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2014 (11) TMI 841 - AT - Income TaxAddition on account profit on sale/redemption of investments – Held that:- Following the decision in assessee’s own case as decided in Oriental Insurance Co. Ltd. Versus Assistant Commissioner of Income-tax, Circle 16(1), New Delhi [2011 (7) TMI 728 - ITAT DELHI] - no adjustment is required to be made to the accounts furnished to the Controller of Insurance in respect of profit on sale of investments - Decided against assessee. Disallowance of provision made for orphan claims – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee explained that as per clause 5.1 of accounting policy of the assessee company in respect of motor third party claim where Court summons have been served on the company without adequate policy particulars to establish the liability of the company, provision is made to the extent of one third of the value of the total estimated liability of such unidentified claims determined on the basis of existing guide lines and practices - the claim of assessee is clearly contingent in nature and cannot be allowed as deduction – thus, the order of the CIT(A) is upheld – Decided against assessee. Diminution in value of investments – Held that:- As decided in assessee’s own case for the earlier assessment year, CIT(A) rightly held that the claim of the assessee for an unascertained liability was rightly disallowed by the AO - the provision made by the assesee for notional losses on revaluation of investment is in fact a reserve irrespective of the nomenclature given by the, assesee - the substance of the Claim is to be considered and not the nomenclature. The assessee has not sold the investments in question during the relevant accounting period and notwithstanding the guidelines given by the IRDA to reflect the true position of assets and liabilities in the relevant balance sheet of the assessee, the notional losses claimed only on the basis of prevailing market price could not be allowed against the actual business profits of the relevant accounting period - the claim of loss pot actually incurred on the investments which have neither been sold nor transferred otherwise is only a provision for unascertained liability and cannot be allowed to be reduced from the income of the assessee - the deduction for the amount provided by the assessee in its relevant accounts to meet diminution in or loss on realization of investments cannot be allowed for the period prior to 01.04.2011 as per the existing provisions of the Act – the order of the CIT(A) is upheld – Decided against assessee. Admission of additional ground - Computation of book profits u/s 115JB – Held that:- All the facts are on record and the ground is a legal ground by following the decision in NTPC Ltd. Vs. CIT [1996 (12) TMI 7 - SUPREME Court] - the provisions of S.115 JB of the Act are not applicable in case of Insurance Companies, as they are not required to prepare the accounts as per Part 2 and 3 of Schedule VI to the Companies Act - the computation made u/s 115 JB of the Act is deleted – Decided in favour of assessee. Disallowance on investment written off deleted – Held that:- As decided in assessee’s own case for the earlier assessment year, CIT(A) rightly held that the entries made in the assessee's books of account in this behalf are strictly in accordance with the guidelines issued by General Insurance Corporation - These guidelines permit the assessee to book a loss which has for all practical purposes, been suffered on account of depreciation in value of investments beyond any reasonable hope of recovery - the guide lines permitted the insurance company to book the loss in the accounts rather than waiting for actual realization of loss on sale of investment - Thus, the amounts claimed by the assessee are to be understood as a loss on investments suffered by the assessee - Such 'loss' can neither be-considered an 'expenditure' nor an 'allowance' - the addition made by the AO in respect of amounts written off by the assessee on punt of depreciation in the value of investments is to be set aside – Decided against revenue. Disallowance u/s 14A – Held that:- As decided in assessee’s own case for the earlier assessment year, section 14A contemplates an exception for deductions as allowable under the Act are those contained u/s 28 to 438 - Section 44 creates special application of these provisions in the cases of insurance companies – the order of the CIT(A) is upheld – Decided against revenue. Guest house expenses – Held that:- As decided in assessee’s own case for the earlier assessment year, expenditure incurred for maintenance of the company's own guest houses is covered u/s 30(a)(ii) - in respect of the guest houses owned by the assessee, repair expenses will have to be allowed as deduction under section 30(a)(ii) - once the expenditure is allowable under section 30(a)(ii ), if the expenditure of incurred on repair and maintenance of guest house taken on lease should also be allowed – the order of the CIT(A) is upheld – Decided against revenue.
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