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2010 (10) TMI 764 - AT - Income TaxDisallowance - amortization of the premium paid on the purchase of investments - Section 44 of the Income Tax Act, 1961, makes provision for the computation of the profits and gains of any business of insurance - It was only the compulsion of law that required the assessee to invest its funds in specified securities so that there is sufficient cushion to cover the insurance liability - It was further contended that there is no specific provision in the Profit and Loss Account permitting amortization claim, including the instructions of the IRDA - Expenditure, which is deductible for income tax purposes, is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure - In General Insurance Corporation of India vs. CIT (1999 -TMI - 5762 - SUPREME Court), the Supreme Court held that even if an item of debit is considered as an expenditure, it should further be such an expenditure contemplated in sections 30 to 43A and, therefore, unless there was a specific prohibition for such an allowance, the departmental authorities would not be justified in adding back the amount under rule 5(a) - Decided in favor of the assessee Regarding amortization of the pre-operative expenses - The brief facts in this connection are that the assessee company was incorporated on 24th August 2000 and the certificate of commencement of business was issued on 3rd January 2001 - There is no dispute that the expenditure was incurred between the date of incorporation and the date on which the license to carry on the business was obtained from the Regulatory Authority. Thus it is clear that the expenses were incurred before the actual carrying on of the business - Only capital expenditure can be amortized under section 35D and that is a special allowance for capital expenditure, which is not otherwise allowed as a deduction - An assessee can correct any mistake or omission in the original return by filing a revised return, the validity of which has not been challenged - Decided in favor of the assessee
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