TMI Blog2019 (1) TMI 1332X X X X Extracts X X X X X X X X Extracts X X X X ..... depositing the said amount and the assessee in such circumstances cannot be held responsible for non-depositing the contribution to ERF. As already held in the above paras that the assessee was only the collector of funds of the amount which was to be deposited on behalf of the owner (insured), when the mechanism was provided for such deposit. Thus allowing the claim of the assessee, we hold that the fund collected by the assessee was neither fee, tax or cess and, hence, do not come within the ambit of section 43B of the Act. Determination of income of the insurance companies as prescribed under rule 5 of Schedule 1 of the Act - The Profit and Loss Account disclosed by the assessee i.e. its annual accounts are sacrosanct. The said rule provides that the income to be determined is subject to clause 8 i.e. if any expenditure is debited to the Profit and Loss Account, then the same can be added back. As pointed out in the paras above, the assessee had not debited the aforesaid amount to the Profit and Loss Account, but shown as Current Liabilities and consequently, the same cannot be added back to the profits of the business for the year of Insurance Business. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to consider the claim of the assessee. In the second round of assessment proceedings, the assessee pointed out that since it had not routed the said amount through the Profit and Loss Account, no disallowance could be made under section 43B of the Act. Reliance was placed on different decisions in this regard. The Assessing Officer was of the view that the liability was created under the Public Liability Fund Act, 1999 (in short PLI Act, 1999 ) to which provisions of section 43B of the Act were applicable. In view thereof, a sum of ₹ 70,31,561/- was disallowed and addition made in the hands of the assessee. 5. The CIT(A) upheld the order of Assessing Officer holding that the amount was covered under cess and there was no provisions in the Act to exclude such case from the ambit of the provisions of section 43B of the Act. He further held that the assessee could claim the same in the year of payment. 6. The assessee is in appeal against the order of CIT(A). 7. The Ld.AR for the assessee pointed that the assessee was a collecting agency on behalf of the Government of India and the amount was to be handed over to the Government of India. Our attention was dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 167; and ii) Dalmia Cement (Bharat) Ltd. Vs. CIT [2013] 36 taxmann.com 358 (Delhi) 9. The Ld.DR for the Revenue pointed out that the assessee had collected the fund and he was taking advantage of the said fund and was even earning interest on the fund. The Ld.DR for the Revenue also pointed out that in the financial years 2001-2002 and 2003-2004 the assessee suo motu had made the aforesaid disallowance. Addressing the contention of ld. AR of the assessee that it was collecting agency; hence, where it was statutory liability, it had to be deposited before filing the income tax return and since the assessee had failed to do so, the provisions of section 43B of the Act are to be applied. The Ld. DR for the Revenue further pointed out that where the fund was established later, then the assessee can claim the deduction under section 43B of the Act on the date of payment. He stressed that the cases relied upon by the assessee are not relevant to the issue. He also pointed out that in case no rules were prescribed, then the assessee could not take advantage of the same. He placed reliance on the following decisions:- i) Om Prakash Agarwal Vs. Giri Raj Kishori Ors., (19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sub-section (1) of section 3; xxxxxx 4(2C) Every owner shall also, together with the amount of premium, pay to the insurer, for being credited to the Relief Fund established under section 7A, such further amount, not exceeding the amount of premium, as may be prescribed.; 12. The case of the assessee before us is that the amounts collected towards ERF were specifically identified in the policy schedule issued by it. The assessee collects the said amount from the owner (insured) of the insurance policy but it was acting only as a channel between proposed insured and the Government. The liability to contribute to the said fund arises when the owner (insured) pays the additional remuneration to the insurer. As per clause 4(2D) of PLI Act, the liability of insurer was to remit the amount received from the owner under sub-section (2C) to the Relief Fund, in such manner and within such period as may be prescribed; and where the insurer fails to so remit the amount, such amount shall be recoverable from insurer as arrears of land revenue or of public demand. In other words, the liability of assessee (insurer) is to deposit the said sum collected from the owner (insured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r non-depositing the contribution to ERF. In any case, we have already held in the above paras that the assessee was only the collector of funds of the amount which was to be deposited on behalf of the owner (insured), when the mechanism was provided for such deposit. 14. Before parting, we may also point out that there is no merit in the order of CIT(A) in holding the said payment to be in the nature of cess. The Hon ble Supreme Court in the case of M/s Guruswamy Co. Etc. (supra) has decided the said issue at para 21 of its judgment and has held that the word cess means tax and generally used when the levy is for such specifically administrative expenses which the name indicates i.e. health cess, education cess, road cess, etc. The said levy (i.e. cess) is an additional levy with tax and is within the powers of State Legislature to levy the same. Applying the said principle to the facts of the case, where the levy is prescribed under the PLI Act, cannot be said to be a State levy of cess . Thus, we find no merit in the order of the CIT(A) in this regard. Allowing the claim of the assessee, we hold that the fund collected by the assessee was neither fee, tax or cess and, he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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