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2019 (1) TMI 1332 - AT - Income TaxDisallowance of Contribution to Environmental Relief Fund u/s 43B - case of the assessee is that the amounts collected towards ERF were specifically identified in the policy schedule issued by it - Held that:- Here the assessee has collected the contribution to the ERF from the owner (insured) then he is only acting as a custodian of the said fund and the said amount cannot be regarded as income of the assessee. In case the amount is not the receipt of the assessee, not routed through Profit and Loss Account, then there is no question of applicability of provisions of section 43B. The absence of a mechanism of making contribution to ERF; though under the Act, the assessee has collected the amount from the owner (insured), but in the absence of the fund being created, the assessee was handicapped in transferring the amount so collected to the fund. The manner of remittance was prescribed in December 2008 and the assessee has paid the accumulated balance on 2.9.2009. In the absence of the creation of fund, the assessee had no means of depositing the said amount and the assessee in such circumstances cannot be held responsible for non-depositing the contribution to ERF. As already held in the above paras that the assessee was only the collector of funds of the amount which was to be deposited on behalf of the owner (insured), when the mechanism was provided for such deposit. Thus allowing the claim of the assessee, we hold that the fund collected by the assessee was neither fee, tax or cess and, hence, do not come within the ambit of section 43B of the Act. Determination of income of the insurance companies as prescribed under rule 5 of Schedule 1 of the Act - The Profit and Loss Account disclosed by the assessee i.e. its annual accounts are sacrosanct. The said rule provides that the income to be determined is subject to clause 8 i.e. if any expenditure is debited to the Profit and Loss Account, then the same can be added back. As pointed out in the paras above, the assessee had not debited the aforesaid amount to the Profit and Loss Account, but shown as Current Liabilities and consequently, the same cannot be added back to the profits of the business for the year of Insurance Business. Accordingly, the disallowance made by the Assessing Officer is hereby deleted. - decided in favour of assessee.
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