TMI Blog2023 (5) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... ber For the Assessee : Shri Ajay Vohra, Sr. Advocate, Shri Kishor Kunal, Advocate And Shri Parth, Advocate For the Revenue : Ms. Princy Singla, Sr. DR ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : These are appeals filed by the Revenue against the respective orders of ld. CIT (Appeals)-38, New Delhi pertaining to AYs 2013-14, 2014-15 2015-16. 2. Since the appeals were heard together these are disposed off by this common order. 3. For the sake of reference, we are giving the grounds raised by the Revenue for the Assessment Year 2013-14 as under :- 1. On facts and under circumstances of the case the Ld. CIT(A) has erred in law and facts in deleting the disallowance of Rs.49,00,867/- being claims outstanding as on 31.03.2013 ignoring that this amount is shown as a provision in books of accounts of the assessee and can be allowed in the year when it is materialized and not in the year under consideration. 2. On facts and under circumstances of the case the Ld. CIT (A) has erred in law and facts in deleting the disallowance of Rs. 4,47,15,583/- on account of provision for unlogged claim ignoring that this provision was purely on ad-hoc basis and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the following disallowances :- Particulars AY 2013-14 AY 2014-15 AY 2015-16 Returned income (-)40,98,65,043 (-)79,44,57,040 (-)67,06,94,506 Provision for unsettled claims outstanding as on March 31 st 49,00,867 3,99,26,327 4,74,48,153 Provision for IBNR Claims 4,47,15,583 4,79,30,912 8,11,23,768 Total disallowances 4,96,16,450 8,69,56,519 12,85,71,921 Assessed income (-)36,02,48,593 (-)70,75,00,521 (-)54,22,22,595 6. The reasoning for the above said disallowances by the AO has been summarized as under :- i. The provision for unsettled claims outstanding as on March 31 st is adhoc provision made on account of contingent liabilities and not ascertained liabilities and therefore not allowable under Section 37 of the Income Tax Act, 1961 ( Act ). ii. The provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which cannot be foreseen at the time of creating the said provision and is settled basis the medical evaluation of the claim documents so filed. It must be noted that the event of occurrence that led to settlement of the claims was within the relevant year under consideration and it is only the quantification of the claims that was concluded in the subsequent period. Merely because the amount of claim varies because of post facto circumstances, the extent of which cannot be envisaged at the time of accrual of expenditure does not mean that the said provision is not allowable under the provisions of the Act. In this regard, reliance is placed on Kerala Transport Co. vs. ACIT, [1994] 50 TTJ 435 (Coch. ITAT) [Paras 4@Pgs. 6-91 Compilation], the reasoning of which has also been upheld by the Hon'ble Kerala High Court in CIT vs. Kerala Transport Co., [1999] 2391TR 183 (Ker.) [Paras 10-11@Pgs. 3-41 Compilation]. 8. Without prejudice to the above, the unutilised provision consisting of rejected claims for each relevant financial year have been reversed by the Respondent and offered to tax in the subsequent year. In CIT vs Realest Builders Services Ltd., [2008] 307 ITR 202 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iods of the cover. Thus, it pertains to the methodology of recognizing premium income in the books of insurance companies. On the contrary, IBNR is created for claims already incurred in the current period but not reported to the Respondent and thus, relates to expense recognition. The very purpose of these two provisions vary and the law does not in any way prohibit the Respondent from claiming deduction for both URR and IBNR simultaneously subject to the provisions of Part B of First schedule of the Act. 13. It is reiterated that provision for IBNR is an allowable expenditure under section 37 of the Act being provision for ascertained liability which has been created on actuarial basis in light of the favourable judicial pronouncements on this issue. Thus, the same cannot be disallowed merely on the ground of being over and above the URR for reasons cited above. 14. In view of the above, it is humbly submitted that the Ld. CIT(A) has rightly held that the provision for IBNR claims is ascertained liabilities and therefore, allowable as expenditure under Section 37 of the Act. 15. Based upon the above contentions, it is humbly submitted that the deletion of disputed disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order of the AO. The fundamental submissions of the appellant is that the provision for claims incurred but not reported is in accordance with the IRDA Regulations and the appellant being an insurance company is bound by such regulation. Further, the recent ruling of the Kolkata ITAT Bench in the case of Deputy Commissioner of Income tax vs National Insurance Co. Ltd. (2016) 72 taxmann.com 116 (supra) is squarely applicable to the facts of the case as reproduced hereunder: 3.6 We have heard the rival submissions and gone through facts and circumstances of the case. We find that the Ld CIT(A) had given a categorical finding that the provision made for liabilities incurred but not reported (IBNR) made by the assessee as per the regulations framed by Insurance Regulatory Development Authority (IRDA) based on a scientific calculation with a proper rationale could only be termed as ascertained liability. Hence the same need not be added back by treating the same as an unascertained liability while computing the book profits ii/ 115JB of the Act. The revenue was not able to controvert the findings given by the Ld CITA before us. Hence, we find no infirmity in the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
