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TMI Blog2019 (12) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... profit of the assessee company u/s 115JB of the Act was also computed by the AO at Rs. 1571,51,21,928/- after making additions inter alia on account of reserve created for unexpired risk amounting to Rs. 488,59,39,000/- and disallowance u/s 14A amounting to Rs. 70,70,62,845/-. 3. Against the order passed by the AO u/s 143(3), an appeal was preferred by the Ld. CIT(A) and after considering the submissions made by the assessee as well as material available on record, the Ld. CIT(A) deleted some of the additions made by the AO while computing the total income of the assessee under the normal provisions of the Act as well as book profit u/s 115JB of the Act. Aggrieved by this relief given by the Ld. CIT(A) to the assessee, the Revenue has preferred this appeal before the Tribunal on the following grounds: "1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in directing that a sum of Rs. 1,33,58,000/-, being disallowance of written off depreciated investments, be deleted following the decision of CIT(A) A.Y.(s) 2007-08 & 2008-09. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in directing that a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce made to the decision of the Hon'ble Supreme Court as reported in 240 ITR 139 (SC) and he disallowed the sum of Rs. 4,22,26,000/-. The assessee further submitted that as per the facts and the decision of the Hon'ble Supreme Court in the case of CIT v. Oriental Fire & General Insurance Co. Ltd. [2007] 291 ITR 371(SC), any amount having been written off, cannot be considered as an expenditure or allowance which could be added back as per the provisions of section 44 read with Rule 5 of the First Schedule. Without prejudice to the submission made hereinabove, the assessee submitted that as per the provisions of section 44 read with Rule 5 of the First Schedule all the incomes of the assessee were to be considered as assessable under the head "Profits and gains of business or profession ". As per the relevant provisions of the Act, there is no provision for assessment of any income of the assessee under any head other than under the head "Profits and gains of business or profession ". Hence, all the assets of the assessee were to be considered as assets utilised for the assessee's business. Though in the Balance Sheet some of the assets are being shown under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000-01, 2002- 03 and 2004-05 of the CIT(A)-VI, Kolkata. The Authorised Representative further submitted that the transactions in investments being a part of business of the assessee, the writing off of investments should be considered as deductible for the purpose of computing the business income of assessee. Since the assessee has been carrying on the General Insurance business and consequently its assessment is required to be made in accordance with the provisions of section 44 read with the Rule 5 of the First Schedule to the Income-tax Act, 1961, the Assessing Officer is empowered to make additions/disallowances only in accordance with the above-mentioned Rule 5. Any sum which has been written off cannot be considered as either "expense" or "allowance" or "provision". 24. It is observed that in the above-referred Rule 5 of the First Schedule it has been mentioned that certain expenditure or allowance or provision can be added back only if the same is not admissible under sections 30 to 438 of the Act and there is no specific mentioning of adding back of any amount written off out of investments. From the above-referred Supreme Court decisions it is clear that if the particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 relating to the deletion by the Ld. CIT(A) of the disallowance of Rs. 5,89,11,000/- made by the Assessing Officer on account of amortization of premium paid on investments, the learned representatives of both the sides have agreed that this issue is also squarely covered in favour of the assessee by the order of the Tribunal dated 05.08.2016 (supra), wherein a similar issue was decided by the Tribunal vide its paragraph no. 8 of its order as under: "8. Disallowance of Amortisation of Premium paid on Purchase of Investments The brief facts of this issue is that the assessee claimed Rs. 6,02,18,000/- towards amortization of premium paid on investments. Without assigning any reason, the ld AO stated in his order that the said claim of amortization could allegedly not be allowed as admissible deduction and accordingly disallowed the same. The assessee submitted that it has been carrying on the business of insurance other than life insurance and accordingly its income tax assessments were required to be made in accordance with the provisions of section 44 read with Rule 5 of the First Schedule to the Income Tax Act. According to the aforesaid provisions, the profits and gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, the amortization of premium paid on investments should be considered as deductible for the purpose of computing the business income of the assessee. It was submitted further that this was the first year in which such disallowance has been made. The assessee buys the Government Securities on Premium. The premium amount is amortised and is being charged to profit & loss account on pro rata basis depending on the number of years when the securities will be paid back. The purchasing of the securities at premium is compulsory as per the guidelines of the Government of India and there is no choice with assessee for not to buy the same. The assessee distributes the premium paid over a period of holding rather than debiting the same in the year of purchase which will give a distorted look to the Profit & Loss Account and will not be reflecting the true and fair view of the company as per the assessee. It was further submitted that since the assessee has been carrying on the General Insurance business and consequently its assessment is required to be made in accordance with the provisions of section 44 read with Rule 5 of First Schedule to the Income Tax Act, 1961, the ld A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the revenue for the Asst Years 2007- 08 and 2008-09 are dismissed. The decision taken in Asst Year 2007-08 with regard to this ground would apply with equal force to Asst Year 2008-09 as similar disallowance was made in Asst Year 2008-09 except with variance in figures. The aforesaid decision rendered by the Tribunal for A.Ys. 2005-06, 2007-08 and 2008-09 vide a common order dated 05.08.2016 has been subsequently followed by the Tribunal to decide a similar issue involved in assessee's case for A.Y. 2014-15 vide its order dated May 29, 2019 in ITA No. 1876/Kol/2017. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of A.Ys. 2005-06, 2007-08 & 2008-09 and 2014-15, we respectfully follow the orders of the Tribunal for the said years and uphold the impugned orders of the Ld. CIT(A) giving relief to the assessee on this issue. Ground No. 2 of the Revenue's appeal is accordingly dismissed. 6. As regards the issue involved in Ground No. 3 relating to the deletion by the Ld. CIT(A) of the addition of Rs. 488,59,39,000/- made by the Assessing Officer towards reserve created for unexpired risk while computin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve created in the immediate preceding year and the Reserve required to be credited during the current accounting year. This cannot be considered as any alleged "Amount carried to any Reserve" debited to the Profit & Loss Account, but it should be appreciated that this Reserve represents that part of Premium Income which does not relate to the current accounting period. It must be appreciated that as per the Mercantile System of accounting, it is only that Income/Expenditure which relate to the current accounting period, should find places in 'the Revenue/Profit & Loss Account of the year. Hence it was submitted that in case of an Insurance Company (carrying on General Insurance Business), the creation of "Reserve for Unexpired Risk" cannot be considered to be similar to those "Reserves" which have been referred to in Clause (b) of Explanation (1) to Section 115JB(2). It may also be appreciated that the "Reserve for Unexpired Risk" can, in any case, not be considered as any provision made for meeting liabilities, other than ascertained liabilities as referred to in Clause(c) of Explanation (1) to Section 115JB(2). On the basis of the above facts it may kindly be appreciated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serves which have been specified in Explanation 1 (b) to section 115JB(2). Therefore, this reserve viz., the reserve for Unexpired Risk in the case of a General Insurance business, should not be added back for the purpose of computation of Book Profit u/s. 115JB(2) for MAT purposes. On the basis of this observation, it was held that the ld AO's action in adding back a sum of Rs. 169,45,00,000/- being reserve created for Unexpired Risk, was not in accordance with the relevant provisions of the Income-tax Act, 1961 and accordingly deleted the addition. 11.2. Aggrieved, the revenue is in appeal before us on the following ground:- "4. The CIT(A) erred on the facts of the case and in law in holding the sum of Rs. 1694500000 being the reserve created for unexpired risk should be considered as reserve for computing the Book Profit under section 115JB of the Income-tax Act." 11.3. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR vehemently relied on the order of the ld CITA. 11.4. We have heard the rival submissions. We find that the ld CITA had dealt this issue very elaborately and had given proper finding that the reserve created for unexp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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