TMI Blog2016 (2) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... tever amount could not be identified, the same has been offered as an income in that year. Thus, the whole of the amount has now been accounted for and income has also been offered by the assessee in the assessment 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). - Decided against revenue Disallowance of deduction on account of estimated expenses to be reimbursed to General Body of Insurance Council - CIT(A) deleted the addition - Held that:- The assessee being Member of GBIC was required to make a payment towards fees / subscription. Such a levy of fees and subscription by the GBIC has been authorized by the Insurance Act itself and regulations thereof. Thus, such a payment definitely falls within the realm of revenue expenditure incurred by the assessee. Since this expenditure is an ascertained liability which is required to be paid every year, therefore, the same is allowable as a 'deduction' while computing the income of the assessee in this year, even if the said payment has been made in the subsequent year, because the said expenditure has definitely accrued to the assessee in the year under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de. For the purpose of the Income-tax, first of all the figures of the income of the assessee is to be drawn-up in accordance with the provisions of First Schedule to the Income-tax Act and satisfying the requirement of Insurance Act and such a determination of income is binding on the AO and there is no power to tinker with such an account.Thus, when the income of the assessee as well as the expenditure are governed by specific provision which have an overriding effect, then it is not open for the AO to invoke the other provisions of the Act for carrying out the disallowance or adjustment in the income. Thus, we hold that, no disallowance u/s 14A can be made in the case of the assessee - Decided in favour of assessee - ITA No. 1971/Mum/2011, CO No. 210/Mum/2013 - - - Dated:- 11-12-2015 - Amit Shukla, JM And Ashwani Taneja, AM For the Appellant : Shri S Venkatraman For the Respondent : Shri S S Rana ORDER Per Amit Shukla, JM The aforesaid appeal and the Cross Objection has been filed by the revenue as well as by the assessee against impugned order dated 17.12.2010, passed by CIT(A) -7, Mumbai for the quantum of assessment passed u/s 143(3) for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts remitted by the importers towards export dues of the Indian Exporters is blocked by the Central Bank of such countries in view of inadequate foreign exchange, then the assessee company negotiates with these Central Banks of such countries through the good offices of Government of India and Indian Embassies located in such countries to recover the dues. The amounts when received by the assessee from these foreign banks, do not carry sufficient details as to the exports and the exporters to whom the amounts pertained as well as share of each exporter. Consequently, such amount which are received in lump sum from these foreign banks are held in trust by the company in a fiduciary capacity pending identification of the exporters and ascertainment of their respective shares. The assessee company reflects such amount in the Balance sheet under the head current liabilities as unapportioned claim recovery . During the previous year, the assessee has received sum of ₹ 504.24 lakhs representing amounts received from foreign countries as recovery against the claims paid. The said amount was not included in the income on the ground that amount received could not be apportioned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of First Schedule. Rule 5 of the First Schedule mandates that the profits and gains of any business of insurance shall be taken to be the profits disclosed in the annual accounts. Such profits are only subject to any expenditure that are disallowable under sections 32 to 43B. Thus, the AO is bound to accept the profits as shown in the audited accounts and such profit can only be adjusted in respect of expenditure allowances that qualifies for disallowance under sections 32 to 43B. Here in this case, the amount of ₹ 5.04 crores was received by the assessee from the foreign Central Banks and was classified in the Balance sheet as a liability which was as in accordance with the accepted accounting practice followed by the assessee right from the earlier years. The assessee has held the amount as a trust that is in fiduciary capacity on behalf of the exporters. Consequently, such amount had not been routed through profit and loss account by the assessee, as per the accounting system followed by the assessee. Hence, in accordance with the provisions contained in section 44 read with first schedule, such an adjustment by the AO for taxing the income in this year is whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory payment that the assessee was required to make to being the member of the GBIC. Ld. D.R. on the other hand relied upon the order of the AO. 9. After considering the relevant finding given in the impugned orders and the submissions made by the parties, we find that the assessee being Member of GBIC was required to make a payment towards fees / subscription. Such a levy of fees and subscription by the GBIC has been authorized by the Insurance Act itself and regulations thereof. Thus, such a payment definitely falls within the realm of revenue expenditure incurred by the assessee. Since this expenditure is an ascertained liability which is required to be paid every year, therefore, the same is allowable as a 'deduction' while computing the income of the assessee in this year, even if the said payment has been made in the subsequent year, because the said expenditure has definitely accrued to the assessee in the year under consideration. Thus, the finding given by the CIT(A) on this score is upheld. 10. In ground no. 3, the revenue has challenged the deletion of addition of ₹ 5,28,788/-, made by the AO out of the amount incurred on antivirus software of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n insurance company, its income is to be computed under Sec. 44 of the Income Tax Act, 1961 r/w the First Schedule and Rule 5 of the First Schedule does not provide for any disallowance under sec. 14A of the Income Tax Act, 1961 and consequently the Ld. Commissioner of Income Tax (Appeals) erred in confirming the disallowance of ₹ 23,35,815/- made by the Assessing Officer under Sec. 14A of the Income Tax Act, 1961. 2. Without prejudice to the above, the Assessee submits that the Ld. Commissioner of Income Tax (Appeals) erred in confirming the disallowance of ₹ 23,35,815/- u/s 14A of the Income Tax Act, 1961 when the tax-free investments has been incurred to earn the tax free income . 17. The AO noted that the assessee has received a dividend income of ₹ 2,87,73,576/- and interest on UTI bonds of ₹ 3,15,33,503/- which were credited to the profit and loss account but claimed as exempt. The AO show caused the assessee as to why disallowance u/s 14A r.w. Rule 8D should not be made. In response the assessee submitted that, the assessee being an Insurance Company, its income has to be computed as per the provisions of 44 r.w. First Schedule and only the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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