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2022 (3) TMI 528 - AT - Income TaxAllowable expense u/s 37(1) - provisions for claim Incurred but Not Reported (IBNR) and claim Incurred But Not Enough Reported (IBNER) - whether such provisions are in the nature of contingent liability? - HELD THAT:- CIT(A) while deciding the issue has relied upon the decision National Insurance Company Limited [2016 (8) TMI 326 - ITAT KOLKATA]has held that the provisions made available the above claim are based on scientific calculation with a proper and rational and therefore, it could only be termed as ascertain liability. Though the above decision was rendered with respect to the computation of book profit under section 115JB of the Act, however, the learned CIT (A) applied it and allowed the claim of assessee for deduction under section 37(1) for the reason that the claim of the assessee is ascertained claim, supported by Actuarial valuation and also made on a scientific basis. To reach at this calculation, the learned CIT (A) obtained information for 6 different assessment years and found that the actual claim settled is always higher than the provisions made by the assessee. This it shows that the provisions made are not excessive - this claim is allowed to the assessee from year to year. In view of this, we find that assessee has incurred an expenditure, which is incurred during the year with respect to the provisions made for the IBNER and IBNR claims, on scientific basis and also certified by the valuer with respect to the methodology adopted in making such provisions. Thus, it satisfies the entire ingredient for its allowance u/s 37 (1) of the act. Thus, there is no infirmity in the order of the learned CIT (A) in allowing the claim under section 37(1) - Decided against revenue. TDS u/s 194H - TDS on co-insurance fee u/s 40(a)(ia) - whether the assessee is not required to deduct tax at source on such payments? - HELD THAT:- In the decision of the coordinate bench [2009 (2) TMI 234 - ITAT BOMBAY-G] we find that there is no discussion with respect to any of the agreements between the insurance company and the reinsurance Co, no such agreements were also available before us. Therefore it is very difficult for us to say without looking at the evidence that the provisions of Section 194H do not apply The honourable High Court [2019 (8) TMI 1803 - BOMBAY HIGH COURT] has already held that the provisions of Section 194D do not apply to such commission. Therefore it is pertinent to examine whether the provisions of Section 194H applies to it or not. Before us, the assessee has relied merely on the decisions. There are neither the copies of agreement of Reinsurance/coinsurance between the parties - we did not find any guidance that how the above payments were held to be on principal to principal basis and are not covered u/s 194 H of the Act , because para no 31 of the order merely says that it agrees with arguments of the assessee. Thus, these facts are not coming from the order of the lower authorities also. Therefore, in absence of any evidence placed before us, we are not in position to decide whether the above payments are covered u/s 194 H or not. We set-aside the whole issue back to the file of the learned assessing officer with a direction to assessee to produce the relevant agreements and arrangements before the assessing officer to show that the above payment does not fall within the purview of Section 194H of the act. The learned assessing officer may examine the same and then decide whether on such payment the provisions of Section 194H applies or not based on the various arguments raised before him by the assessee - ground no. 2 of the appeal of the Assessing Officer is allowed subject to above direction. Nature of expenditure - expenditure incurred towards the purchase of pen drives, laptop adaptors etc. - whether such expenditure incurred by the assessee creates enduring benefit and was a capital asset eligible for depreciation u/s 32 - HELD THAT:- We find that identical issue arose in case of the assessee for Assessment Year 2006-07 to 2008-09 [2015 (11) TMI 1858 - ITAT MUMBAI] relying on the decision of Southern Roadways Ltd. [2006 (10) TMI 82 - MADRAS HIGH COURT] held that purchase of hard disk, battery, etc. is revenue expenditure and not capital. Further identical issue in case of the assessee honourable Bombay High Court [2019 (8) TMI 1800 - BOMBAY HIGH COURT] as already decided this issue in favour of the assessee. Therefore, this issue is squarely covered in favour of the assessee. Hence, we confirm the order of the learned CIT (A) in deleting the above disallowance. In the result, ground No. 3 of the appeal is dismissed.
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