TaxTMI 
TaxTMI 
2024 (8) TMI 1762
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.....s. 144C(13) of the Act pertaining to AY 2020-21 and 2021-22. 2. Since the grievance of the assessee is identical in both the appeals, they were heard together and are being disposed off by way of this common order for the sake of convenience and brevity. 3. Common grievance relates to the computation of book profit in accordance with the provisions of Section 115JB of the Act, thereby making addition to the net profit while computing the book profit in accordance with Clause (b) of Explanation 1 to Section 115JB of the Act by treating the Reserve for Unexpired Risks ('RFUR'), thereby considering the provisions as an unascertained liability. 4. Since the underlying facts and the issues are identical, at the concession of both the r....
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....rt in the case of SREI Infrastructure Finance Ltd. vs Additional Commissioner Of Income tax, (2015) (281 CTR 532), the AO treated the amount of Rs.4,57,19,196/-, as unascertained liability for the purpose of computation of book profit as per the Explanation 1(b) of the provision of Section 115JB of the Act and added the same. Objections were raised before the DRP but were of no avail. 6. Before us, the ld. Counsel for the assessee reiterated what has been stated before the lower authorities and explained the accounting entries and vehemently contended that the impugned amount was never debited to the profit and loss account. Therefore, there is no question of imputing the provisions of Section 115JB of the Act. Strong reliance was placed....
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.... provisions of Insurance Act and the guidelines set out, the assessee is required to compute the amount of premium which is attributable to future financial years i.e., the amount of unexpired risk or unearned premium and deduct this from the gross premium in the premium schedule. 8. The above can be understood from the following schedule of premium earned:- Schedule- 1 Premium Earned (Net) ('000) Particulars Life Fire Marine Miscellaneous* Total - - Hull Others Premium from Direct business written - - - - - Add : Premium on reinsurance accepted - - 51,613 - 104,199 155,812 Less :....
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....k shall be shown separately under the head "Current Liabilities" in the financial statements of the assessee." 10.1. Following the aforementioned mandatory compliance, the premium earned as mentioned elsewhere was determined. In our considered opinion, for attracting the provisions of Section 115JB of the Act, the condition precedent is that the amount should have been debited to the P&L account but in the present case, as per the entries discussed hereinabove, the impugned alleged reserved amount was never debited to the P&L account. It is only a provision deducted from the gross premium as ascertained liability to be adjusted in subsequent years. This has been explained lucidly by the DRP as under:- Particulars AY Amount (INE)....
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....s appropriate. Premium received in advance which 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(l)(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 Computa....
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....ion made for meeting liabilities, other than ascertained liabilities as referred to in Clause(c) of Explanation (1) to Section 115JB(2). On the basis of the above facts it may kindly be appreciated that there has not been any requirement to add back any sum in relation to the "Reserve for Unexpired Risk" while computing "Book Profit" u/s.115JB(2) for the Assessment Year 2008-09. Accordingly, the assessee submitted that the "Reserve for Unexpired Risks" not being of the nature as specified in clause (b) of Explanation 1 to section 115JB(2), the action of the ld AO in making an addition of such Reserve should be held as unjustified. Hence, the assessee submitted that the ld AO may kindly be directed to delete the addition of Rs.169,4....