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2016 (11) TMI 1256 - BOMBAY HIGH COURT

2016 (11) TMI 1256 - BOMBAY HIGH COURT - TMI - Revision u/s 263 - Disallowance of provision made for contribution to Solatium Fund - whether the payment was made to the Solatium fund only in September 2005 at 0.1%. Therefore, during the subject Assessment Year, the provision could not be allowed as an expenditure as it was a contingent liability? - ITAT delted revision orders - Held that:- We note that the impugned order of the Tribunal has after elaborate discussion come to the conclusion that .....

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a fund to be formed to make payment to victims of hit and run accident. - In this case, the liability of making a contribution to the Solatium fund at 1% of premium received, is a certain liability in view of IRDA letter dated 13th May, 2004. Therefore, it is not a contingent liability during the subject Assessment Year. In fact, this Court in Shrikant Textiles v/s. CIT [ 1970 (3) TMI 40 - BOMBAY High Court ] has held that whether a liability is ascertained or contingent for a subject Assess .....

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order dated 6th May, 2013 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order dated 6th May, 2013 relates to the Assessment Year 2005-06. 2. Mr. Bajpayee, learned Counsel appearing for the Revenue, Revenue urges only the following question of law for our consideration: Whether on the facts and in the circumstance of the case and in law, the Tribunal was correct in holding that the CIT was not justified in invoking the provisions of section 263 on the issue of disallowa .....

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called upon the Respondent-Assessee to explain its above claim. The Respondent-Assessee in response, by letter dated 15th September, 2008 explained that the Solatium fund, is a scheme framed by the Central Government to compensate the victims of hit and run motor accidents. The Motor Vehicle Act defines a hit and run motor accident as an accident arising on use of motor vehicle/ motor vehicles whose identity cannot be ascertained in spite of reasonable efforts. Therefore, Insurance Regulatory a .....

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g at its profits/ income for the subject Assessment Year. The Assessing Officer being satisfied, accepted the claim of the Respondent-Assessee in respect of provisions for contribution to Solatium funds. The Assessing Officer passed an order on 24th December, 2008 under Section 143(2) of the Act (the Act), determining the total income at ₹ 101.59 Crores. 4. The Commissioner of Income Tax (CIT) by an order dated 30th March, 2014 passed under Section 263 of the Act, revised the order dated 2 .....

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ssessment Year was in the nature of contingent liability and cannot be allowed as expenditure. Therefore, the amount of ₹ 3.46 Crores being the expenditure provided for as contribution to the Solatium fund to the Central Government was disallowed. 5. Being aggrieved, the Respondent-Assessee carried the issue in appeal to the Tribunal. The Tribunal by the impugned order holds that the provision made for contribution to the Solatium fund as directed by the IRDA was an ascertained liability f .....

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r is in excess of what is finally paid in the next/ subsequent years, then Section 41(1) of the Act ensures that the excess amount allowed as expenditure in next/ subsequent year, is brought to tax. The impugned order holds that for the purpose of invoking Section 263 of the Act, the order of the Assessing Officer must satisfy twin conditions viz: the order must be erroneous and it must be prejudicial to the Revenue. In the present case, the impugned order holds that the view by the Assessing Of .....

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