TMI Blog2022 (3) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... gher than the provisions made by the assessee. This it shows that the provisions made are not excessive - this claim is allowed to the assessee from year to year. In view of this, we find that assessee has incurred an expenditure, which is incurred during the year with respect to the provisions made for the IBNER and IBNR claims, on scientific basis and also certified by the valuer with respect to the methodology adopted in making such provisions. Thus, it satisfies the entire ingredient for its allowance u/s 37 (1) of the act. Thus, there is no infirmity in the order of the learned CIT (A) in allowing the claim under section 37(1) - Decided against revenue. TDS u/s 194H - TDS on co-insurance fee u/s 40(a)(ia) - whether the assessee is not required to deduct tax at source on such payments? - HELD THAT:- In the decision of the coordinate bench [ 2009 (2) TMI 234 - ITAT BOMBAY-G] we find that there is no discussion with respect to any of the agreements between the insurance company and the reinsurance Co, no such agreements were also available before us. Therefore it is very difficult for us to say without looking at the evidence that the provisions of Section 194H do not apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed. - ITA No. 14/Mum/2021 - - - Dated:- 8-3-2022 - SHRI VIKAS AWASTHY, JM AND SHRI PRASHANT MAHARISHI, AM Appellant by : Shri Rajesh Damor, CIT DR Respondent by : S/Shri J.D. Mistry Madhur Agrawal, ARs ORDER PER PRASHANT MAHARISHI, AM: 01. This appeal [ITA No. 14/Mum/2021] is preferred by the Dy. Commissioner of Income Tax on 08.03.2001, Mumbai (the learned Assessing Officer/AO) for the Assessment Year 2015-16 against the order passed by the Commissioner of Income-Tax (Appeals)-15 [The Learned CIT(A)], Mumbai dated 28.02.2020. 02. Ld AO has raised 3 grounds of appeal as under:- 1. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in holding that the provisions for claim Incurred but Not Reported (IBNR) and claim Incurred But Not Enough Reported (IBNER) amounting to ₹ 148,43,01,915/- is allowable u/s 37(1) of the Act without appreciating that such provisions are in the nature of contingent liability. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the co-insurance fee of ₹ 41,49,000/- is allowable u/s 40(a)(ia) of the Act and the assessee is not require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, [ the Act] read with Rule 5 of the Schedule. The learned Assessing Officer passed an order under section 143(3) of the Act on 31.12.2018 at ₹ 1,33,26,67,350/-. The assessee preferred an appeal against 14 different disallowances/ additions made by the learned Assessing Officer. As per order passed by the learned CIT (A) now, the Revenue is aggrieved against three issues as per the grounds of appeal. 06. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer and merely referred to the order of the learned Assessing Officer and learned CIT (A) stating relevant paragraph of the issues involved. It was submitted that the issues are decided in favour of the assessee by the co-ordinate Bench in assessee s own case; however, the above disallowance should not have been deleted by the learned Commissioner of Income-Tax (Appeals) for the reason given in assessment order y the ld AO. He extensively referred assessment order on all these [3] issues. 07. The Authorised Representative submitted that the appeal of the Revenue deserves to be dismissed in view of the issues already decided in favour of the assessee by the co-ordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 considered that if there is a present obligation with respect to the provision, and it arises out of events involving outflow of resources and can be based on reliable estimation of such obligation then the liability incurred by the assessee company is allowable. He further held that the methodology to determine the liability is also certified by actuary in accordance with guidelines and norms issued by the Institute of actuaries of India and insurance regulatory and development authority of India. He further held that such provisioning relates to present obligation and involves outflow of resources. He further considered the provisioning made by the assessee in different years and actual utilization of such provision with respect to those financial years and then he found that the provision was made less than the actual amount incurred in settling those claims. He further held that the coordinate bench in case of DCIT vs. National Insurance co. Ltd. (2016) 72 taxmann.com 116 (Kolkata p Trib.) which has been affirmed by Hon'ble Calcutta High Court in ITA No.76 of 2019. Therefore he held that such provisioning is allowable u/s 37 (1) of the act and the addition made by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation of India Ltd. in ITA No.7657/Mum/2014, wherein the co-ordinate Bench vide order dated 11.10.2017 vide para No.3.3 has allowed the identical claims. The learned CIT(A) while deciding the issue has relied upon the decision co-ordinate Bench in DCIT vs. National Insurance Company Limited (supra) has held that the provisions made available the above claim are based on scientific calculation with a proper and rational and therefore, it could only be termed as ascertain liability. Though the above decision was rendered with respect to the computation of book profit under section 115JB of the Act, however, the learned CIT (A) applied it and allowed the claim of assessee for deduction under section 37(1) of the Act for the reason that the claim of the assessee is ascertained claim, supported by Actuarial valuation and also made on a scientific basis. To reach at this calculation, the learned CIT (A) obtained information for 6 different assessment years and found that the actual claim settled is always higher than the provisions made by the assessee. This it shows that the provisions made are not excessive. Further, it was stated before us that this claim is allowed to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stands of the assessee and transactions between them were on principle-to-principle basis. The learned Assessing Officer rejected the contention of the assessee for the reason that in earlier year s identical disallowance was made. The Assessing Officer further noted that co-ordinate Bench in assessee s own case vide order dated 28th November, 2015 has held that no disallowance is to be made with respect to the co-insurance fees. However, the Assessing Officer held that the above matter involves substantial question of law and the appeal of the Assessing Officer is pending before the Hon'ble High Court, the disallowance is made. As assessee has paid a sum of ₹ 41,49,900/- on which no tax is deducted, he disallowed 30% thereafter amounting to ₹ 13,83,03,000/-. When the matter reached the learned and CIT A, he agreed with the contention of the assessee and following the decision of the co-ordinate bench in assessee s own case for earlier year deleted the above disallowance. 015. After hearing both the parties, we find that identical issue is covered in favour of the assessee by paragraph No. 27 in ITA No.3535 and 1702/11 and 4167/12, 1584 3596/2011. The co-ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angement with the coinsurers for sharing the risk premium as per the agreed ratio. It was pleaded that the coinsurers were not the agents of the assessee and that the transactions between the assessee and the coinsurers were on principal to principal basis. The same effect was stated to be evidenced by the arrangement between the two parties and therefore no with the holding was required. It was further submitted that the essential characteristic of commission was payment to an agent. In the present case, the coinsurers were stated to be neither acting as an agent nor acting as broker for and on behalf the assessee and therefore the payments of coinsurance fees could not be construed as commission as per the act or in common parlance. The AR made detailed submissions to bring out how the provisions of Section 194H are not applicable in their case. The AR also placed reliance on a number of judicial pronouncements, the ratio of which is not applicable to the facts of the case. 31. Considering totality of facts and circumstances of the case, we are in agreement with the contentions of the learned AR that no disallowances warranted u/s 40 (a) (ia) in respect of coinsurance fees paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the lower authorities also. Therefore, in absence of any evidence placed before us, we are not in position to decide whether the above payments are covered u/s 194 H or not. Further, we also do not know whether the nature of payments and parties covered in earlier orders are also same. in the interest of justice we set-aside the whole issue back to the file of the learned assessing officer with a direction to assessee to produce the relevant agreements and arrangements before the assessing officer to show that the above payment does not fall within the purview of Section 194H of the act. The learned assessing officer may examine the same and then decide whether on such payment the provisions of Section 194H applies or not based on the various arguments raised before him by the assessee as well as the arguments raised by the assessee before the coordinate bench in earlier years as per para number 30 of that order. Accordingly, ground no. 2 of the appeal of the Assessing Officer is allowed subject to above direction. 018. The third ground of appeal is with respect to the disallowance of expenditure of ₹ 29,46,886/- incurred by the assessee for purchase of pen drives and l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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