Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2009 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2009 (2) TMI 240 - AT - Income TaxDisallowance of 50 per cent on guest house expenses - assessee did not give details of expenditure on repairs and maintenance of own guest houses and rented guest houses - assessee has also not furnished lease agreement so as ascertain the liability to maintain the guest houses - HELD THAT:- The Tribunal in AY 1999-2000 has held that expenditure incurred for maintenance of the company's own guest houses is covered u/s 30(a)(ii). Therein the Tribunal accepted the plea of the assessee that in respect of the guest houses owned by the assessee, repair expenses will have to be allowed as deduction u/s. 30(a)(ii). Once the expenditure is allowable u/s. 30(a)(ii), if the expenditure is incurred on repair and maintenance of guest house taken on lease should also be allowed. Accordingly, we decide the matter, for the assessment years in question, in favour of the assessee. Addition on account of interest accrued on loans, bonds and debentures - the recovery of which was deferred or has remained outstanding - business of general insurance - HELD THAT:- Identical issue arose in assessee's own case for AY 1985-86. The Tribunal accepted the plea of the assessee and in fact the issue went up to the Hon'ble Delhi High Court in AY's 1986-87 to 1988-89, decided the issue in favour of the assessee by holding that s. 44 is a special provision dealing with the computation of profits and gains of business of insurance. It being a non obstante provision, has to prevail over other provisions in the Act. It clearly provides that income from insurance business has to be computed in accordance with the rules contained in the First Schedule. It is not the case of the Revenue that the assessee has not computed the profits and gains of its insurance business in accordance with the said rules. Reliance was placed on the scope of s. 44, as held in the case of General Insurance Corporation of India vs. CIT [1999 (9) TMI 3 - SUPREME COURT], held that the provision of s. 44 being a special provision, governs computation of taxable income earned from business of insurance. It mandates the tax authorities to compute the taxable income in respect of insurance business in accordance with the provisions of the First Schedule to the Act. Therefore, order of the Tribunal has been affirmed. Following the same reasoning, addition made by the AO is deleted. Allowing only 50 per cent of the management expenses by invoking the provisions of s. 14A - investments made by the assessee are both taxable as well as tax-free - claimed in the P&L a/c is treated as expenses incurred in connection with the looking after tax-free investment - HELD THAT:- It is very clear that s. 44 applies notwithstanding anything to the contrary contained within the provisions of the IT Act relating to computation of income chargeable under different heads. We agree with the ld counsel that there is no requirement of head-wise bifurcation called for while computing the income u/s. 44 in the case of an insurance company. The income of the business of insurance is essentially to be at the amount of the balance of profits disclosed by the annual accounts as furnished to the Controller of Insurance. The actual computation of profits and gains of insurance business will have to be computed in accordance with r. 5 of the First Schedule. Hence, AO is not permitted to travel beyond these provisions. Sec. 14A contemplates an exception for deductions as allowable under the Act are those contained under ss. 28 to 43B. Sec. 44 creates special application of these provisions in the cases of insurance companies. We therefore, agree with the assessee and delete the disallowance made by the AO which is based on the application of s. 14A as according to us, it is not permissible to the AO to travel beyond s. 44 and First Schedule of the IT Act.
|