TaxTMI 
TaxTMI 
2025 (11) TMI 2082
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....18/Mum/2024 Assessee 2013-2014 2841/Mum/2024 Department 2014-2015 C.O.96/Mum/2024 Assessee 2014-2015 2619/Mum/2024 2836/Mum/2024 Assessee Department 2015-2016 2620/Mum/2024 2834/Mum/2024 Assessee Department 2016-2017 2621/Mum/2024 2827/Mum/2024 Assessee Department 2017-2018 2622/Mum/2024 2830/Mum/2024 Assessee Department 2018-2019 2623/Mum/2024 2823/Mum/2024 Assessee Department 2019-2020 2. Since the all the above matters involved common issues arising from similar factual matrix, the same were heard together and are being disposed off by way of a common order. ASSESSMENT YEAR 2010-2011 ITA No.2617/Mum/2024 (Assessee's Appeal) 3. We would first take up appeal preferred by the Assessee for the Assessment Year 2010-2011 against the Order, dated 20/03/2024, passed by National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as 'the CIT(A)'] dismissing appeal preferred by the Assessee against the Assessment Order, dated 29/12/2017, passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 [hereinafter referred to as `the Act']. 4. The re....
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....O has not disclosed any specific non- disclosure of material facts by the appellant." 8. We have heard the both the sides in relation to the validity of reassessment proceedings and have perused the material on record including the relevant submissions/synopsis, documents forming part of the paper book relied upon during the course of hearing and the orders passed by the authorities below. 9. The record shows that for the Assessment Year 2010-2011 regular assessment under Section 143(3) of the Act was framed vide Assessment Order dated 30/03/2011. Thereafter, reassessment proceedings were initiated in the case of the Assessee which culminated into passing of Assessment Order, dated 29/06/2016 under Section 143(3) read with Section 147 of the Act. Thereafter, the case was again reopened under Section 147 of the Act after recording the reason and after obtaining the approval from the competent authority. The notice under Section 148 of the Act was issued to the Assessee on 30/03/2017 which was served on the Assessee on 31/03/2017. In response the Assessee vide letter, dated 17/04/2017, the Assessee submitted that the revised return of income filed on 24/03/2011 declaring loss o....
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....ment, it is a verifiable fact. as any expenditure claimed as reimbursement has to be first spent and then only can be claimed. However, none of the dealers could provide any evidence for expenditure of any amount whose reimbursements are claimed by them from the insurance companies. They have all accepted that the amount claimed vide these reimbursement invoices are nothing but PAY-OUT as agreed upon between the insurance companies and the car-manufacturer informally. The investigations have established that car dealers are not providing any service to the insurance companies, However, they are getting all their illegal pay-out from the insurance companies on the basis of the false invoices issued by them on the instructions of insurance companies. 2. As per Section 40(1) of the Insurance Act, 1938, no person shall after the expiry of six months from the commencement of this Act, pay or contract to pay any remuneration or reward whether by way of commission or otherwise for soliciting or procuring insurance business in India to any person except an insurance agent or an intermediary or insurance intermediary. 3. As per IRDA Circular Ref: 011/IRDA/ Brok-Co....
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....f.no.IRDA/CIR/011/2003 dated 27-03-2003. c) Commission circular ref.no.011/IRDA/Brok-comm/Aug-08, dated 25-08-2008 and para 30 of F&U guidelines dated 28/09/2006. d) Regulation 3 of IRDA (Licensing of Corporate Agent) Regulation, 2002 and clause 21 of IRDA circular ref.017/IRDA/Circular/CA guidelines/2005 dated 14.07.2005 by entering into additional relationship with tied corporate agent of another general insurer. e) Regulation 7 (C) of IRDA (Registration of Companies) Regulations, 2000. For the AY.2014-15, the above issue was examined in detail and the expense made to the motor dealers amounting to Rs. 183.11.32.413/- was disallowed u/s.37 and added back to the total income. For the A. Y.2010-11, the nature of expenses in the form of payments made to motor car dealers needs to be examined on the same issue as in A.Y.2014-15, such payments made to the motor dealers are clearly in the nature of commission which was paid to the motor dealers which is not an allowable expense u/s 37. In view of all the above, for the A.Y. 2010-11 I have reason to believe that income assessable to tax amounting to more than rupees fifty thous....
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....ings are bad in law as, inter-alia, the reasons recorded by the Assessing Officer for reopening assessment reasons recorded fail to demonstrate link between the tangible material and formation of belief that income chargeable to tax had escaped assessment on account of failure of the Assessee to disclose fully and truly all material facts necessary for framing assessment for the Assessment Year 2010-2011. 14. Per contra, the Learned Departmental Representative placed reliance upon the order passed by the Learned CIT(A). Reliance in this regard was placed on Paragraph 6.1.1 and 6.1.2 of the order impugned. 15. On perusal of reasons recorded for reopening assessment for the Assessment Year 2010-2011, we find that the Assessing Officer has stated that the reassessment proceedings were initiated on the basis of information received from Director of Income Tax (Inv.), Chennai according which, inter-alia, the Assessee was making payment to car dealers in violation of Section 40(1) of the Insurance Act, 1938. Commission was being paid to the car dealers in the grab of making payments towards reimbursement of expenses or payments towards outsourced services. For the Assessment Year 2....
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....Wadkar in Writ Petition No.1505 of 2003, dated 25/02/2004 [2004] 137 Taxman 479 (Bom) wherein it was held as under: "20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons ....
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....t it had not suo- moto disclosed such information before the AO at that point of time. 4. The CIT(A) was not justified in confirming the action of the AO of disallowing the payment of Rs.26,13,19,736 by the Appellant to the Auto Dealers. 5. The CIT(A) erred in confirming the action of the AO, without appreciating the fact that the year under consideration was not the year for which order was passed by the Service Tax Department. 6. The CIT(A) was wrong in observing that it has not been brought out as to when the appellant had asked for the cross-examination of the auto dealers, as to how the appellant was prejudiced if the AO did not provide it an opportunity to cross-examine the auto dealers, and whether the auto dealers, if any had retracted their statements. 7. The CIT(A) further erred in confirming the action of the AO without providing an opportunity to the appellant to cross-examine the auto dealers." 20. Since we have allowed Ground No.1 raised by the Assessee and have quashed Assessment Order, dated 29/12/2017, passed under Section 143(3) read with Section 147 of Act, the additions/disallowance made by the Assessing Officer stand delet....
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....hallenged the validity of reassessment proceedings contending that the same are bad in law. The primary submission advanced by the Learned Authorized Representative for the Assessee was that the reasons recorded by the Assessing Officer for reopening assessment did not disclose any specific non-disclosure of material fact by the Assessee necessary for framing assessment for the Assessment Year 2012-2013. Therefore, the jurisdictional pre-condition for initiating reassessment proceedings under Section 147 of the Act were not satisfied. Reliance in this regard was placed on the judicial precedents including: - Hindustan Lever Ltd. Vs. R.B. Wadkar (Writ Petition No. 1505 of 2003, dated 25/02/2004) [2004] 137 Taxman 479 (Bom) - NYK Line (India) Ltd. Vs. Deputy Commissioner of Income Tax (No.2): [2012] 346 ITR 361 (Bom). 29. Per contra, the Learned Departmental Representative placed reliance upon the order passed by the Learned CIT(A) and submitted that in the present case the reassessment proceedings were initiated within a period of four years from the end of the relevant assessment year and therefore, First Proviso to Section 147 of the Act was not applicable. Pl....
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.... with the General Insurance Companies All the dealers investigated by this office have accepted that they have not provided to the insurance company any service as specified in their invoice issued by them. Since most invoices are for reimbursement, it is a verifiable fact, as any expenditure claimed as reimbursement has to be first spent and then only can be claimed. However, none of the dealers could provide any evidence for expenditure of any amount whose reimbursements are claimed by them from the insurance companies. They have all accepted that the amount claimed vide these reimbursement invoices are nothing but PAY-OUT as agreed upon between the insurance companies and the car-manufacturer informally. The investigations have established that car-dealers are not providing any service to the insurance companies, However, they are getting all their illegal pay-out from the insurance companies on the basis of the false invoices issued by them on the instructions of insurance companies. 2. As per Section 40(1) of the Insurance Act, 1938, no person shall after the expiry of six months from the commencement of this Act, pay or contract to pay any remunerat....
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....n the nature of commission which was paid to the motor dealers and is hence a violation of a) Violation of Point 3(ix), 8 & 11 of F&U guidelines dated 28/09/2006 and circular no. 048/IRDA/De-tariff/Dec-07 dated 18th Dec, 2007. b) Circular ref.no.IRDA/CIR/011/2003 dated 27-03-2003. c) Commission circular ref.no.011/IRDA/Brok-comm/Aug-08, dated 25-08-2008 and para 30 of F&U guidelines dated 28/09/2006. d) Regulation 3 of IRDA (Licensing of Corporate Agent) Regulation, 2002 21 of IRDA circular ref 017/IRDA/Circular/CA guidelines/2005 dated 14.07.2005 by entering into additional relationship with tied corporate agent of another general insurer. e) Regulation 7 (C) of IRDA (Registration of Companies) Regulations, 2000. For the A.Y.2014-15, the above issue was examined in detail and the expense made to the motor dealers amounting to Rs. 183,11,32,413/- was disallowed u/s 37 and added back to the total income. For the A. Y.2012-13, the nature of expenses in the form of payments made to motor car dealers needs to be examined on the same issue as in A.Y.2014-15, such payments made to the motor dealers are clearly in the nature o....
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....n (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unlessany income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." 18. Reading of proviso to section 147 makes it clear that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under section 147, or recompute the loss or the depreciation allowance or any other allowance, as the case may be for the concerned assessment year. However, where an assessment under sub-section (3....
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....ns as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. 21. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of proviso to section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside. " (Emphasis Supplied) 34. On perusal of the above extract it becomes clear that in the case of Hindustan Lever ....
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....ssment. The Assessing Officer is not required to meet the requirements laid down in Proviso to Section 147 of the Act. 37. Having noted as above, we find that in the case of Commissioner of Income-tax, Delhi vs. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC)[18-01-2010], it was held by the Hon'ble Supreme Court that reassessment proceedings cannot be initiated merely on account of `change of opinion'. In the aforesaid case, the following issue had come up for consideration before the Hon'ble Supreme Court: "2. A short question which arises for determination in this batch of civil appeals is, whether the concept of "change of opinion" stands obliterated with effect from 1-4- 1989, i.e., after substitution of section 147 of the Income- tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987?" 38. Answering the question in favour of the assessee, the Hon'ble Supreme Court concluded that even after the substitution of Section 147 of the Act with effect from 01/04/1989 the concept of `change of opinion' has not been obliterated. The concept of `change of opinion' must be treated as an in-built test to check abuse of power by the assessing officer ....
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....d "opinion" in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549, dated 31-10-1989, which reads as follows: "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147. - A number of representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words ....
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....7 does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion. We, however, may hasten to add that if 'reason to believe' of the Assessing Officer is founded on an information which might have been received by the Assessing Officer after the completion of assessment, it may be a sound foundation for exercising the power under section 147 read with section 148. 22. We are unable to agree with the submission of Mr. Jolly to the effect that the impugned order of reassessment cannot be faulted as the same was based on information derived from the tax audit report. The tax audit report has already been submitted by the assessee. It is one thing to say that the Assessing Officer had received information from an audit report which was not before the ITO, but it is another thing to say that such information can be derived by the material which had been supplied by the assessee himself. 23. We also cannot accept submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded on analysis of the materials on the record by itself ....
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....ssessment year may furnish a foundation to reopen an assessment for an earlier assessment year. However, there must be some new facts which come to light in the course of assessment for the subsequent assessment year which emerge in the order of assessment. Otherwise, a mere change of opinion on the part of the Assessing Officer in the course of assessment for a subsequent assessment year would not by itself legitimise the reopening of an assessment for an earlier year. 15. In Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC), the case 15 of the Revenue was that the assessee was charging to its profit and loss account, fiscal duties paid during the year as well as labour charges, power, fuel, wages, chemicals, etc. However, while valuing its closing stock, the elements of fiscal duty and the other direct manufacturing costs were not included by the assessee. This resulted in undervaluation of inventories and understatement of profits. This information, as the Supreme Court emphasized, was obtained by the Revenue in the assessment proceedings of a subsequent year. Consequently, the reopening of the assessment was held to be valid. The point to be emphasized is, there....
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.... 18, 2009, making a full disclosure of facts. Now, it is in this background that the order of assessment under section 143(3) must be considered. The Assessing Officer specifically discussed in the course of the assessment order the matters in respect of which he has made a disallowance either fully or in part. Since the Assessing Officer did not find any justification to reject the claim of the assessee in respect of the issue of container detention charges, there was no specific discussion in the course of order. In this regard, the following observations of a Division Bench of this court in Idea Cellular Ltd. v. Deputy CIT [2008] 301 ITR 407 (Bom) have relevance (page 414): "It was also sought to be contended that since the Assessing Officer had not expressed any opinion regarding this matter in his original assessment order, it could not be said that there was any change of opinion in this case. In our view, once all the material was before the Assessing Officer and he chose not to deal with the several contentions raised by the petitioner in his final assessment order, it cannot be said that he had not applied his mind when all material was placed by the petitioner be....
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....at case the assessee had made a disclosure in the notes forming part of the accounts of the nature of payments; the statutory auditors had also included a note in the audit report; during the course of the assessment proceedings; and the Assessee had addressed a comprehensive letter making a full disclosure of facts. Taking note of the aforesaid factual background, the Hon'ble High Court observed that the assessing officer had specifically taken up the issue during the course of assessment proceedings and did not find any justification to reject the claim of the Assessee in respect container detention charges. Even though there was no specific discussion in the assessment order in this regard, it cannot be said that the assessing officer had not applied his mind to the issue and/or had not expressed any opinion on the same. Thus, the Hon'ble High Court noted that the Assessing Officer had formed a view on the issue of allowability of container detention charges during the assessment proceedings and on the basis of the aforesaid concluded that the reassessment proceedings could not be have been initiated on account of `change of opinion'. In the aforesaid context the Hon....
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....ficer had not scrutinized the issue of deductibility of payments made to auto dealers under Section 37 of the Act (read with Explanation 1 thereto) during the regular scrutiny assessment proceedings. Therefore, the question of the Assessing Officer forming `another view' on account of `change of opinion' for the Assessment Year 2012-2013 does not arise. We reject the contention of the Assessee that that Assessing Officer had reviewed its earlier decision. Clearly, the case before us is not a case of change of opinion and therefore, the defense of `change of opinion' is not available to the Assessee for the Assessment Years 2012-2013. 44. We note that the Hon'ble Bombay High Court has held that where the reopening has taken place within four years that may legitimately give rise to an inference of escapement of income. The `new information' which has come to the knowledge of the Revenue subsequent to framing of assessment under Section 143(3) of the Act would, therefore, constitute 'tangible material'. It was emphasized by the Hon'ble High Court that where in the case of subsequent assessment proceedings certain `additional information' is obta....
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.... was placed on behalf of the Assessee on a number of judicial precedents. However, none of the judicial precedents would apply to the facts of the present case, since fresh tangible material in the form of the aforesaid statements of the employees of the Assessee-Company recorded by after the completion of the assessment was available with the Assessing Officer at the time of recording reasons for reopening the assessment. 48. Even the disclosure made by the Assessee in the books of accounts and financial statements regarding the payments made by the Assessee to auto dealers would not advance the case of the Assessee. The case set up by the service tax authorities was that the commission payments were made by the Assessee- company to auto dealers for sale of insurance policy. Since the same were prohibited as per the provisions of the Insurance Act, 1938, bogus invoices were raised by the auto dealers for provisions of services and reimbursement of expenses on the Assessee-company and in respect of the same CENVAT Credit was being claimed by the Assessee incorrectly. While reliance was placed by the Assessee on the decision of CESTAT and the judgment of the Hon'ble Madras Hi....
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....le material to come to the conclusion that there is an escapement of income from assessment. If Assessing Officer has such tangible material, the power to reopen can be exercised. It is settled law that at the stage when the Assessing Officer reopens the assessment, it is not necessary that material before the Court should conclusively prove or establish that income has escaped assessment. We find support for this view in Export Credit Guarantee Corporation of India Ltd. v. Addl. CIT [2013] 30 taxmann.com 211/[2015] 228 Taxman 28 (Mag.)/[2013] 350 ITR 651/259 CTR 465 (Bom.) In Export Credit Guarantee Corporation of India Ltd. (supra), His Lordship Dr. D.Y. Chandrachud (as he then was), has expressed that a reason to believe at the stage of re-opening is all that is relevant. The test to be applied is whether there is tangible material to do so. What is tangible is something which is not illusory, hypothetical or a matter of conjecture. At this stage, the test to be applied is only whether there was reason to believe that income had escaped assessment and whether the Assessing Officer has tangible material before him for the formation of that belief. A reason to believe is what is r....
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..../1983, was issued to the assessee under Section 148 of the Act. The order of Collector of Central Exercise & Customs and the Gold Control Administrator which formed the basis of issuance of notices under Section 148 of the Act were set aside vide Order, dated 07/10/1982, passed by the Central Government. Therefore, when the notice under Section 148 was issued, the orders which formed the basis of the notice stood set-aside. In the aforesaid facts, the Hon'ble High Court had quashed the notice as based upon order which were non-existent in the eyes of law. The relevant extract of the decision of the Hon'ble Andhra Pradesh High Court has been reproduced below for ready reference: "It is unnecessary to quote clause (b) of the said section, as it is common case that the impugned notice was issued under clause (a). A reading of clause (a) of section 147 shows that, for issuing a notice, the Income-tax Officer must have reason to believe that certain income had escaped assessment due to the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. Whether he has reason to believe or not d....
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....lector of Central Excise and the Gold Control Administrator were set aside. The effect of this order would be that there was no order of the Collector of Central Excise or the appellate authority (Gold Control Administrator) existing in law. Since the impugned notice was issued only on the basis of the orders of the Collector of Central Excise and the Gold Control Administrator, which do not exist in the eye of law, the impugned notice cannot be sustained and it must be held that it is based on no material. It is submitted by Mr. Suryanarayana Murthy, the learned standing counsel for the Department, that the proceedings regarding confiscation of gold are still pending and the enquiry in regard to the ownership of the gold is in progress. As and when such enquiry is completed, it is open to the Government to take such appropriate action in accordance with law and in accordance with the findings arrived at the enquiry. But, so far as the present notice is concerned, we are of the view that it cannot be upheld and it must be held to be void as it is based on no valid material. For the foregoing reasons, we quash the impugned notice. The writ petition is accordingly a....
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....ngs after recording/concluding as under: "For the A. Y.2010-11, the nature of expenses in the form of payments made to motor car dealers needs to be examined on the same issue as in A.Y.2014-15, such payments made to the motor dealers are clearly in the nature of commission which was paid to the motor dealers which is not an allowable expense u/s.37. In view of all the above, for the A.Y.2010-11 I have reason to believe that income assessable to tax amounting to more than rupees fifty thousand has escaped assessment and hence notice u/s.148 is to be issued." 55. In view of the above we reject the contention of the Assessee that the reassessment proceedings were initiated to make fishing/roving inquiries or for the purpose of mere verification. During the course of hearing it was contended on behalf of the Assessee that re-assessment cannot be initiated for the purpose of making fishing enquiry. It was submitted that the reasons recorded state: " ... The nature of expenses in the form of payments made to motor car dealers needs to be examined on the same issue as in Assessment Year 2014-15 ... ". (emphasis added). 56. We have also perused the three j....
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....sessing Officer formed a belief that income chargeable to tax had escaped assessment. Therefore, we hold that in the present case the mandatory preconditions for initiating reassessment proceedings for the Assessment Year 2012-2013 within a period of 4 years from the end of the relevant previous year stood satisfied. Accordingly, we reject all the contentions raised by the Assessee challenging the validity of the reassessment proceedings for the Assessment Year 2012-2013. We hold that in the present case jurisdictional requirements for reopening of the assessment were `strictly satisfied'. Accordingly, Ground No.1 & 2 raised by the Assessee are dismissed. Ground No.3 to 6: 58. Ground No. 3 to 6 raised by the Assessee pertains to disallowance of payments made to auto dealers read as under: "3. The CIT(A) was wrong in observing that the appellant was very well aware about the disallowance of payment to auto dealer issues and inquires, but that it had not suo- motu disclosed such information before the AO at that point of time. 4. The CIT(A) was not justified in confirming the action of the AO of disallowing the payment of Rs.72,96,29,567 by the Appellant t....
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....t of DGCEI, auto dealers were not licensed as agents/brokers/intermediaries of the insurance company and therefore, not entitled to receive any commission from the insurance company. The investigations revealed that the insurance company was also claiming CENVAT Credit on the aforesaid commission payments. The aforesaid report of the DGCEI was forwarded to the Assessing Officer by the Director of Income Tax (Investigation), Chennai. Based upon the aforesaid report of DGCEI, the Assessing Officer scrutinized the identical payments made to auto dealers. Placing reliance upon Section 40(1), 40(2A), 42E of Insurance Act, 1938 and circulars issued by Insurance Regularity and Development Authority of India (IRDAI), the Assessing Officer observed that the quantum of commission/brokerage that can be paid on general insurance cannot exceed 10% of the premium amount. He further observed that no brokerage can be paid where agency commission is payable and likewise, agency commission can be paid where brokerage is payable. However, the Assessing Officer concluded that (a) the payments made to auto dealers exceeded the threshold limit; and (b) procurement of insurance constituted a core activit....
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....ed by law. The relevant law in the present case is the Insurance Act. The AO has alleged that the assessee has violated the provision of Sections 40(1) and 40(2A) of the Insurance Act and IRDAI guidelines. In this context, the allegation of the Departmental Authorities is the assessee has paid commission in excess of what is authorized under the Insurance Act. Per contra, assessee has claimed that it has paid agency commission for motor insurance purely in accordance with the provisions of Insurance Act, which is 10% of the premium value. It is the case of the assessee that the alleged excess payment made is not insurance commission but payment made towards services rendered in relation to non-core activities such as policy servicing and related activities. 21. Though, the Departmental Authorities have not accepted the aforesaid claim of the assessee, however, there is no material on record to demonstrate that any action has been taken by the competent authorities under the Insurance Act. As per our understanding, Sections 102, 103, 104, 105, 105A and 105B contain provisions to impose penalty for default in complying with or acting in contravention of any provisions of the....
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....e Assessee was directed to submit copy of all the orders passed by IRDA levying penalty on the Assessee. It was submitted by the Learned Counsel appearing for the Assessee that the no penalty was levied in relation to the payments made to auto dealers. Following details were furnished by the Assessee during the course of hearing along with the copy of the relevant orders, dated 11/03/2016 and 13/09/2019: "Details of Penalty imposed on New India Assurance Company Ltd. by IRDAI A.Y. Penalty order Description Penalty imposed on New India 2012- 2013 IRDAI/Enf/O RD/ONS/046 /03/2016 Dated 11/03/2016 Charge 3 Insurer has violated the F&U guidelines dated 28/09/2006 by not following the rating and discount structure filed with the Authority In view of the violation of the F&U guidelines observed at charge 3 & 7, a penalty of Rs.5 lakhs is imposed Charge 7: allowed regional office in-charge to offer 'discretionary/commercial' discounts without any upper limit 2018- 2019 IRDAI/Enf/O RD/ONS/164 /09/2019 Dated 13/09/2019 Charge 1 Violation of F & U Guidelines/Circulars Only observation and no penalty imposed as no violation post ....
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....ction (C.O. No.97/Mum/2024) in Revenue's Appeal. ITA No.2845/Mum/2024 [Revenue's Appeal] 67. The Revenue has raised three grounds of appeal in ITA No. 2845/Mum/2024 which are taken up hereinafter in seriatim. Ground No.1 68. Ground No. 1 raised by the Revenue reads as under: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the claim of the appellant for IBNR and IBNER without appreciating the fact the assessee company has created the provisions in anticipation of settlement of claims that were not ascertained and ignoring the fact the assessee company is yet to assess the loss and determined the amount of compensation thereby making this liability as unascertained liability." 69. Ground No.1 raised by the Revenue challenges the order of CIT(A) whereby the Learned CIT(A) had deleted the disallowance of INR.8,58,10,00,000/- made by the Assessing Officer in respect of claims 'Incurred But Not Reported' (IBNR) and 'Incurred But Not Enough Reported' (IBNER). 70. The relevant facts in brief are that the Assessee had claimed deduction for Provision towards IBNR and IBNER claims fo....
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....supported by the actual valuation and hence, he disallowed 148,43,01,915/-. The ld CIT(A) after considering the decision of the Honourable Supreme Court in case of 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 Insuran....
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....ring the year. The learned Assessing Officer held that it is an anticipation of settlement of claim and therefore it cannot be said to be a definite liability. We find that 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 vs. 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 asses....
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....esident nor filed the prescribed undertaking alongwith the certificate from an accountant while making remittance reissurance. Further the Ld. CIT(A) has also not appreciated the fact that the payment of reissurance premium is in violation of section 2(9) of the Insurance Act, 1938 and accordingly the said payment is contravention of the existing law and also not allowable expenses u/s.37(1) of the Act." 76. Ground No.2 raised by the Revenue challenges the order of CIT(A) deleting the disallowance of INR.17,30,60,501/- made by the Assessing Officer in respect of reissurance premium paid outside India. The Assessing Officer has made the aforesaid disallowance holding that the payment of reinsurance premium outside India was prohibited as per Section 2(9) of the Insurance Act, 1938 and therefore, as per Explanation 1 to Section 37(1) of the Act deduction could not be allowed for the same. Further, since the Assessee had failed to discharge the tax withholding obligations in terms of Section 195 of the Act, the deduction for the payment made outside India towards reinsurance premium could be allowed as a deduction in terms of Section 40(a)(ia) of the Act. However, in appeal the CIT....
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....ompanies outside India results in loss of foreign exchange of their requirements in this connection and more often than not enter into disadvantageous and the Bill is intended to foster the growth of Indian re-insurance companies and also to save foreign exchange. The Bill sought to provide that every insurance company operating in India must re- insure a certain percentage of its business with Indian re- insurance companies approved in this behalf by the Central Government. The Central Government was given power to fix the percentage and this power to be exercised in consultation with the Advisory Committee so constituted. The power was also conferred on the Central Government to allocate the percentage so fixed amongst the approved Indian re-insurance companies. With the aforesaid object, the Bill proposed to insert Part IVA under the head "Re- insurance" containing two provisions, viz., Sections 101A and 101B. 17. XX XX 18 XX XX 19. XX XX 20. A conjoint reading of Regulation 3 and sub-Regulations (1) to (10) will clearly show that the objectives were to maximize the retention of revenue within the country. What we are required to see ....
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....-insurance companies can accept re-insurance business without taking any licence and without opening any branch in India. Thus, the suggestion was there is a need for regulation for any foreign country coming into India and doing re-insurance business. Ultimately, the Standing Committee on Finance noted that there is no bar on foreign re-insurance business companies carrying on or opening a branch, nor there to control the transaction of foreign re-insurers. This ultimately, led to the amendment to the Insurance Act by amending the definition of "insurer" in Section 2(9) of the Insurance Act to mean a foreign company engaged in re- insurance business through a branch established in India. The Tribunal was of the view that unless and until a branch is opened by the foreign re-insurance company, the question of conducting re-insurance business in India cannot be done. In our considered view, this conclusion of the Tribunal is not sustainable. The answer lies not in any recent proceedings but, a circular issued by the CBDT as early as on 03.10.1956 bearing Circular No. 38(XXXIII-7) [F.No.51(5)-IT/54]. The operative portion of the circular reads as follows :- "Liability to tax....
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....ments without reference to the bank. 24. The above will clearly show that re-insurance arrangement with a foreign insurance company is permissible. Thus, it is evidently clear that on and after the introduction of Section 101A to the Insurance Act, there is a mandatory requirement for other insurer to re insure with the Indian re-insurers and such percentage is put to a maximum of 30% and the language of Section 101A nowhere prohibits the re-insurance with foreign re insurance companies above the percentage specified by the authority with previous approval by the Central Government. That apart, the Tribunal erred in drawing a presumption regarding prohibition of re-insurance with foreign re-insurance companies . This presumption is erroneous for the simple reason that the statement of objects of the Insurance Act itself clearly stipulates wherever there is a prohibition . By way of illustration, we can refer to Sections 2(c), 2(c)(b), 2(9), 32(a), 40, 41, 42(a) and 52(a). Therefore, no inference could have been drawn, as drawn by the Tribunal and consequently, to be held that there can be no bar or prohibition under the Insurance Act, which prohibits ceding of re-insurance....
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....red by the Division Bench and ventured into a jurisdiction, which is wholly prohibited in the light of the plain language of Section 254(1) of the Act. 27. Thus, for the above reasons, we are of the clear view that the order passed by the Tribunal calls for interference. Accordingly, the appeals, filed by the assessee are allowed and the substantial questions of law framed are answered in favour of the assessee." ( Emphasis Supplied) 80. On perusal of the above extract of the judgment of Hon'ble Madras High Court it becomes clear that the Hon'ble High Court held that there was no absolute prohibition under India Insurance laws on payment of reinsurance premium outside India to a foreign re-insurer. Therefore, the Tribunal erred in invoking provisions contained in Explanation 1 to Section 37(1) of the Act. In our view, the ratio of the aforesaid judgment would squarely apply in the case before us. Accordingly, respectfully following the above judgment of Hon'ble Madras High Court in the case of Cholamandalam Ms General Insurance Co. Ltd (supra) we reject the contention of the Revenue that reinsurance premium paid outside India cannot be allowed as de....
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....nce chargeability of income in India is so established, provisions of withholding tax u/s 195 of Income Tax Act 1961 kick in which appellant has not adhered to. (b) The NRs and appellant are not doing one-off transaction but are involved in continuous transactions over the period of treaty/agreement between NRs and appellant while such treaties keep on getting over for some cases and get created for some other cases. NRs depend fully upon appellant with respect to any risk analysis and NRs reimburse any claims made by appellant. (c) Due to amendment in as per Insurance Law (Amendment) Act 2015 and IRDA (General insurance-reinsurance) Regulations 2016, a foreign company engaged in reinsurance business can do so only through a branch established in India and hence presence of a PE is prerequisite for NR to carry out any such business in India. Also, rule 6 of First schedule to income Tax Act becomes applicable in such cases. (d) In cases where brokers remit the reinsurance premium to NRs, said brokers act as agent of NR and liabilities of appellant stands discharged as per IRDA guidelines. Thus, principal & agent relationship exists between reinsurance agen....
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.... compensation was determined. I have gone through the submissions of the appellant carefully and I find that the AO had provided sufficient opportunities of hearing to the appellant but it is not apparent from record in appeal whether any specific query had been raised by the AO, during the assessment proceedings, regarding the details furnished during these appeal proceedings. In view of the above and also considering that the additional evidences submitted by the appellant are crucial to decide the issues in appeal as well as to compute the actual income of the appellant, relying upon the decisions of Hon'ble Courts in Alcon Resort Holding Ltd [2023] 151 taxmann.com 98 (Bombay), Daljit Singh Sra [2017] 80 taxmann.com 271 (Punjab & Haryana), Suretech Hospital & Research Centre Ltd. [2007] 164 TAXMAN 168 (BOM.) and Rankin Infrastructure (P.) Ltd. [2022] 142 taxmann.com 37 (Mumbai - Trib.), the additional evidences submitted by the appellant are hereby admitted in terms of Rule 46A of I.T Rules 1962. It is noted that in its rejoinder dated 12/01/2024, to remand report, the appellant reiterated its earlier submissions on merits of the issue. 6.....
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....rough setting up of branches for the purpose of reinsurance business or as investors in an Indian Insurance Company within the 49% cap." This explanatory note read with Insurance Regulatory and Development Authority of India (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd's) Regulations, 2015 and Insurance Regulatory and Development Authority of India (General Insurance- Reinsurance) Regulations, 2016 brings out that this Act & regulations enables the NRs, if they want, to open branch offices in India but these laws do not make it mandatory for them to do so. Thus, the foreign reinsurers did not have to open any branch office in India and it was just a choice given to them by these amendments in regulations. Hence, the presumption of the AO that by virtue of these amendments it could be assumed that foreign re-insurers had branches in India was incorrect. 6.3.6 In the present case, the appellant has provided the details of NRs and submissions on taxability of their receipts based upon DTAAs. It is noted that the appellant ceded reinsurance to the following NRs in FY 2011-12: 1. Asian Re, Thailand 2. Best ....
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....reinsurance ceded to non-resident reinsurers is not taxable in India under Income-tax Act, 1961 or under DTAA between India, and respective countries. To better understand the decisions of Hon'ble Tribunal, the relevant paras of decision in case of Cholamandalam MS General Insurance Co. Ltd. [2022] 142 taxmann.com 3 (Chennai-Trib.)[26-08-2022] are reproduced below: XX XX The important aspect of these decisions is that they were pertaining to the periods prior to FY 2016-17 when the foreign reinsurers did not have any branches in India even under IRDA Act/regulation and hence, the said decisions can be taken as applicable for those NRs who did not have any branch in India prior to FY 2016-17. Thus, relying upon aforementioned decisions of Hon'ble Tribunals, specifically in cases of Tata AIG General Insurance Company Ltd (supra) and Cholamandalam MS General Insurance Co. Ltd. (supra), it is hereby held that for as none of the entities had any branches in India in FY 2011- 12 as has been brought out in preceding paras of this order, no disallowance u/s 40a(i) was called for in the present case of the appellant. Also, in the case of the prese....
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.... a permanent establishment in India in terms of the applicable double taxation avoidance agreement. The CIT(A) noted that the foreign general insurance companies were not permitted to set up branch in India prior to financial year 2016- 17. The CIT(A) relied upon the financial statements and disclosures made by the non-resident payees with IRDA in supported the findings that the none of the non-resident payees had presence in India during the previous year relevant to the Assessment Year 2012-2013. Having given thoughtful consideration to the rival submissions and on perusal of record, we are of the considered view that there is no infirmity in the above findings returned by the Learned CIT(A). The Revenue has not been able to place on record any material to dislodge the findings returned by the Learned CIT(A). No material has been placed before us to take a different view of the matter. We do not find any infirmity findings returned by the CIT(A) and therefore, we decline to interfere with the order passed by the Learned CIT(A) in this regard. Accordingly, Ground No.2 raised by the Revenue is dismissed. Ground No.3 84. Ground No.3 raised by the Revenue is as under: ....
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....nd find that the identical issue has been decided in favour of the Assessee the Tribunal. The relevant observations/findings of the Tribunal are as under: (a) Unexpired Risk Reserve (URR) represents portion of net premium attributable to future risk period; (b) URR is not an ad-hoc or discretionary reserve and is computed scientifically based on actuarial methods and regulatory requirements as mandated by Insurance Act, 1938 and IRDA guidelines; (c) Rule 5 of the First Schedule to the Act specifically allows deduction for the URR while computing taxable income for general insurance business. Rule 6E of the Income Tax Rules, 1962 prescribed limits (e.g., 50% for fire and miscellaneous insurance, 100% for marine) for deduction of URR (d) URR does not fall under the reserves to be added back as specified under Explanation 1 to Section 115JB(2), as it is not a reserve created out of book profits voluntarily but under statutory compulsion for accounting for unearned premium. 91. The relevant extract of the decisions of Mumbai Bench of the Tribunal in the case of the case of Munchener Ruckversicherungs Gesellschaft Aktiengesellschaftin Munchen (supr....
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.... income not relating to the particular accounting period in which the said premium has been received, is separately disclosed in the financial statements. Hence logically that part of income which is attributable to the succeeding accounting period is reduced from the total premiums received during an accounting period by way of creation of a reserve for unexpired risk which is in accordance with the Insurance Act, 1938. In this regard, the ld. AR also submitted that every year adjustments are made to the existing reserve for unexpired risk by way of crediting or debiting the amount of difference between the reserve created in the immediately preceding year and the reserve required to be credited during the current accounting year. Accordingly, we hold that it cannot be considered as any "amount carried to any reserve" debited to the Profit & Loss Account, but it represents that part of premium income which does not relate to the current accounting period. Hence, in our considered opinion, the creation of a reserve for unexpired risk cannot be considered to be similar to those "reserves" which have been referred to in clause (b) of Explanation (1) to section 115JB(2) of the Act. Th....
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....the same has been duly certified by the actuary and the auditors of the assessee. Hence we hold that the same should be excluded for the purpose of computing book profit. 10. Our aforesaid view is also fortified by the decision of Co-ordinate Bench of Kolkata Tribunal in the case of DCIT v. National Insurance Co. Ltd reported in 72 taxmann.com 116, wherein it was held that a reserve created for unexpired risk in case of general insurance business cannot be added back for the purpose of computation of book profits u/s 115JB of the Act as it does not fall in the category of reserves specified in clause (b) of Explanation 1 to section 115JB(2) of the Act. 11. Before we conclude the issue, we would also like to address the issue in dispute that Rule 5 of the First Schedule of the Act specifies the computation mechanism of profits/gains arising from general insurance business and specifically allows deduction for reserve for unexpired risk while computing taxable income for the year under consideration. Rule 6E of the Income-tax Rules, 1962 prescribes certain percentage of the net premium for creating reserve for unexpired risks which is allowed as a deduction. Accordi....
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....ss Objections preferred by the Assessee challenging the validity of the reassessment proceedings are dismissed as having been rendered infructuous. 95. In result, the present appeal preferred by the Assessee [ITA No.2616/Mum/2024] is Partly Allowed and appeal preferred by the Revenue [ITA No.2845/Mum/2025] as well as the Cross Objections [CO 97/Mum/2024] are dismissed. ASSESSMENT YEAR 2013-2014 ITA No.2618/Mum/2024 [Assessee's Appeal] 96. Now we would take up appeal preferred by the Assessee for the Assessment Year 2013-2014 which is directed against the Order, dated 20/03/2024, passed by the CIT(A) whereby the appeal preferred by the Assessee against the Assessment Order, dated 29/12/2017, passed under Section 143(3) read with Section 147 of the Act was disposed off as dismissed. Ground No.2 to 4: 97. We would first take up Ground No. 2 to 4 dealing with the merits of the disallowance of payments made by the Assessing Officer in respect of payments made by the Assessee to auto dealers which was confirmed by the Learned CIT(A). The said grounds of appeal read as under: "2. The CIT(A) was not justified in confirming the action of the AO of disallowing ....
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....iled Cross Objections (CO 96/Mum/2024) challenging the validity of the reassessment proceedings. ITA No.2841/Mum/2024 (Revenue Appeal) 102. We would first take up grounds raised by the Revenue in its appeal. Ground No.1 & 3 103. Ground No.1 & 3 raised by the Revenue is as under: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the claim of the appellant for IBNR and IBNER without appreciating the fact the assessee company has created the provisions in anticipation of settlement of claims that were not ascertained and ignoring the fact the assessee company is yet to assess the loss and determined the amount of compensation thereby making this liability as unascertained liability. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the disallowance of Rs.846,55,00,000/- on account of reserve for unexpired risk without appreciating the fact the said reserved was created by the assessee on adhoc basis by considering the total premium earned from various segments during the relevant financial year." 104. During the course of hearing both the side....
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....urance premium of Rs. 44,87,29,401/- ceded outside India. 6.3.1 The AO noted that appellant had collected premium from clients in India and ceded a portion of the premium to foreign insurers depending upon quantum of business, risk-sharing and negotiations. Such premium had been deducted from total premium declared in P/L account. When asked as to whether TDS had been deducted/withholding tax made on these amounts, appellant's submissions on this issue before AO are summarized below: (i) As per IRDA guidelines/regulations, appellant can undertake such reinsurance business outside India with such cross-border re-insurers who do not have any branch in India. (ii) No withholding tax obligations arises to appellant on such remittances as the cross-border insurers (except Swiss Reinsurance Company Ltd.) did not have any presence/permanent establishment in India. (iii) Appellant also relied upon Hon'ble ITAT Mumbai in case of Aon Global insurance Services Ltd (ITA No. 5184 to 5186/Mum/2009), Swiss Reinsurance Co. Ltd ITA No. 1667/Mum/2014 (AY 2010-11) and M/s Bharti AXA Life Insurance Co. Ltd (ITA no.4805- 4808) to support its claim. 6....
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....ore Exploration India Ltd ITA No. 2037/Mads/06, West Asia Maritime Ltd (ITAT Chennai), AAR in Rajiv Malhotra (in Re)- w.r.t. withholding tax (f) AO also held, without prejudice to the above reasons, that such payments were allowable u/s 37(1) of the Act also in view of decision in case of United India Insurance Co. Ltd (ITA No. 2107/Chny/2014 dated 28/08/2018) 6.3.3 During the present appeal proceedings, appellant made similar submissions as made before the AO. Appellant also relied upon more decisions, as below, in its favour: (a) Cholamandalam MS General Insurance Co Ltd 102 Taxmann.com 292 (Mad HC) (b) Cholamandalam MS General Insurance Co Ltd 142 Taxmann.com 3 (ITAT Chennai) (c) Tata AIG General Insurance Co. Ltd 141 taxmann.com 70 (Mumbai ITAT) 6.3.4 Admissibility of additional evidences: Vide notice dated 30/08/2023, this office had specifically asked the appellant to produce the copies of agreement between appellant and Non Resident Insurers (NRs), details of premium ceded in this assessment year, details of TDS deducted and paid along with explanation if no TDS deducted/less deducted, evidences that all NRs were registered/certif....
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....is seen that one has to first establish the chargeability of the sum in India under section 5 rws 9 of the I.T. Act as well as under the relevant DTAA and application of section 195 and 40(a)(i) of the I.T. Act is secondary. To establish the chargeability of income of NRs in India, AO has relied upon, among other reasons, on the fact of amendments in Insurance Act and IRDA regulations to point out that due to such amendments, the NRs compulsorily had to have a 'branch' in India which would create a 'business connection' or a `permanent establishment' in India and which, in turn, would lead to income of NRs taxable in India. However, in my considered opinion, AO has perhaps been led only by a presumption that any business connection or permanent establishment existed in India on account of such amendment in insurance Acts and IRDA Act. XX XX 6.3.6 In the present case, the appellant has provided the details of NRs and submissions on taxability of their receipts based upon DTAAs. It is noted that the appellant ceded reinsurance to the following NRs in FY 2013-14: 1. ARIG Re, Bahrain 2. Asian Re, Thailand ....
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....isallowed u/s 40(a)(i) of the Act, for failure to deduct TDS u/s 195 of the Act, because, reinsurance ceded to non-resident reinsurers is not taxable in India under Income-tax Act, 1961 or under DTAA between India, and respective countries. To better understand the decisions of Hon'ble Tribunal, the relevant paras of decision in case of Cholamandalam MS General Insurance Co. Ltd. [2022] 142 taxmann.com 3 (Chennai- Trib.)[26-08-2022] are reproduced below: XX XX The important aspect of these decisions is that they were pertaining to the periods prior to FY 2016-17 when the foreign reinsurers did not have any branches in India even under IRDA Act/regulation and hence, the said decisions can be taken as applicable for those NRs who did not have any branch in India prior to FY 2016-17. Thus, relying upon aforementioned decisions of Hon'ble Tribunals, specifically in cases of Tata AIG General Insurance Company Ltd (supra) and Cholamandalam MS General Insurance Co. Ltd. (supra), it is hereby held that for as none of the entities had any branches in India in FY 2013-14 as has been brought out in preceding paras of this order, no disallowance u/s 40(a)(i) was called....
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....sessee against the Assessment Order, dated 01/03/2018, passed under Section 143(3) read with Section 147 of the Act was partly allowed. Ground No.1 & 2: 114. Ground No. 1 and 2 raised by the Revenue reads as under: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the profit on sale of investments has to be taxed as income from capital gain and not income from business. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that income of Rs.14,59,55,79,315/- is exempt under Section.10(38) of the I.T. Act, 1961." 115. Ground No. 1 & 2 raised by the Revenue relate to the exemption claimed by the Assessee under Section 10(38) of the Act in respect of profit on sale of investment. 16. When the above claim for exemption came up for scrutiny during the assessment proceedings, the Assessee relied upon letter issued by the Ministry of Finance [F. NO. 153/24/2006-TPL, dated 21/02/2006] to the Insurance Regulatory and Development Authority (IRDA) wherein it was mentioned that general insurance companies are to be treated at par with other assessees who are e....
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....sed for consideration it would be appropriate to refer to the relevant factual/legal background as emanating from material on record. 121. We note that Clause (b) of Rule 5 as in force prior to 01/04/1989 read as under: "Computation of profits and gains of other insurance business 5. The profits and gains of any business of insurance other than life insurance shall be taken to be the profit before tax and appropriations as disclosed in the profit and loss account prepared in accordance with the provisions of the Insurance Act, 1938 (4) of 1938) or the rules made thereunder or the provisions of the Insurance Regulatory and Development Authority Act, 1999 (4 of 1999) or the regulations made thereunder subject to the following adjustments: (a) subject to the other provisions of this rule, any expenditure or allowance including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed which is not admissible under the provisions of sections 30 to 43B in computing the profits and gains of a business shall be added back; (b) Any amount either written off ....
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....n credit for in the accounts on account of appreciation of or gains on realization of investments in accordance with the regulations made by Insurance Regulatory and Development Authority" 126. Circular No. 5/2010, dated 03/05/2010, issued by the CBDT explained that the purpose of re-insertion of Clause (b) in Rule 5 was to provide that any increase in respect of any amount credited in the books of accounts by reason of appreciation or gain on realization of investments in accordance with the regulations prescribed by IRDA shall be treated as income and shall be included in the computation of the total income. Similarly, it was provided that deduction shall be allowed in respect of any amount either written off or provided in the accounts to meet diminution in or loss on realization of investments in accordance with the regulations prescribed by IRDA. 127. Finance (No. 2) Act 2010 amended the above clause (b) of Rule 5 with effect from 01/04/2011 to read as under: "(b) (i) any gain or loss on realization of investments shall be added or deducted, as the case may be, if such gain or loss is not credited or debited to the profit and loss account (ii) any provi....
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....es of Section 10 of the Act. We note that Clause (37)/37A of Section 10 provide for exemption in respect of income chargeable under the head 'Capital Gains'. However, on perusal of Clause (38) of Section 10 we find that the expression used is 'any income'. Therefore, in our view, the contention advanced on behalf of the Assessee holds good in case of Clause (38) of Section 10 of the Act. We note that identical issue had come up for consideration before the Co-ordinate Benches of this Tribunal in the case of the Assessee for the assessment years falling after the amendment to Clause (b) Rule 5 which came into effect from 01/04/2011 and the same has been decided in favour of the Assessee for the Assessment Years 2011-2012 [ITA No.5116/Mum/2016, dated 06/11/2019, @ Page 5 para 6], and 2012-2013 & 2013-2014 [ITA No.3151&3149/Mum/2018, dated 11/08/2020 @ Page 6 Para 10]. Further, the Delhi Bench of the Tribunal has, in case of Oriental Insurance Co. Ltd. vs. Deputy Commissioner of Income-tax [2023] 146 taxmann.com 297 (Delhi - Trib.)/[2023] 102 ITR(T) 122 (Delhi - Trib.) held that an assessee-company engaged in business of general insurance would be entitled to claim exe....
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....10(34) 3,39,26,96,410/- 4. Profit on Sale of Investments u/s. 10(37) 6,39,06,24,962/- Total 9,81,85,84,856/- In the course of the assessment proceedings, the assessee was called upon to explain as to why disallowance of expenditure incurred for earning of the exempt income may not be worked out as per Sec. 14A r.w. Rule 8D. In reply, it was submitted by the assessee that as it was a wholly owned Government of India undertaking into general insurance business, whose income was computed as per the provisions of Sec. 44 of the Act r.w Rule 5 of the 'First Schedule', therefore, the provisions of Sec. 14A were not applicable in its case. Alternatively, without prejudice to its aforesaid claim, the assessee on a proportionate basis attributed an amount of Rs. 2,10,53,225/- i.e part of the expenses incurred by the Investment Department towards earning of the exempt income. However, the A.O rejected the aforesaid claim of the assessee and worked out the disallowance u/s 14A r.w Rule 8D at Rs. 13,05,70,512/-. On appeal, the CIT(A) relying on the orders passed by the Tribunal and also that of his predecessor in the assessee's own case for t....
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....neral insurance company governed by the special provisions laid down in Section 44 of the Act. Accordingly, we decline to interfere with the order passed by the Ld. CIT(A) on this issue. Ground No.3 raised by the Revenue is dismissed. GROUND NO.4 & 5 137. Ground No. 4 and 5 raised by the Revenue reads as under: "4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the premium paid by the assessee on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that there is no provision for amortization of such premium in the I.T. Act, 1961. 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the premium paid by the assessee on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that such premium paid is capital in nature and hence no allowable u/s.37 of I.T. Act, 1961." 138. The Ground No. 4 & 5 raised by the Revenue pertains deduction claimed by the Assessee in respect of amortized securities premium. 139. The relevant fa....
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....ame effect is the recent decision of the Tribunal in the case of the Assessee for the Assessment Year 2014-2015 [ITA Nos.2594&3150/Mum/2018, dated 11/03/2025] on which reliance was placed during the course of hearing. In that case the Co-ordinate Bench of the Tribunal had dismissed identical ground raised by the Assessee and allowed deduction for amortized securities premium amount for the Assessment Year 2014-2015 holding as under: "22. We heard the parties and perused material on record. We notice that the coordinate bench while considering identical issue in the case of TATA AIG General Insurance Co. Ltd. vs. ITO (ITA No. 2597/M/2009), wherein the issue of Amortization of Premium on Securities has been explained by way of example. The relevant extracts of the same is reproduced hereunder - "2. We may first take up the assessee's appeal in ITA No: 2597/Mum/2009. The first ground relates to the disallowance of the assessee's claim for amortization of the premium paid on the purchase of investments amounting to Rs. 1,91,33,945/-. The brief facts in this connection may be noticed. In the course of carrying on the business the assessee is required to invest ....
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.... understanding, is to value the investment only at its face value which is what the assessee would get at the end of the period and any excess paid over the face value while acquiring the security though will have to be shown as part of the cost, but still would have to be amortized over the remaining period till the maturity of the security so that the excess paid is properly accounted for and also the true picture is shown in the Balance Sheet. This appears to be the rationale behind the requirement. 23. We further notice that the coordinate bench in assessee's own case for AY 2006-07 has followed the above decision and decided the issue favour of the assessee by holding that - "16. We have heard the rival submissions and also perused the relevant finding given in the impugned orders. The assessee in the course of carrying of its insurance business, is required to invest its fund in specific debts securities of government or PSU bonds or other securities in accordance with the Insurance Act, 1938 and IRDA regulations. The assessee has purchased securities at a price which was slightly higher than the face value of the security because of accumulated interest....
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.... against allowing such an expenditure under the provisions of sections 30 to 43B. The words "expenditure or allowance ...... Which is not admissible under the provisions of sections 30 to 438" appearing in the sub-rule has been explained by the Supreme Court to mean that there should be a specific prohibition against the expenditure or allowance in which case alone the Assessing Officer can add back the same to the balance of profits. It is common ground that there is no such specific prohibition against, the allowance of the expenditure in the above sections-of the Act. It may be noted that though rule 5(a) of the First Schedule considered by the Supreme Court in the above judgment was slightly different, but the words "any expenditure or allowance which is not admissible under the provisions of section 30 to 43A" were present and the same words being present in the amended sub- rule, they have to be given the same meaning as was given by the Supreme Court. Therefore, even if the debit for amortization is considered as an expenditure or allowance, there being so specific prohibition against the expenditure or allowance in section 30 to 43B, the departmental authorities were not ju....
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....owance made under Section 14A of the Act. Accordingly, Ground No.6 raised by the Revenue is dismissed. 150. Thus, the present appeal preferred by the Revenue for the Assessment Year 2015-2016 is dismissed. ITA No.2619/Mum/2024 [Assessee's Appeal] 151. We would next take up appeal preferred by the Assessee for the Assessment Year 2015-2016 which is directed against the Order, dated 20/03/2024, passed by the CIT(A) whereby the appeal preferred by the Assessee against the Assessment Order, dated 01/03/2018, passed under Section 143(3) read with Section 147 of the Act was partly allowed. 152. The Assessee has raised 4 grounds of appeal. We would first take up Ground No. 2 to 4 raised by the Assessee dealing with the merits of the disallowance/additions made by the Assessing Officer Ground No.2 to 4: 153. Ground No.2 to 4 pertaining to disallowance made in respect of payments made to auto dealers read as under: "2. The CIT(A) was not justified in confirming the action of the AO of disallowing the payment of Rs.3,24,37,24,329 by the Appellant to the Auto Dealers. 3. The CIT(A) was wrong in observing that it has not been brought out as to when the appel....
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....f the Act was partly allowed. The grounds raised in the aforesaid appeal are taken up hereinafter in seriatim. GROUND NO.1 to 6 159. Ground No. 1 & 6 raised by the Revenue reads as under: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the profit on sale of investments has to be taxed as income from capital gain and not income from business. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that income of Rs.14,06,54,30,731/- is exempt u/s.10(38) of the I.T. Act, 1961. "3. whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the amount of disallowance under Section.14A of the I.T. Act, 1961 has to be computed as per rule 8D of I.T. Rules, 1962 when the computation of the assessee was not found to be correct and as held in the order of the Hon'ble High Court in the case of M/s. Godrej & Boyce Manufacturing Co. Ltd. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the premium paid by the assessee on purc....
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....it has not been brought out as to when the appellant had asked for the cross-examination of the auto dealers, as to how the appellant was prejudiced if the AO did not provide it an opportunity to cross-examine the auto dealers, and whether the auto dealers, if any had retracted their statements. 4. The CIT(A) further erred in confirming the action of the AO without providing an opportunity to the appellant to cross-examine the auto dealers." 164. During the course of hearing both the sides had agreed that our finding/adjudication on the Ground No.3 to 6 raised in appeal preferred by the Assessee for the Assessment Year 2012-2013 shall apply mutatis mutandis to Ground No.1 to 4 raised in the present appeal for the Assessment Year 2016-2017. Thus, keeping in view the parity in the facts and circumstances, and adopting the reasoning given while adjudicating identical grounds raised in appeal preferred by the Assessee for the Assessment Year 2012-2013 [ITA No.2616/Mum/2024] hereinabove, we delete the disallowance of INR.3,61,14,71,484/- made in respect of payments made to auto dealers the under Section 37(1) of the Act read with Explanation 1 thereto by following the decisi....
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.... CIT(A) has erred in holding that the premium paid by the assessee on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that such premium paid is capital in nature and hence no allowable u/s.37 of I.T. Act, 1961. 6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the claim of appellant for IBNR and IBNER without appreciating the fact that the assessee company has created the provisions in anticipation of settlement of claims that were not ascertained and ignoring the fact the assessee company is yet to assess the loss and determined the amount of compensation thereby making this liability as unascertained liability. 8. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the provisions of Section 115JB of the I.T. Act, 1961 are not applicable in the case of the assessee. 9. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the disallowance of Rs.776,13,61,000/- on account of reserve for unexpired risk without appreciating the fact th....
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....) of the Insurance Act, 1938 and accordingly the said payment is contravention of the existing law and also not allowable expenses u/s.37(1) of the Act." 171. Ground No. 7 raised by the Revenue challenges the order passed by the Learned CIT(A) deleting the disallowance to the extent of INR.80,66,10,860/- that was made by the Assessing Officer in respect reinsurance premium paid to the non-resident parties. We have dealt with identical issue in appeal preferred by the Revenue for the Assessment Year 2015-2016 [ITA No.2845/Mum/2024] and Assessment Year 2012-2013.After considering the contentions raised by both the sides and taking into consideration the material on record, we declined to interfere with the order passed by the Leaned CIT(A) on this issue in appeals for the Assessment Year 2012-2013 and 2015-2016. 172. For the Assessment Year 2017-2018, the learned CIT(A) has disposed of the ground raised by the Assessee challenging the disallowance made by the Assessing Officer in respect of re- insurance premium paid to the non-resident parties in the following manner: "6.9 Ground no. 9: It pertains to addition on account of reinsurance premium of Re 80,66,10,860/- ced....
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....) Due to amendment in as per Insurance Law (Amendment) Act 2015 and IRDA (General insurance-reinsurance) Regulations 2016, a foreign company engaged in reinsurance business can do so only through a branch established in India and hence presence of a PE is prerequisite for NR to carry out any such business in India. Also, rule 6 of First schedule to income Tax Act becomes applicable in such cases. (d) In cases where brokers remit the reinsurance premium to NRs, said brokers act as agent of NR and liabilities of appellant stands discharged as per IRDA guidelines. Thus, principal & agent relationship exists between reinsurance agent and NRs. (e) AO also cited case laws in favour of the Department: (i) R.D. Aggarwal & Company 56 ITR 20, 128 ITR 27 (Mad)-w.r.t. business connection (ii) Kanchan ganga Sea Foods Ltd AIT 2010 264 SC, Van Oordac Jet India P Ltd ITD 79, Transmission Corporation of Andhra Pradesh 239 ITR 587, Poompuhar Shipping Corporation Ltd 109 ITD 226, Frontier Offshore Exploration India Ltd ITA No. 2037/Mads/06, West Asia Maritime Ltd (ITAT Chennai), AAR in Rajiv Malhotra (in Re)- w.r.t. withholding tax 6.9.3 During the present....
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....ital & Research Centre Ltd. [2007] 164 TAXMAN 168 (BOM.) and Rankin Infrastructure (P.) Ltd. [2022] 142 taxmann.com 37 (Mumbai Trib.), the additional evidences submitted by the appellant are hereby admitted in terms of Rule 46A of I.T Rules 1962. It is noted that in its rejoinder dated 12/01/2024, to remand report, the appellant reiterated its earlier submissions on merits of the issue. To establish the chargeability of income of NRs in India, AO has relied upon, among other reasons, on the fact of amendments in Insurance Act and IRDA regulations to point out that due to such amendments, the NRs compulsorily had to have a "branch in India from FY 2016-17 onwards which would create a business connection or a permanent establishment in India and which, in turn, would lead to income of NRs taxable in India. However, in my considered opinion, AO has perhaps been led only by a presumption that any business connection or permanent establishment existed in India on account of such amendment in Insurance Acts and IRDA Act. XX XX 6.9.6 In the present case, the appellant has provided the details of NRs and/submissions on taxability of their receip....
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....f Hannover Re. https://www.hannover-re.com/1201530/form-ni- 28-statement-of-assets-3b pdf, also brings out this fact and that this entity had branch in India in FY 2016-17 w.e.f. 21/12/2016 and had also filed the returns and disclosure to this effect in India from quarter 4 of FY 2016-17 onwards as available on its above- referred website. Disclosures in form NL-31 for QE 31/03/2017 shows that this branch acted as an agent of Hannover Ruck SE, Germany, for the flow of insurance premiums including receipts/payments. Thus, these facts bring out that payments made by the appellant to Hannover Re, Germany in FY 2016-17 were liable for TDS u/s 195 of the Act as an agent of this entity existed in India and such payments were liable for taxation in India u/s 9 of the Act. In its defence, the appellant submitted a copy of five of its agreement with Hannover Re, Germany wherein General Insurance Corporation (GIC) was lead re-insurer and these agreements have been accepted by Hannover Re outside India, as per appellant's submissions. Thus, taxability of payments made to all entities (other than Swiss Re) has to be decided in the background of facts of this case. ....
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....ras of this order, these two entities had branches in India in 2016-17 who acted as their agents. However, in case of Swiss Re, since the appellant had deducted TDS @2.163% in view of lower TDS certificate no. 0216DL612A dated 08/07/2016 (effective from 01/04/2016 to 31/03/2017) issued by DCIT (IT)-4(2)(2), Mumbai u/s 195 of the Act, disallowance made by the AO u/s 40(a)(i) in case of Swiss Re is hereby deleted. Regarding Hannover Re, Germany as per the declaration filed in India (as available at IRDA website as referred above) by the agent of this entity, the existence of a PE in India has been established. The copies of five agreements furnished by the appellant or the DTAA does not bring out that the payments made to Hannover Re. Germany were not taxable in India after existence of such PE in India from 21/12/2016 onwards. The existence of such agent/branch of this entity in India made it liable for tax in India on payments made by the appellant u/s 9 of the Act. No lower TDS certificate u/s 195 of the Act has been produced by the appellant on account of this entity & hence disallowance was called for u/s 40(a) (i) of the Act. Considering the above, it is held ....
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....attracted. We note that the Learned CIT(A) had called for and admitted the additional evidence furnished by the Assessee. After taking into consideration the remand report submitted by the Assessing Officer as per Rule 46A of the Income Tax Rules, 1962, the CIT(A) had disposed off the ground raised by the Assessee challenging the disallowance onf reinsurance premium paid to foreign parties. Therefore, we reject the contention of the parties that sufficient opportunity was not granted by the CIT(A) to lead evidence or to make submission. We note that for the preceding assessment years the Learned CIT(A) has followed identical approach and adopted reasoning while deleting the entire disallowance. We note that for the Assessment Year 2016-2017, the Learned CIT(A) has returned following factual finding in respect of 15 non-resident parties to which reinsurance premium was paid by the Assessee during the relevant previous year: (a) 13 parties did not have presence in India either in the form of business connection or permanent establishment. Income of the aforesaid non-resident parties was not chargeable to tax in India; tax withholding provisions contained in Section 195....
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....issed. ITA No.2621/Mum/2024 [Assessee's Appeal] 177. . Now we would take up appeal preferred by the Assessee for the Assessment Year 2017-2018 which is directed against the Order, dated 20/03/2024, passed by the CIT(A) whereby the appeal preferred by the Assessee against the Assessment Order, dated 16/03/2019, passed under Section 143(3) of the Act was partly allowed. Ground No.1 to 4: 178. The Assessee has raised the following grounds of appeal: "1. The CIT(A) was not justified in confirming the action of the AO of disallowing the payment of Rs.4,12,93,89,338 by the Appellant to the Auto Dealers. 2. The CIT(A) erred in confirming the action of the AO, without appreciating the fact that the year under consideration was not the year for which order was passed by the Service Tax Department. 3. The CIT(A) was wrong in observing that it has not been brought out as to when the appellant had asked for the cross-examination of the auto dealers, as to how the appellant was prejudiced if the AO did not provide it an opportunity to cross-examine the auto dealers, and whether the auto dealers, if any had retracted their statements. 4. The CI....
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....d No. 1 to 6, 8 & 9raised by the Revenue reads as under: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the profit on sale of investments has to be taxed as income from capital gain and not income from business. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that income of Rs.23,02,96,38,259/- is exempt under Section.10(38) of the I.T. Act, 1961. 3. whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the amount of disallowance under Section.14A of the I.T. Act, 1961 has to be computed as per rule 8D of I.T. Rules, 1962 when the computation of the assessee was not found to be correct and as held in the order of the Hon'ble High Court in the case of M/s. Godrej & Boyce Manufacturing Co. Ltd. "4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the premium paid by the assessee on purchase of Government Securities, on Amortisation, was allowable as Revenue Expenditure without appreciating the fact that there i....
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.... both the sides had also agreed that our finding/adjudication on the corresponding grounds (Ground No.1 & 3) raised in appeal preferred by the Revenue for the Assessment Year 2012-2013 shall apply mutatis mutandis to Ground No.6 & 9 raised in appeal preferred by the Revenue for the Assessment Year 2017-2018. Thus, keeping in view the parity in the prevailing facts and circumstances, and adopting the reasoning given while adjudicating Revenue's appeal for the Assessment Year 2012- 2013 [ITA No.2845/Mum/2024] hereinabove, we dismiss Ground No.6 &9 raised by the Revenue. Ground No.7 185. Revenue has raised the following ground which reads as under: 7. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made on account of reissurance premium paid outside India of Rs.80,66,10,860/- without appreciating the fact that the deduction of TDS was not made on these payment u/s.195 of the Act, and it was neither approached the department u/s.195(2) before remitting the payment to non-resident nor filed the prescribed undertaking alongwith the certificate from an accountant while making remittance reissurance. Furthe....
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.... his reasons for doing so are summarized below. (a) The event of selling the insurance policy by the appellant takes place in India, any liability/loss claim on such reinsurance transactions arise in India through the brokers (most of whom are situated in india), most of the time reinsurance premium is received from Indian Insurer (II) by the broker in India who also settle the claim (if any) and after deducting their commission remit the net amount to the non-resident insurer (NR). These events establish that reinsurance income of NR accrues and arises in India and is also received in India wherever the broker is located in India. Thus, section 5(2) of Income Tax Act is applicable in such cases of reinsurance remitted to NRs by appellant. Once chargeability of income in India is so established, provisions of withholding tax u/s 195 of Income Tax Act 1961 kick in which appellant has not adhered to. (b) The NRs and appellant are not doing one-off transaction but are involved in continuous transactions over the period of treaty/agreement between NRs and appellant while such treaties keep on getting over for some cases and get created for some other cases. NRs depend....
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....im which were sent to the AO by this office on 13/10/2023. Vide report dated 09/01/2024, the AO stated that the Hon'ble ITAT Chennai in case of United India Insurance vs DCIT(LTU) ITA No. 1753, 1605, 1606,1607, 1608, 1609 & 1610/Chny/2011 dated 28/08/2018 had decided this issue against the assessee holding that merely because the incident happened during the year which is the basis for making a claim that cannot be the reasons for allowing compensation payable by the assessee for relevant assessment year & that such payment has to be allowed in the year in which compensation was determined. I have gone through the submissions of the appellant carefully and I find that the AO had provided sufficient opportunities of hearing to the appellant but it is not apparent from record in appeal whether any specific query had been raised by the AO, during the assessment proceedings, regarding the details furnished during these appeal proceedings. In view of the above and also considering that the additional evidences submitted by the appellant are crucial to decide the issues in appeal as well as to compute the actual income of the appellant, relying upon the dec....
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....e Business in India: The amended law enables foreign reinsurers to set up branches in India and defines re-insurance to mean "the insurance of part of one insurer's risk by another insurer who accepts the risk for amutually acceptable premium", and thereby excludes the possibility of 100% ceding of risk to a re-insurer, which could lead to companies acting as front companies for other insurers. Further, it enables Lloyds and its members to operate in India through setting up of branches for the purpose of reinsurance business or as investors in an Indian Insurance Company within the 49% cap." This explanatory note read with Insurance Regulatory and Development Authority of India (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd's) Regulations, 2015 and Insurance Regulatory and Development Authority of India (General Insurance- Reinsurance) Regulations, 2016 brings out that this Act & regulations enables the NRs, if they want, to open branch offices in India but these laws do not make it mandatory for them to do so. Thus, the foreign re-insurers did not have to open any branch office in India and it was just a choice given to them....
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....his entity existed in India and such payments were liable for taxation in India u/s.9 of the Act. In its defence, the appellant submitted a copy of five of its agreement with Hannover, Re. Germany wherein General Insurance Corporation (GIC) was lead re-insurer and these agreements have been accepted by Hannover Re outside India, as per appellant's submissions dated 25/09/2023.However, it is noted here that as per details filed by the appellant for this AY 2018-19, no payments were made to Hanover Re during FY 2017-18 & hence such agreements do not have any evidentiary value in this AY 2018-19. Even otherwise, it is noted that it is seen from the IRDA website that this entity had been granted a branch certificate on 21/12/2016 vide certificate/registration no. FRB/003. The website of Hannover Re, htts://www.hannover-re.com/1201530/form-nl- 28-statement -of-assets-3b.pdf, also brings out this fact and that this entity had branch in India in FY 2016-17 w.e.f. 21/12/2016 and had also filed the returns and disclosure to this effect in India from quarter 4 of FY 2016-17 onwards as available on its above-referred website. Disclosures in form NL-31 for QE 31/03/2017 s....
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.... cases of Tata AIG General Insurance Company Ltd (supra) and Cholamandalam MS General Insurance Co. Ltd. (supra), it is hereby held that for the 11 entities (except Swiss Re & Hannover Re) who did not have any branches in India in FY 2017-18 also as has been brought out in preceding paras of this order, no disallowance u/s 40a(i) was called for in the present case of the appellant. The disallowances made by the AO in these 11 cases is hereby deleted. Regarding SCORE Re, Singapore as per the details filed in India (as available at IRDA website as referred above in a preceding para of this order) by the agent of this entity, the existence of a PE in India from FY 2016-17 onwards has been established. The existence of such agent/branch of this entity in India made it liable for tax in India on payments made by the appellant u/s 9 of the Act. No lower TDS certificate u/s 195 of the Act has been produced by the appellant on account of this entity & hence disallowance was called for u/s 40(a) (i) of the Act. Considering the above, it is held that disallowance of payment of Rs.4,00,050/-made by the appellant to SCORE Re, Singapore is hereby upheld. To sum up, di....
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....bmitted by the Assessing Officer as per Rule 46A of the Income Tax Rules, 1962, the CIT(A) disposed off the ground raised by the Assessee in appeal before the CIT(A). Therefore, we reject the contention of the parties that sufficient opportunity was not granted by the CIT(A) to lead evidence or to make submission. Having given thoughtful consideration to the rival submissions and on perusal of record, we are of the considered view that there is no infirmity in the above findings returned by the Learned CIT(A). Neither the Assessee nor the Revenue have been able to place on record any material to dislodge the above findings returned by the Learned CIT(A). While the Assessee had refuted the findings of the Learned CIT(A) in relation to Hannover Re, no material has been placed before us to take a different view of the matter. The CIT(A) has returned a finding that SCORE Re had a business connection and Permanent Establishment in India for the previous year relevant to the Assessment Year 2018-2019 since it had a branch in India. The CIT(A) had relied upon the financial statements and disclosures made with IRDA in supported the findings. It is admitted position that the Assessee had....
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.... reasoning given while adjudicating identical grounds raised in appeal preferred by the Assessee for the Assessment Year 2012-2013 [ITA No.2616/Mum/2024] hereinabove, we delete the disallowance of INR.3,09,93,03,301/- made in respect of payments to auto dealers under Section 37(1) of the Act read with Explanation 1 thereto by following the decision of the Co-ordinate Bench of the Tribunal in the case of HDFC ERGO General Insurance Company Ltd. Vs. Assistant Commissioner of Income Tax[ITA No.2836 to 2841/Mum/2025 & ITA No.3277 to 3281/Mum/2025 for the Assessment Year 2010-2011, 2011-2012, 2013-2014, 2015-2016 & 2016-2017]. Accordingly, Ground No.1 to 4 raised by the Assessee are allowed. Ground No.5 192. Ground No. 5 raised by the Assessee reads as under: "5. The CIT(A) was not justified in confirming the order of the AO in disallowing deduction of reinsurance premium paid outside India to Hannover Ruck SE amounting to Rs.4,00,050" 193. We have already dismissed Ground No.5 raised by the Assessee while adjudicating Ground No.7 raised by Revenue in its appeal. 194. Thus, appeal preferred by the Assessee is partly allowed. 195. In result, for the Assessment Yea....
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....r IBNR and IBNER without appreciating the fact that the assessee company has created the provisions in anticipation of settlement of claims that were not ascertained and ignoring the fact the assessee company is yet to assess the loss and determined the amount of compensation thereby making this liability as unascertained liability. 8. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the provisions of Section 115JB of the I.T. Act, 1961 are not applicable in the case of the assessee. 9. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the disallowance of Rs.6,33,26,35,480/- on account of reserve for unexpired risk without appreciating the fact the said reserved was created by the assessee on adhoc basis by considering the total premium earned from various segments during the relevant financial year even if premium received by the assessee from Marine Hull and Miscellaneous insurance without the component of terrorism pool has been provided @50% of total receipt as reserve for URR." 198. During the course of hearing both the sides had agreed that our finding....
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....einsurance premium of Rs.56,32,97,673/- ceded outside India. 6.8.1 The AO noted that appellant had collected premium from clients in India and ceded a portion of the premium to foreign insurers depending upon quantum of business, risk-sharing and negotiations. Such premium had been deducted from total premium declared in P/L account. When asked as to whether TDS had been deducted/withholding tax made on these amounts, appellant's submissions on this issue before AO are summarized below: (i) As per IRDA guidelines/regulations, appellant can undertake such reinsurance business outside India with such cross-border re-insurers who do not have any branch in India. (ii) No withholding tax obligations arises to appellant on such remittances as the cross-border insurers (except Swiss Reinsurance Company Ltd.) did not have any presence/permanent establishment in India. (iii) Appellant also relied upon Hon'ble ITAT Mumbai in case of Aon Global insurance Services Ltd. (ITA No.5184 to 5186/Mum/2009) and M/s Bharti AXA Life Insurance Co. Ltd (ITA no.4805-4808) to support its claim. 6.8.2 The AO did not accept contentions of appellant....
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....a Maritime Ltd (ITAT Chennai), AAR in Rajiv Malhotra (in Re), United India Insurance (ITAT Cehnnai in ITA No.1753, 1606 to 1610/Chny/2011 dated 28.08.2018- w.r.t. withholding tax 6.8.3 During the present appeal proceedings, appellant made similar submissions as made before the AO. Appellant also relied upon more decisions, as below, in its favour: (a) Cholamandalam MS General Insurance Co Ltd 102 Taxmann.com 292 (Mad HC) (b) Swiss Reinsurance Company Ltd (ITA No. 1667/Mum/2014)- ITAT Mumbai (c) Tata AIG General Insurance Co. Ltd. 6.8.4 Admissibility of additional evidences: Vide notice dated 30/08/2023, this office had specifically asked the appellant to produce the copies of agreement between appellant and Non Resident Insurers (NRs), details of premium ceded in this assessment year, details of TDS deducted and paid along with explanation if no TDS deducted/less deducted, evidences that all NRs were registered/certified in their home country and if it were not so, then copy of approval of IRDA and copy of re- insurance program approved by IRDA. Vide submissions dated 14/09/2023, the appellant filed the details in support of its....
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....rom FY 2016- 17 onwards which would create a business connection' or a 'permanent establishment in India and which, in turn, would lead to income of NRs taxable in India. However, in my considered opinion. AO has perhaps been led only by a presumption that any business connection or permanent establishment existed in India on account of such amendment in Insurance Acts and IRDA Act. It is seen that the legislative intention behind the amendments in Insurance Acts and IRDA Act can be found from explanatory notes as in Press Information Bureau release dated 13/03/2015 (available at https://pib.gov.in/newsite/printrelease.aspx?relid=11704 3) "The amendment Act will remove archaic and redundant provisions in the legislations and incorporates certain provisions to provide Insurance Regulatory and Development Authority of India (IRDAI) with the flexibility to discharge its functions more effectively and efficiently. It also provides for enhancement of the foreign investment cap in an Indian Insurance Company from 26% to an explicitly composite limit of 49% with the safeguard of Indian ownership and control. ........... 6. Promoting Rei....
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....orm no. 15CA & 15CB (for foreign remittance compliances) of these entities. Now, regarding the details whether any branch of these 12 entities existed in India pursuant to amendments in IRDA & Insurance Act in 2015 & 2016, IRDA website, https://irdal.gov.in/frbs, shows that except Swiss Re and Hannover Re, none of the above entities had branch in India in FY 2018-19. Thus, based upon the details furnished by the appellant and the details available at IRDA website, the issue of taxation of such amount in India arises in none of the above cases and taxability of payments made to all entities has to be decided in the background of facts of this case. It is seen that reasons (viz. existence of a PE/business connection and taxability in India of such premium ceded to foreign reinsurers by Indian Insurers) set out by the AO, while disallowing these payments made by the appellant, have been elaborately dealt by Hon'ble ITAT, Chennai in decision for AY 2006-07 to 2009-10 in case of Royal Sundaram Alliance Insurance Co. Ltd [2023] 154 taxmann.com 19 (Chennai - Trib.) wherein the issue was decided in favour of the assessee placing reliance upon Tribunal's o....
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....already rejected the challenge to approach/reasoning adopted by the Learned CIT(A) in appeals for the preceding assessment years. We do not find any infirmity either in the approach or the reasoning adopted by the Learned CIT(A) while returning the factual finding for the assessment year before us. Thus, keeping in view the parity in the prevailing facts and circumstances, and adopting the reasoning given while adjudicating Ground No.7 raised in Revenue's appeal for the Assessment Year 2017-2018 [ITA No.2827/Mum/2024] hereinabove, we decline to interfere with the order passed by the Learned CIT(A) on this issue. The Revenue has failed to bring on record any material to dislodge the factual findings returned by the Learned CIT(A). Therefore, we dismiss Ground No.2 raised by the Revenue. 203. Thus appeal preferred by the Revenue is dismissed ITA No.2623/Mum/2024 [Assessee's Appeal] 204. Now we would take up cross-appeal preferred by the Assessee for the Assessment Year 2019-2020. Ground No.1 to 4: 205. Ground No. 1 to 4 raised by the Assessee pertains to disallowance of payments made to auto dealers read as under: "1. The CIT(A) was not justified in co....