TMI Blog1967 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... -law 52 of the assessee-company provides that bonus shall be paid on those policies (not being reinsurance policies) on certain conditions, the following of which are relevant: "1. That the premium on that policy is more than Rs. 5. 2. That there has been no claim on that policy. 3. That the policy was insured during the year for which bonus is declared. 4. That the bonus amount will be paid only if the policy is renewed on expiration and the bonus amount may be credited towards premium under the renewed policy." In proceedings for assessment of the income of the assessee-company for the assessment years 1957-58 and 1958-59 the assessee-company claimed allowance of Rs. 29,615 and Rs. 44,920, respectively, paid under the bonus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not regarded by the assessee-company as expenditure charged on profits, they were not admissible as deductions in the computation of the taxable income of the assessee-company under rule 6 of the Schedule to the Income-tax Act. With special leave, the assessee-company has appealed to this court. By section 10(7) of the Income-tax Act the profits and gains of any business of insurance and the tax payable thereon are computable, notwithstanding anything to the contrary contained in section 8, 9, 10, 12 or 18, in accordance with the rules contained in the Schedule to the Act. Rule 6 of the Schedule which prescribes the method of computation of taxable income of insurance business (other than life insurance) provides: " The profits and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears to him that any return furnished to him under the provisions of the Act is inaccurate or defective in any respect, to require the insurer to correct or supplement such return, or to call upon the insurer to submit for his examination any book of account, register or other document or to examine any officer of the insurer on oath in relation to the return, or to decline to accept any such return unless the inaccuracy has been corrected or the deficiency has been supplied. By section 22 the Controller has the power to order investigation or re-valuation to be made by an actuary appointed by the insurer for the purpose. Having regard to the wide powers conferred upon the Controller, the Income-tax Act has in respect of the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e included. In Form C which is the form of profit and loss appropriation account the following appropriations are directed to be made : " Balance being loss brought forward from last year. Balance being loss for the year brought from profit and loss account (as in Form B). Dividends paid during the year on account of the current year. Transfers to any particular funds or accounts, and Balance at the end of the year as shown in the balance-sheet." The assessee-company, in drawing up its profit and loss account instead of showing the actual disbursement in Form B against the head " Other expenditure ", estimated the amounts which it would be liable to pay and debited the same against the head " Transfers to any particular fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept the figure disclosed at the foot of the profit and loss account as determinative of the quantum of profits and gains of that insurance business. Section 15 requires the insurer to submit not merely the profit and loss account in Form B, but also the balance-sheet and the account in Form C and other accounts, and there is no warrant for the view that the balance of profits disclosed by the annual account must be equated with the balance of profits disclosed in Form B. The other plea which appealed to the High Court, that the assessee-company had itself not treated the bonus paid as an expenditure related to the business, but only as disbursements made out of the profit after it had accrued to the assessee-company, also cannot be sust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results therefrom to the trade of the insurer, the scheme is clearly intended to advance the business of the insurer, and payment to renewing policy-holders or adjustment of bonus against renewal premium made under that scheme constitutes expenditure laid out wholly and exclusively for the purpose of the business of the assessee-company. Counsel for the Commissioner contended that the estimated liability was not " crystallised liability " and was on that account inadmissible as an allowance in the computation of taxable income. The liability, submitted counsel, was a mere contingent liability which could not amount to expenditure within the meaning of section 10(2)(xv), nor a permissible outgoing in the determination of the income, profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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