable estimation, the capability of a liability being quantified based upon historical trends and the known actuarial methods for estimation which are liable to be adopted in accordance with the IRDA Regulations. We consequently find no error in the view ultimately taken by the Tribunal...." 13.5 We have also noted that the latest decision on the subject has been delivered by Hon'ble Bombay High Court in the Writ petition No.2271 of 2019 as at 422 ITR 248 in the case of General Insuranc....
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....ure would be permissible. We have noted that facts of the case as existing in the present appeal are identical to those as in the cases adjudicated by the Hon'ble Coordinate Benches of Kolkata, Delhi and Mumbai Tribunals. No distinguishment of facts could be pointed out by the appellant revenue. Accordingly, respectfully following the ratio decided in the judicial decisions discussed herein above, we hold that IBNR and IBNER are ascertained liability and therefore allowable as a deduction. Accordingly we hold that the order of the Ld. First Appellate Authority does not requires any interference at this stage. The order of the Ld.CIT(A) is confirmed and the grounds of appeal raised by the revenue are dismissed. 7.9 As noted supra, this Tribunal in the case of M/s. Royal Sundaram General Insurance Co. Ltd.,(supra) has recently held that the claim made in respect of IBNR & IBNER are indeed an ascertained liability and that the liability in question principally arises in view of guidelines formulated by IRDA and calculated by a IRDA approved actuarial valuer fulfills, the ratio as laid down by Hon'ble Apex Court mandating that as long as a liability is properly ascertainable on the ....
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....in it has been held as under: 42. The next issue that came up for our consideration from the assessee appeals for the assessment years 2010-11 & 2013-14 is disallowance of excess depreciation claimed on motor vehicles. The assessee has claimed depreciation @ 50% on motor vehicles as per Rule 5 read with Appendix I clause III (Machinery & Plant) (via), as per which new motor vehicles purchased after certain dates is entitled for 50% depreciation. The Assessing Officer has allowed depreciation @ 15% as per Item 3 of Part A of Appendix - entry 2, which is applicable to general category of motor cars acquired or put to use on or after 01.04.1990. 43. Mr. Percy J. Pardiwalla, learned Sr. counsel for the assessee referring to Motor Vehicles Act, submitted that commercial vehicles, include light motor vehicle and thus, as per Clause 5A of New Appendix 1 read with Rule 5, the assessee is entitled for 50% depreciation on new motor vehicles acquired and put to use after certain dates. However, the Assessing Officer as well as the learned CIT(A) has relied upon Circular No. 609 dated 29.07.1991 and judgement of Hon'ble Bombay High Court in the case of CIT Vs S.C. Takur & Bro....
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....rd both the sides and considered material on record, we find that this issue is squarely covered in favour of the assessee by the decision of the Hon'ble High Court of Bombay in the case of CIT vs. M/s.Birla Global Asset Finance Co.Ltd. in (2012) 76 DTR 342, where the Hon'ble High Court has defined the term 'commercial vehicles' in light of Motor Vehicles Act, and held that commercial vehicle includes light motor vehicles. The Hon'ble Bombay High Court in the case of CIT Vs Shah Rukh Khan in ITA No. 1206 of 2010 had considered very similar issue and held that commercial vehicle includes light motor vehicle also. In this case, there is no dispute with regard to fact that higher depreciation claimed on the vehicles is light motor vehicles which were acquired on or after specified date. Therefore, we are of the considered view that the assessee is entitled for higher depreciation @ 50% on motor vehicles and thus, we direct the Assessing Officer to delete additions made towards excess depreciation on motor vehicles. 8.2 In this regard, it is noted that assessee had acquired commercial vehicles (which included light motor vehicles also) between 01.01.2009 and 30.09.2009 a....
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....o intent to purchase motor vehicles and if the purchaser of motor vehicle chooses the policy offered by the assessee, then the dealer would do the necessary paper work so as to enable the customer to get cover of insurance from the moment they drive the vehicle out of the showroom, and for such services rendered by the dealers, the assessee paid service charges to them [Motor Vehicle Dealers]. According to the assessee, the services rendered by the motor vehicle dealers includes a variety of services such as data processing services, policy servicing charges, inspection services, training, etc., and in consideration of these services, the assessee made payment/service charges to the dealers, and while making payment to them, duly deducted/withheld tax at source as well as remitted the service tax on it, which has been claimed as CENVAT; and the Ld.CIT(A) have found that the dealers had indeed rendered services to the assessee, which fact is evidenced by invoices and payments were through banking channel after deducting taxes at source. Considering the aforesaid relevant facts, the Ld CIT(A) noted that motor vehicle dealers have rendered services to the assessee justifying the payme....
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....sments has been cancelled / annulled by the CESTAT, additions made by the Assessing Officer towards payment made to motor vehicle dealers cannot be sustained. 49. Mr. M. Swaminathan, learned Sr. Standing Counsel for the Revenue, submitted that the assessee could not file any evidences to justify huge payment made to motor vehicle dealers. Further, investigation carried out by Service Tax Directorate reveals that the assessee has availed input tax credit without any services being rendered and on that basis; the Assessing Officer has disallowed payment made to motor vehicle dealers. Although, the assessee claims that the CESTAT has held that motor vehicle dealers have rendered services to finance companies, but fact needs to be examined by the Assessing Officer in light of order passed by the CESTAT and thus, issue may be set aside to the file of the Assessing Officer. 50. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The assessee had entered into agreement with various vehicle manufacturing companies for arrangement of finance for customers. As per said agreement, motor vehicle dealers provid....
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....because there is sufficient proof for rendering services by said dealers. However, fact remains that the order passed by the CESTAT is not available to the Assessing Officer, we are of the considered view that the issue needs to be set aside to the file of the Assessing Officer for limited purpose of verifying the issue with reference to the CESTAT order and allow the claim of the assessee. Hence, we set aside the issue to the file of the Assessing Officer and direct that Assessing Officer to verify facts with reference to order passed by the CESTAT in the assessee's own case with reference to investigation carried out by the Service Tax Directorate. In case, the Assessing Officer finds that there is finding on rendering of services, then the Assessing Officer is directed to delete additions made towards disallowances of payment made to motor vehicle dealers. 9.3 Further it is noted that the sole reason for the AO to disallow the claim was based on the report of the DIT (Investigation), Chennai, which in turn was pursuant to the report/investigation carried out by the Service Tax Department. And the report of the Service Tax Department that the assessee has made payment without ....
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....he assessee company. The Assessing Officer has disallowed payment made to Third Party Administrators u/s.40(a)(ia) on the ground that the assessee ought to have deducted TDS on such payments. It was the contention of the assessee that as per CBDT Circular No.8/2009 dated 24.11.2009, it is the responsibility of third party administrators (TPAs) to deduct TDS while making payments to hospitals, but not the assessee. 10.2 However, the AO didn't agree and disallowed such payments on the ground that no tax was withheld/deducted at source as required u/s.194H of the Act at the time of such payments to the FLOAT account maintained with the TPAs. On appeal, the Ld.CIT(A) has allowed the grounds of appeal of the assessee on this issue relying on the decision of this Tribunal in the assessee's own case in ITA No. 711/Chny/2020 for AY 2014-15 dated 26.08.2022, wherein it was decided by the Tribunal as under: We have heard both the sides and considered relevant materials on record. There is no dispute with regard to applicability of provisions of section 194H of the Act to payments made by the assessee to hospitals through third party administrators. However, as per CBDT circular N....
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....bove the Double Taxation Avoidance Agreement between India and Japan ('DTAA') rate 6. The Learned CIT(A) has erred in not providing the refund of excess DDT paid over and above the rate as per the DTAA between India and Japan. 7. On the facts and circumstances of the case and in law, the Appellant prays that the benefit of applicable DTAA be extended qua the rate of tax on payment of dividend to the shareholders. 8. The Learned CIT(A) has erred in not appreciating the fact that section 90 of the Act overrides all the provisions of the Act including the provisions of section 115O of the Act. This is inter-alia for the reason that section 90 of the Act aims to give effect to the international fiscal agreements entered into between India and other Government. 9. The Learned CIT(A) has failed to recognize that the dividend income is that of the non-resident recipient, who was subject to the provisions of the relevant DTAA. 10. The Learned CIT(A) erred in not appreciating the fact that the DDT paid in excess of amount to be paid as per DTAA shall be granted as refund based on the provisions outlined in Section 237 of the Act read in c....
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.... Governments. In view of the same, rate as per the Act or DTAA whichever is beneficial would be applicable thereby making it 10%. Hence, the Ld.AR prayed to grant refund of INR 74,27,818 (i.e. excess of DDT paid as per the Act vs. DDT as per the India-Japan DTAA). 11.5 Per contra, the Ld.DR pointed out that the issue stands covered against the Assessee by the Special Bench decision of the Tribunal in the case of M/s Total Oil India Pvt. Ltd (ITA No. 6997/Mum/2019), and therefore, does not want us to interfere in the impugned action of the Ld.CIT(A). In his rejoinder, the Ld.AR submitted that the Hon'ble Calcutta High Court has admitted the substantial question of law in the case of Exide Industries Limited in ITA/23/2024 vide its Order dated 31.01.2024 which is pending disposal and therefore, prays reconsideration of the issue. 11.6 Having heard both the parties, we note that the Ld.CIT(A) has decided the issue against the assessee by following the biding decision of the Special bench order in the case of M/s. Total Oil India Pvt. Ltd., (supra). Therefore, we decline to interfere with the impugned action of the Ld.CIT(A) and confer it. This ground of appeal of assessee stands....
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....of MAT provisions u/s 115JB to the case of the appellant is covered by the decision of Hon'ble High Court of Madras in the Appellant's own case for A.Y.09-10 in TCA No. 93 to 100 of 2019 dated 28.01.2019 wherein after considering the provisions of sec 115JB, it was held that the provisions of sec 115JB are not applicable to the appellant. 3.9.8 Following the above decision of the Jurisdictional High Court in the Appellants own case, I allow the Ground of Appeal No.37 raised by the appellant for non-applicability of section 115JB. As the provisions of section 115JB are held to be not applicable, the adjustments made by the AO in calculation of the book profits u/s 115JB and the consequent grounds raised by the Appellant against such adjustments are irrelevant and accordingly directed to be deleted. 12.2 Since there is no change in facts or law, respectfully following the decision of the Hon'ble Madras High Court in the assessee's own case, we confirm the action of the Ld.CIT(A) for AY 2012-13 and AY 2011-12. 12.3 However, it is noted that there has been an amendment brought in by Finance Act, 2012, and by virtue of the said amendment, insurance companies which....
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....e made in this regard by holding that disallowance made u/s.14A of the Act r.w.r.8D can't be adjusted while computing book profit u/s.115JB of the Act by relying on Special Bench decision of the Tribunal in the case of ACIT v. Vireet Investments Pvt. Ltd. reported in [2017] 165 ITD 27 (Delhi Trib.) (Special Bench). We, therefore, confirm the impugned action of the Ld.CIT(A) by taking note of the decision of the Special Bench in the case of Vireet Investments Pvt. Ltd. (supra) wherein, it was held that provisions of Sec.14A r.w.r.8D will not apply while computing the book profit u/s.115JB of the Act; and therefore, it is held that the Ld.CIT(A) rightly deleted the disallowance made by the AO invoking provisions of Sec.14A r.w.r.8D while computing book profit u/s.115JB of the Act; and hence, this ground of Revenue stands dismissed for AY 2016-17 & AY 2018-19. 14. Issue 11: Addition of Unexpired Premium Risk ('UPR') while computing the book profits under section 115JB of the Act Assessment Year Appeal by Ground No. AY 2011-12 Department (ITA No. 1438/2024) Ground No.7 AY 2016-17 Department (ITA No. 1462/2024) Ground no. 14 14.1 The AO made addition for....
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....61. 62. The learned Sr. counsel for the assessee submitted that this issue is squarely covered in favour of the assessee by the decision of ITAT., Mumbai in the case of M/s.Munchener Ruckversicherungs Gesellschaft Aktiengesellschaft in Munchen Vs. CIT in ITA No. 937/Mum/2021 dated 13.05.2022 and also decision of the ITAT., Kolkata Bench in the case of DCIT Vs. National Insurance Co.Ltd. (2016) 72 taxmann.com 116, where it has been held that provision made for UPR is not an item contemplated to be added in Explanation 1 to section 115JB(2) of the Income Tax Act, 1961. 63. The learned Sr. Standing Counsel for the Revenue, on the other hand, supporting order of the learned CIT(A) submitted that once liability has been treated as unascertained liability, then same needs to be added back to the book profit computed u/s.115JB of the Income Tax Act, 1961, and thus, the Assessing Officer has rightly added UPR to book profit and their orders should be upheld. 64. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The addition of UPR to book profit u/s.115JB of the Act had been subject matter of de....
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....written by the assessee. We find that the assessee has claimed a deduction for the "reserve for unexpired risk" to the extent of Rs. 5,24,000/- in accordance with Rule 6E while computing its total income under the normal provisions of the Act. However, while computing its book profits u/s 115JB of the Act, no adjustment was made in respect thereof as it would not fall within any of the items specified in clause (a) to (k) of Explanation 1 to section 115JB(2) of the Act. However, the ld. AO restricted the allowance in terms of rule 6E to Rs. 8,75,44,500 as evident from page 15 of the assessment order. The ld. DRP deleted the addition of Rs. 5,32,31,500/- made by the ld. AO under the normal provisions of the Act. This has been accepted by both the assessee as well as the revenue and no appeal is preferred before this Tribunal on the same. 5. We deem it fit and appropriate to narrate the facts relevant for the issue in dispute and the basis of disallowance made by the ld. AO in respect of provision for unexpired risks and premium deficiency while computing the book profits u/s 115JB of the Act as under:- a) The ld. AO passed a draft assessment order making an adjustm....
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....duly certified by the actuary. It was submitted that the premium received in advance which is not related to a particular accounting period is separately disclosed in the financial statements of the assessee and is reduced from the total premium received during the accounting period by way of creation of a 'Reserve for Unexpired Risk'. The Unexpired Risk Reserve is created to cover expected claims and expenses arising from active portfolio of the insurer. Reserve for Unexpired Risk is defined as a prospective assessment of amount that needs to be set aside in order to provide for claims and expenses which emerge from unexpired risks covered under insurance contract period. The reserve is calculated using statistical methods and is determined and certified by the actuaries using statistical methods. The certificate as per IRDAI Regulations, 2016 is provided in Form IRDAI-GI-TR, i.e., the statement of liabilities as on 31/03/2017 which is certified by the appointed actuary and statutory auditor of the assessee. Thus, it is submitted that insurance companies are required to provide for reserve for unexpired risk in the books of accounts while preparing financial statements for....
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....e" as understood by the courts. We do not deem it fit to get into the same as we would like to address the entire issue in dispute on first principle itself as above. 9. We find that the assessee has prepared the financial statements as per the principles and guidelines prescribed by IRDAI. The expenditure claimed by the reinsurer are calculated and certified by the actuary and the computation of expenditure like reserve for unexpired risk and premium deficiency reserve is certified by the actuary and filed with IRDAI. Further, the statutory auditor in IRDAI-GI-TR has stated that liabilities of the assessee have been determined in the manner prescribed in IRDAI Regulations, 2016 and the amount of liabilities are fair and reasonable. Further, the statutory auditor has also certified that the outstanding claims reserves are estimated using statistical methods determined by the actuaries. Based on the above, it is submitted that the regulatory requirement for creation of a reserve for unexpired risk is created using statistical methods under the IRDAI guidelines and certified by the statutory auditor and actuary and, therefore, it is an ascertained liability and it cannot be ....
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....h represents Premium Income not relating to that particular accounting period in which the said Premium has been received, is separately disclosed in the Financial Statements of an Insurance Company. That part of income which is attributable to the succeeding accounting period or periods is reduced from the total Premiums received during an accounting period by way of creation of a Reserve for Unexpired Risk in accordance with Section 64V(1)(ii)(b) of the Insurance Act, 1938. The aforesaid Reserve is to be created for a minimum amount as prescribed under the above mentioned section. Appreciating the special nature of the Insurance Business, the Lawmakers prescribed special procedure for Computation of Total Income of an Insurance Company carrying on Business of Insurance other than Life Insurance which are to be found in Rule 5 of the First Schedule to the Income-tax Act, 1961, read with Rule 6E, of the Income-tax Rules, 1962. This particular procedure has to be mandatorily complied with in making the assessment for Income-tax purposes. Every year adjustments are made to the existing Reserve for Unexpired Risk by way of crediting or debiting by the amount of difference bet....
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....s of the general insurance business carried out by the assessee. In the assessee's case, firstly the concerned reserve for Unexpired Risk has not been created through any debit entry made in the Profit & Loss Account. The reserve has been created in accordance with the relevant provisions of the Insurance Act, 1938, by way of debiting the premium received for adjusting the amount of premium that may be related to future year or years. It is noted that Rule 5 of the First Schedule of the Income-tax Act, 1961, which specifies the procedure to be followed for computing the business income of a General Insurance business, specifically allows deduction for reserve carried over for Unexpired Risk and Rule 6E of the Income-tax Rules, 1962 provides that such deduction will be allowed to the maximum extent of 50% of the net premium received during the relevant year. Hence, this creation of reserve out of the premium received during the year, is a statutory requirement and the same is duly recognised by the Income-tax Act/Rules. As already mentioned hereinabove, this particular reserve does not fall in the category of those reserves which have been specified in Explanation 1 (b) to secti....
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....of the premium received during the year, is a statutory requirement and the same is duly recognised by the provisions of the Act. Accordingly, it can be inferred that the intent of the law has been to allow the said reserve for unexpired risk created by the insurance companies to the extent of specified limits which is derived as a percentage of net premium. Therefore, in our considered opinion, making an addition of reserve for unexpired risk u/s 115JB of the Act would defeat the purpose of the Act which allows deduction of the said reserve to the extent of prescribed limits. Further, the provisions of section 115JB of the Act do not specifically provide for any adjustment in connection with the reserve for unexpired risk and no adjustment is permitted to such profits other than those listed in Explanation 1 to section 115JB of the Act. Reliance in this regard is rightly placed on the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd reported in 255 ITR 273 (SC). 12. We further find that the premium deficiency of Rs 773000 has been allowed by the ld. AO under the normal provisions of the Act but the same has been added back while computing book profits u/s....