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2017 (10) TMI 1516 - ITAT MUMBAIAllowance of prior period expenditure - assessee has not claimed any deduction on such expenditure - HELD THAT:- As decided in [2015 (12) TMI 1826 - ITAT MUMBAI] assessee has voluntarily added back part of the expenditure to the total income following the consistent accounting method adopted by it. It is also evident that assessee is following similar method of accounting from earlier assessment years and offered similar income on account of adjustment of prior period income and expenditure and the AO in assessments completed u/s. 143(3) has accepted non only such accounting treatment given by the assessee but also the income offered. Therefore, when the assessee has not claimed any deduction on account of prior period expenditure by debiting it to the profit loss account, the disallowance made by the AO is totally unjustified. Therefore, we direct deletion of the amount from the income of the assessee. The ground raised by the assessee is allowed. Addition being provisions for insurance claim debited in the P&L a/c. - HELD THAT:- Provisions made on the basis of an actuarial valuation cannot be considered a contingent liability. The basic thing to be remembered is that unlike other businesses life insurance business is being regulated by IRDA. Regulatory body issues instructions time to time. One of the instructions was about follow actuarial valuation while preparing the accounts. The actuarial method of valuation has been recoginsed an approved method for valuing liabilities by various courts. So, we hold that method followed by the assessee for valuing its liabilities cannot be rejected. Besides Rule 5(a)of the First Schedule deals with provisions pertaining to expenditure or allowance or other prescribed liabilities and not in respect of income. ln short the AO is not authorised to disturb any income reflected in the P&L account. The assessee was following the method of creating provisions based on actuarial valuation and the AO had accepted it while passing orders u/s.143(3)of the Act. Without bringing changed circumstances the AO should not have held that liabilities were contingent. AO had not raised any objection about non filing of bifurcation of data which was made available to the actuary therefore in our opinion the DR cannot make a totally fresh ease before us at this stage about non filing of bifurcation. Neither the AO nor the FAA had dealt With the issue. The DR has a definite role in helping the bench to decide the Matters. But there are limitation of representation. ln any case the assessee had followed Rule 5 in respect of IBNR and IBNER as mentioned earlier. Therefore we do not find any force in the argument advanced by the DR in that regard. - Decided against revenue. Disallowance made by the AO u/s. 14A - HELD THAT:- As decided in own case [2017 (5) TMI 1717 - ITAT MUMBAI] ITAT has deleted the addition. The AR also referred to the case of ICICI Prudential Insurance Company Ltd. [2012 (11) TMI 13 - ITAT MUMBAI] held when the income of the assessee as well as the expenditure are governed by specific provision which have an overriding effect then it is not open for the AO to invoke the other provisions of the Act for carrying out the disallowance of adjustment in the income. Thus, we hold that no disallowance u/s 14A can be made in the case of the assessee and hence grounds raised by assessee allowed.
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