TaxTMI 
TaxTMI 
2026 (10) TMI 656
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....ds of appeal: "1. The learned CIT(A) erred in disallowing the deduction of profit on sale of assets amounting to Rs. 2,02,000." "2. The learned CIT(A) erred in not following the provisions of section 32 of the Act, i.e. in not allowing the claim of depreciation amounting to Rs. 10,37,11,785 under section 32 of the Act." "3. The learned CIT(A) erred in not allowing the deduction of expenses amounting to Rs. 3,63,76,969 as per the proviso to section 40(a)(ia) of the Act, i.e. expenses disallowed in an earlier year on which tax was deducted and deposited during the year under consideration." "4. The learned CIT(A) erred in exceeding his jurisdiction in considering that the advertisement and marketing expenses incurred by the appellant constituted an international transaction within the meaning of section 92B of the Act." 3. The Revenue has raised the following grounds of appeal: "(i) The learned CIT(A) erred in not following the decision of his predecessor for assessment year 2009-10 wherein the adjustment was upheld." "(ii) The learned CIT(A) erred in holding that the advertisement and direct and indirect marketing expenses did....
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.... assets, tax depreciation and the expenditure earlier disallowed under section 40(a)(ia), principally relying upon New India Assurance Co. Ltd. v. Addl. CIT (2012) 133 ITD 131 (Mumbai). Both sides are aggrieved. 6. The learned Authorised Representative submitted that grounds 1 to 3 of the assessee's appeal stand squarely covered in favour of the assessee by the subsequent orders of the coordinate benches in the assessee's own case, namely, ITA No.1718/Mum/2020 for assessment year 2015-16, order dated 25.04.2022; ITA Nos.1834 and 1835/Mum/2023 for assessment years 2016-17 and 2017-18, order dated 30.10.2024; and ITA No.5394/Mum/2025, order dated 23.12.2025 for assessment year 2013-14. A detailed chart identifying the relevant paragraphs was placed on record. In respect of the Revenue's appeal, reliance was placed on ITA No.2597/Mum/2009 for assessment year 2003-04, order dated 22.10.2010; ITA No.7748/Mum/2013 for assessment year 2005-06, order dated 04.12.2015; the consolidated order dated 20.11.2015 in ITA Nos.3535 and 1702/Mum/2011 and connected appeals for assessment years 2006-07 to 2008-09; ITA No.14/Mum/2021 for assessment year 2015-16, order dated 08.03.2022; ITA Nos.1834 ....
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...., it had resulted in a situation that no depreciation at all was granted deduction to the assessee. This action was upheld by the Id. CIT(A). This, in our considered opinion, had resulted in gross injustice to the assessee. In any case, the depreciation computed u/s.32 of the Act is to be granted mandatorily to the assessee as per Explanation 5 to Section 32 of the Act. In our considered opinion, the effect of Rule 5, Clause 'a' of schedule-1 is that, if the insurance company has claimed a deduction for any expenditure / allowance or as debited in the accounts to the profit and loss account by way of provision or reserve, which is not admissible as per the provisions of Section 30 to 43B of the Income Tax Act, the same shall be liable for disallowance. The natural corollary to this would be that deductions that are otherwise specified u/s.30 to 43B would become allowable under the provisions of the Act and the same would get allowed to insurance company. Hence, logically if book depreciation is not allowed to the assessee, then the depreciation computed as per Section 32 of the Act would become automatically allowable to the assessee. This is irrespective of the fact that i....
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....owed u/s.43B in the year in which the same is actually paid. The Explanatory Memorandum to the Finance Bill 2020 explaining the provisions relating to direct tax amendments while proposing an amendment in Section 43B to insurance companies had stated as under:- "Section 44 of the Act provides that computation of profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or a co-operative society shall be computed in accordance with the rules contained in the First Schedule to the Act. Section 43B of the Act provides for allowance of certain deductions, irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by the assessee, only in the previous year in which such sum is actually paid. Rule 5 of the said Schedule provides for computation of profits and gains of other insurance business. It states that 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 accordanc....
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....nd legally liable for deduction / allowance to the assessee in the year in which such payments are made. This alone would address the clear intention of the legislature. Moreover these benefits are otherwise available to all other types of the assessee and there is no logical reason that an Insurance company alone should be deprived of the same. This would be more relevant from the point of discrimination of assessee. Considering the totality of these observations, it could be safely concluded that the amendment brought in Finance Act 2020 addressing this anomaly is merely curative in nature and hence has to be construed as clarificatory having retrospective effect as it was brought in to avoid unintended consequences and to avoid discrimination with other assessees. In this regard, we find that the reliance has been rightly placed by the Id. AR on the decision of the Hon'ble Supreme Court in the case of Allied Motors (P) Ltd., vs CIT reported in 224 ITR 677 wherein it was held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read in....
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....cluded that there should be no double disallowance. In this regard, assessee has given detailed submissions before the Id. CIT(A) that are enclosed in pages 217-222 of the paper book filed before us justifying the claim of deduction. The same reasoning that was given by us in ground No.10 hereinabove would apply to these grounds also. Accordingly, the ground Nos. 6 to 9 raised by the assessee are allowed." 10. The same view was followed in the assessee's own case in ITA Nos.1834 and 1835/Mum/2023. The coordinate bench noted that an expenditure disallowed in an earlier year under section 40(a)(ia), section 43B or a similar provision cannot again remain embedded in the balance of profit when the statutory condition is fulfilled in the subsequent year, since that would result in a double and permanent disallowance. It also allowed statutory depreciation under section 32 and the consequential adjustment for profit on sale of fixed assets. The later order in ITA No.5394/Mum/2025 follows the same position for assessment year 201314. No distinguishing feature in facts or law has been brought to our notice. Respectfully following the coordinate bench decisions in the assessee's own case....
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.... level of AMP expenditure and applied the bright-line method. The Revenue has not brought on record any agreement, arrangement, understanding or action in concert requiring the assessee to incur AMP expenditure for its associated enterprise or to render a brand-promotion service to it. The assessee is a full-risk general insurance company; the expenditure was incurred to promote and sell its own insurance products in India; and any benefit to the AIG name embedded in the joint logo was merely incidental. The decision of the predecessor learned CIT(A) for assessment year 2009-10 cannot govern the present year when the issue has to be decided in accordance with the subsequent binding exposition of law. We therefore uphold the deletion of Rs. 2,18,83,513. Grounds (i) and (ii) of the Revenue's appeal are dismissed. Ground 4 of the assessee's appeal challenges the finding that an international transaction existed. In view of the above conclusion, this ground is allowed. 14. Ground (iii) of the Revenue's appeal concerns profit on sale of investments of Rs. 17,65,97,000. The issue was decided in favour of the assessee in ITA No.2597/Mum/2009 for assessment year 2003-04, paragraphs 17 t....
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....disallowance under section 14A. Ground (iv) is dismissed. 17. Ground (v) concerns co-insurance administration fees of Rs. 34,41,175. The learned CIT(A) followed the consolidated order in ITA Nos.3535 and 1702/Mum/2011 and connected appeals for assessment years 2006-07 to 2008-09, paragraphs 27 to 32, holding that the participating insurers shared premium, claims and risks on a principal-to principal basis and did not act as agents of the lead insurer; consequently, section 194H and the disallowance under section 40(a)(ia) were not attracted. The relevant finding was: "The co-insurers were not the agents of the assessee and the transactions between the assessee and the co-insurers were on principal-to-principal basis... considering the totality of facts and circumstances of the case, we are in agreement with the contention of the learned AR that no disallowance is warranted under section 40(a)(ia) in respect of co-insurance fees paid by the assessee." 18. The Revenue carried the issue further in Income Tax Appeal No.541 of 2017. The Hon'ble jurisdictional High Court did not admit the proposed questions concerning sections 194H and 40(a)(ia). The same issue was again d....