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TMI Blog2004 (9) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... as well. Investment Written Off - On consideration of the matter, we find that the entries made in the assessee s books of account in this behalf are strictly in accordance with the guidelines issued by General Insurance Corporation. These guidelines permit the assessee to book a loss which has, for all practical purposes, been suffered on account of depreciation in value of investments beyond any reasonable hope of recovery. In such circumstances, the guidelines permitted the insurance company to book the loss in the account rather than waiting for actual realisation of loss on sale of investment. Thus, the amounts claimed by the assessee are to be understood as a loss on investments suffered by the assessee. Such loss can neither be considered an expenditure nor an allowance . We find support in this view from the judgment of the Hon ble Supreme Court in the case of General Insurance Corpn. of India vs. CIT [ 1999 (9) TMI 3 - SUPREME COURT] . In that judgment the Hon ble Supreme Court held that spending in the sense of paying out or away of money is the primary meaning of expenditure . Expenditure is what is paid out or away and is something which is gone irretrievably. In that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... afresh as and when, and if necessary approval of COD is received. Shri V.S. Rastogi, advocate, who appeared on behalf of the assessee agreed to this course of action. Accordingly, we dismiss Revenue's appeals in ITA Nos. 5035/Del/1998 and 3910/Del/2000 with full liberty to the Revenue to file these appeals if and after having received necessary approval from COD. 3. We shall take up Revenue's appeals in ITA Nos. 3607 to 3609/Del/1990 for asst. yrs. 1984-85, 1982-83 and 1983-84. These three appeals have been filed by the Revenue on 25th May, 1990, against the orders of the CIT(A)-XI, New Delhi, dt. 29th March, 1990, in the case of the assessee in relation to assessment orders under s. 143(3) for asst. yrs. 1984-85, 1982-83 and 1983-84. In these three appeals the Revenue has disputed deletion by the CIT(A) of additions made by the AO on account of the amount of reserve for export market development allowance. Secondly, the Revenue has disputed the orders of the CIT(A) deleting the additions made by the AO on account of amount of reserve for doubtful debts. These two issues are common in all these three appeals filed by the Revenue for asst. yrs. 1984-85, 1982-83 and 1983-84. We fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that by virtue of the provisions of s. 44 of IT Act, 1961, the income chargeable to tax of an insurance business under the head 'Profits and gains of any business or profession' has to be computed in accordance with the rules contained in the First Schedule and not under the general provisions of the Act. The learned Authorised Representative further pointed out that in respect of insurance business other than life insurance business, r. 5 of the First Schedule governed the matter. He pointed out that insertion made in cl. (a) of r. 5 by the Finance (No. 2) Act, 1998, with retrospective effect from 1st April, 1989, is not applicable to assessment years before us, viz., asst. yrs. 1982-83 to 1984-85. From the fact that the insertion of words "including any amount debited to the P&L a/c either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed" has been given retrospective effect from 1st April, 1989, it can be concluded that amount of any reserve cannot be assessed or added to the book profits for an assessment year prior to asst. yr. 1989-90. He further argued that in any case the amounts of reserve for export mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee fairly conceded that this issue is to be decided against the assessee. We, therefore, set aside the order of the learned CIT(A) on this issue and restore the addition as made by the AO for asst. yrs. 1982-83 to 1983-84. 9. We now take up the Revenue's appeal in ITA 7815/Del/1989 that has been filed on 29th Dec., 1989, against the order of learned CIT(A)-III, New Delhi, dt. 25th Oct., 1989, in the case of the assessee in relation to assessment order under s. 143(3) for asst. yr. 1986-87. The first issue in this appeal is directed against the order of the learned CIT(A) allowing deduction of reserve for bad and doubtful debts amounting to Rs. 60,41,648. Respectfully following the judgment of the Hon'ble Delhi High Court, we reject this ground of appeal. 10. Ground of appeal No. 2 in this appeal is that the CIT(A) was not justified in granting relief of Rs. 14,76,232 to the assessee disregarding the provisions of s. 43B of the Act. During the course of hearing before us, the Authorised Representative of the assessee pointed out that the provisions of s. 43B have been incorporated in r. 5(a) of the First Schedule to IT Act, 1961, by Direct Tax Laws (Amendment) Act, 1987, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this respect on omission of r. 5(b) by the Finance Act, 1988, w.e.f. 1st April, 1989. He pointed out that the CIT(A) had strongly relied upon Circular No. 528, dt. 16th Dec., 1988, being the Explanatory Notes and Memorandum explaining provisions of the Finance Bill, 1988. The learned counsel argued that it was a settled legal position that business loss and business expenditure had separate connotations and these two terms were not synonymous. He placed reliance in this respect on the judgment of the Hon'ble Supreme Court in the case of Badridas Daga vs. CIT (1958) 34 ITR 10 (SC). The learned counsel further argued that interpretation of a statutory provision primarily called for the natural and plain meaning of the words employed. It was only when the statutory provision was ambiguous or capable of more than one meaning that the view found to be in furtherance of legislative intent could be accepted to be the correct meaning of such a statutory provision. He argued that all that happened in r. 5 of the First Schedule was omission of cl. (b) w.e.f. 1st April, 1989. Prior to its omission cl. (b) empowered the AO to examine the reasonableness of the amount written off or reserved i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all not be allowed as a deduction in computing the profits chargeable to tax." 17. The learned counsel argued that the Finance Act, 1988, had not amended sub-r. (b), but omitted it. As a result, no exemption was provided in respect of the profits earned on the sale of investment. The insurance companies were required to work out profits on the sale of investments and the same continued to be income chargeable to tax. Likewise, if there were any losses, the AO was required to allow the same as deduction. The learned counsel argued that it was probable that explanatory notes stated the legislative intention. The fact of the matter was that omission of sub-r. (b) did not achieve that legislative intent. It was a well-settled position that a statutory provision should be construed to be what it actually means and not what the legislature had intended. There was bar against 'causus omissus'. He relied in this respect on the judgments in Smt. Tarulata Shyam & Ors. vs. CIT 1977 CTR (SC) 275 : (1977) 108 ITR 345 (SC), Petron Engineering Construction (P) Ltd. vs. CBDT (1989) 75 CTR (SC) 20 : (1989) 175 ITR 523 (SC), Padmasundara Rao (Decd.) & Ors. vs. State of Tamil Nadu & Ors. (2002) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the intention of the law makers. The fact of the matter was that such effect was not forthcoming from omission of cl. (b). On consideration, we find ourselves in substantial agreement with this argument. If the intention of the legislature was to exempt profit on sale of investments and to disallow deduction of loss on sale of investments, the fact remains that such intention has not been translated into statute. Omission of sub-r. (b) of r. 5 does not bring about this change in the statute. In these circumstances, we are left with the only question as to whether the write off/write down of investments made in the books of account of the assessee for the assessment year before us can be considered to be "expenditure" or "allowance". If it represents either of the two, provisions of ss. 30 to 43B of the Act would come into operation and the amount claimed by the assessee cannot be allowed as deduction for want of corresponding provisions in IT Act, 1961. If, on the contrary, the amount claimed by the assessee by way of write off/write down of investments is neither an "expenditure" nor an "allowance", the AO is not clothed with any ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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