TMI Blog2015 (12) TMI 1826X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) erred in deleting the disallowance of ₹ 12,00,000/- claimed as deduction on account of estimated expenses to be reimbursed to General Body of Insurance Council without appreciating that such amount is a provision in nature. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting of ₹ 5,28,788/- made by AO treating the expenditure of ₹ 13,21,972/- incurred on Antivirus software and switches as capital expenditure eligible for depreciation @ 60%. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of ₹ 10,00,000/- u/s 40A(9) of the I.T. Act being amount paid to Employees Recreation Club . 2. The assessee is a public sector undertaking fully owned by Government of India. It is mainly engaged in the business of Insurance of Export Credit Risk of exporters in India and extending difference types of insurance / guarantee covers to the banks and financial institution in India for facilitating the credit facilities to the exporters. Being in the business of insurance, the income of assessee is liable to be computed u/s 44 of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come side of the profit loss account. In this case, the receipt of the payment by the assessee is not disputed and the corresponding expenditure has already been debited to the profit loss account. Thus, receipt of the sum by the assessee belongs to it and hence it is liable for taxation in the year of receipt, as it is a revenue receipt. Accordingly, he held that the entire receipt of ₹ 504.24 lakhs is taxable in this year. He also rejected the assessee s contention that in the earlier years, the CIT(A) has deleted the similar addition on the ground that, during the year under consideration new facts have been brought into account, though he has not specified such new facts. 4. The Ld. CIT(A) has partly allowed the issue on the ground that, an amount of ₹ 2,99,84,955/- was paid to the exporters / banks in the financial year 2008-09, relevant to the assessment year 2009-10 and the balance amount of ₹ 2,04,39,082/- was treated as an income in that year. Such a practice has been followed by the assessee corporation and all along it has been accepted by the Department. Thus, he deleted the addition subject to the verification by the AO regarding the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2009-10. On these facts, we do not find any reasons to deviate from the finding and the direction given by the CIT(A). Accordingly, the ground raised by the Department on this score stands dismissed. 6. In ground no. 2, the assessee has challenged the deletion of disallowance of ₹ 12 lakhs claimed as deduction on account of estimated expenses to be reimbursed to the General Body of Insurance Council . 7. The assessee had made a provision for fees payable to General Body of Insurance Council (GBIC). In response to the show cause notice as to why the same should not be disallowed, the assessee submitted that it represents fees payable to GBIC and is not an estimated expense. The GBIC has been formed under the provisions of Insurance Act , 1938 and all General Insurance Companies are the members of GBIC. This amount is to be paid by the assessee towards subscription fee and charges levied as per the provisions of the GBIC requirement. However, the AO disallowed the same on the ground that it is mainly a provision. The Ld. CIT(A) after considering the relevant submissions of the assessee, held that since the assessee has been following mercantile systems of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gree with the finding given by the CIT(A), because here in this case, the expenditure has been incurred on antivirus software which is used in the operating system of the computer which in turn is for running of the business more efficiently. No capital asset of any enduring benefit has been acquired by the assessee. In the case of switches also, there is no acquisition of any capital asset giving any advantage of enduring nature to the assessee, as these required periodical updation and constant improvement from time to time. In the decisions cited by Ld. Counsel it has been consistently held that such an expenditure on softwares is nothing but revenue in nature. Accordingly, on this score also, the ground raised by the revenue is dismissed. 13. In ground no. 4, the revenue has challenged the deletion of disallowance of ₹ 10 lakhs made u/s 40A(9) being amount paid to the Employees Recreation Club . 14. At the outset, the Ld. Counsel for the assessee submitted that this issue had come up for consideration before the Tribunal in AY 2006-07, wherein the Tribunal has directed the AO to examine the facts and if the expenditure is found to be in the nature of reimburs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance u/s 14A r.w. Rule 8D(2)(iii) and made a disallowance of ₹ 23,35,815/-. 18. The Ld. CIT(A) held that Rule 8D is not applicable in the assessment year 2007-08. However, he held that 0.5% of the average investment for the purpose of disallowance cannot be said to be unreasonable. He also refer to the decision of CIT(A) in assessee s own case for the year 2004-05. 19. Before us, the Ld. Counsel submitted that, now in a series of decisions, the Tribunal in the case of General Insurance Companies have held that they are governed by specific provision laid down in section 44, therefore, section 14A cannot be applied therein. On the other hand, Ld. DR relied upon the order of the CIT(A). 20. We have heard the rival contentions and also the relevant finding given in the impugned orders. As stated earlier, the assessee company is engaged in the business of General Insurance and under the specific provisions given in the Income-tax Act, its income has to be computed strongly in accordance with section 44 r.w. First Schedule. It is a non obstante clause having overriding effect over the other provisions contained in the Act. For making a disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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