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TMI Blog2011 (10) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has disallowed an amount of ₹ 12,47,14,601/- by observing as under :- It was noted that in Annexure III of Tax Audit Report that there are instances of delays in payment of employees and employers contribution towards Provident Fund. Assessee makes adhoc payments off and on and it was noted that after a certain period of time there was a clear deficit in payment. This was also pointed out to the A/R udirng the course of assessment proceedings and A/R was asked to clarify on this point. In response, in hearing dated 8.3.2004, the A/R filed a statement of delay in deposit in which delayed payment amounting to ₹ 12,47,14,601/- has been accepted. A/R also submitted that there is a typographical error in the Annexure III in the sense that in the column due date, I row down has been inadvertently taken. Therefore for instances, for the month of May 15th May has been written which should be 15th June and so on. This particular submission is considered favourably as always due date is 15th of the following month and not 15th of the same month. However, there is a delay in payment of ₹ 12,47,14,601/- which was beyond due date and which has also been admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntributions included in the disallowed sum of ₹ 12,47,14,601 is confirmed. Hence, out of the disallowance of ₹ 12,47,14,601 the Assessing Officer would allow the amount representing the employer s contributions that had been paid before the due date of filing of the Return for the Assessment Year 2001-02 and the balance of disallowance representing the employees contributions, stands confirmed. 4.2. Aggrieved by this the assessee is in appeal before us. 5 The ld. Counsel on behalf of assessee has submitted that The assessee had been carrying on the business of Insurance other than Life Insurance and, accordingly. the profits and gains of business of Insurance in the hands of the assessee were required to be computed in accordance with the provisions of section 44 of the Income-tax Act, 1961 (Act) read with Rule 5 of the First Schedule of the said Act. As per Rule 5 of the First Schedule, the balance of profits disclosed by the Annual Accounts, copies of which were required to be furnished to the Controller of Insurance under the Insurance Act, 1938. subject to the specified adjustments, were to be considered as the assessee s income from Insurance bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions, he contended that there being no question of incurring of any expenditure in the matter of crediting the sum received towards contributions from the employees, there could not be any scope for making any addition under clause (a) of Rule 5 of the First Schedule in the case of the assessee who has been carrying on the business of Insurance other than Life Insurance. Hence, it is submitted that there should not be any applicability of section 36(1 )(va) read with section 2(24)(x) in view of the same not being covered by Rule 5(a) of the First Schedule. Therefore he requested to delete the disallowance of ₹ 8,67,57,956/- sustained by ld. CIT(A). 5.4. Without prejudice to the submissions made in (1) above, it is submitted by the ld. Counsel for assessee that section 36(l)(va) requires crediting of the employees contributions within the due date by the employer and the said due date , has been clarified by way of an Explanation. Unlike section 43B, which specifically requires actual payment for being entitled to a specified deduction, in section 36(1)(va) the requirement is of credit only. Hence, it is submitted that for being entitled to a deduction in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees Provident Fund (Pages 4 to 30). 5.8. On the basis of the above explanations and the documents, it is submitted that since the assessee had duly credited the individual accounts of the concerned employees in the Provident Fund within 15 of the month following the month in which the salaries have been paid and Provident Fund contributions have been deducted, it may kindly be held that the assessee had duly complied with the requirements of section 36(1)(va). Therefore he requested to delete the disallowance of ₹ 8,67,57,956/- sustained by ld. CIT(A). 6. On the other hand, the ld. DR appearing on behalf of the Revenue relied on the orders of the revenue authorities and further contended that Kolkata Benches has categorically disallowed the employees contributions. Therefore he requested to upheld the orders of the revenue authorities. 7. After hearing the rival submissions and on careful perusal of the materials available on record, specially the individual accounts of the employees as on 31.3.2001 which was placed at page 2 of the paper book and the statement showing the amounts due and paid on account of contribution of the employees and employer s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is duly considered. It is noted that this particular claim is in the nature of an ad-hoc one worked out on specific percentage against anticipated/undetermined liability which is likely to arise in future. This is not an actual or determined liability. No such provision is allowable as per I.T.Act. Hence, the assessee s claim is not admissible. ₹ 3,17,07,848/- is therefore added back to income of assessee. 10.1. On appeal ld. CIT(A) has deleted the addition made by AO in contributing the income under normal provision of the IT Act by observing as under - I have gone through the appellant s submissions and I am of the view that keeping in mind of the specific provisions contained in the I.T.Act, 1961 as regards the procedure for assessment of an assessee carrying on general insurance business, and also the above-referred two decisions of the Supreme Court, the Assessing Officer s action in disallowing the sum of ₹ 3,17,07,848/- does not appear to be correct. Accordingly, following the appellate orders passed for several earlier years, I delete the disallowance of ₹ 3,17,07,848/-. 10.2. However, he confirmed the additions made by AO under the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the year under appeal and hence the net debit to the accounts was for ₹ 3, 17,07,848. The Assessing Officer held that this was allegedly not a determined liability and so he would not allow the same while computing the business income and he disallowed the aforesaid sum of ₹ 3,17.,07,848. Again, while computing the Book Profit u/s 11 5JB, the Assessing Officer added back the abovementioned sum of ₹ 3,17,07,848. 11.1. He further submitted that the CIT(Appeals), in relation to the disallowance of ₹ 3,17,07,848 made in the computation of business income, deleted the said disallowance. However, in respect of the addition made while computing the Book Profit, the CIT(Appeals) held that the assessee s claim was in the nature of an ad hoc one worked out on specific percentage against the anticipated/undetermined liability which would likely to arise in future. On the basis of his above observation the CIT(Appeals) agreed with the Assessing Officer that for computing Book Profit the provision was allegedly an unascertained liability and he confirmed the said addition. The assessee submits for the kind consideration of the Hon ble Members that the Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an assessee carrying on general insurance business and also the above referred two decisions of the Supreme Court, the AO s action in disallowing does not appear to be correct. When once this observation has been made by ld. CIT(A) it is not fair on the part of ld. CIT(A) to take a contrary view while computing the MAT u/s 115JB of the Act by stating that the claim of assessee is in the nature of adhoc one working out on specific percentage against anticipated/undetermined liability. It is further observed from the correspondence and minutes of observations held by the assessee company with General Insurance Corporation of India and other subsidiaries in respect of unidentified Motor Third party claim which were placed at pages 31 to 34 of the paper book that assessee s liability towards unidentified motor Third party claim cannot be stated as unascertained liability. In our considered opinion the liability on account of unidentified Motor Third Party claim is certain. However the quantification is not certain. However, as regarding quantification also all the subsidiary companies of the General Insurance Corporation of India along with the assessee company has adopted the same m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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