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2019 (2) TMI 335 - HC - Income TaxAllowable deduction u/s 37 - ITAT observed that reinsurance payments to non-residents are prohibited by law and therefore hit by Explanation 1 to section 37 of the Act? - TDS liability on reinsurance premium paid to non-resident - Held that:- The words “other insurer” occurring in sub-Section 7 of Section 101A of the Insurance Act cannot be treated as a “pronoun” or a “noun” and should be read as a “verb”. This is more so because, there is no separate definition provided for “other insurer” and considering the scheme of Section 101A of the Insurance Act, “other insurer” should mean the insurer, who is outside India and not a person in terms of the definition under Section 2(9) of the Act. We are of the clear view that the Tribunal erred in coming to a conclusion that it is not the intention of the Parliament to authorize an Indian insurer to have re-insurance outside the country ignoring the provisions of Insurance Act referred above. The Tribunal had no jurisdiction to declare any provisions of the regulations to be inconsistent with the provisions of the Insurance Act. This was wholly outside the purview of the Tribunal. Tribunal clearly exceeded its jurisdiction in stating that the assessee have engaged in a transaction, which is prohibited by law and therefore, not entitled for deduction under Section 37. This has never been the case of the Revenue either before the Assessing Officer or before the CIT(A) or before the Tribunal, when they filed appeals challenging that portion of the order passed by the CIT(A), which was against the Revenue. Tribunal while upholding the order of the AO did not assign any independent reasons. The discussion in the impugned order relates to the validity of re-insurance business outside India done by an Indian insurer. Tribunal did not consider the correctness of the order passed by the AO or that of the CIT(A). Tribunal could not have held that the Assessing Officer rightly disallowed the re-insurance premium under Section 40(a)(i). This finding is not supported with any reasons. Therefore, the Tribunal misdirected itself, exceeded the scope of remand as ordered by the Division Bench and ventured into a jurisdiction, which is wholly prohibited in the light of the plain language of Section 254(1) of the Act. We are of the clear view that the order passed by the Tribunal calls for interference. Accordingly, the appeals, filed by the assessee are allowed and the substantial questions of law framed are answered in favour of the assessee. The matter stands remanded to the Tribunal to take a decision on the following points:- (i) Whether the Assessing Officer was right in disallowing the re-insurance premium under Section 40(a)(i) of the Act; (ii) Whether the CIT(A) was right in rejecting partially the appeal filed by the assessee; and (iii) Whether the CIT(A) was justified in restricting the claim of the assessee to 15% instead of confirming the order passed by the Assessing Officer.
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