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TMI Blog1956 (8) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... a life insurance company and according to the actuarial valuation as at 31st December, 1943, there was a deficit of ₹ 3,56,054. The actuarial valuation as at 31st December, 1946, showed a surplus of ₹ 37,429, and the question that arose was the proper mode of ascertaining the profits or income of this company in accordance with the Schedule to the Income-tax Act. Now, there is no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to this half, the amount, viz., ₹ 17,311 was allowed by the Department as a permissible deduction. But the claim put forward by the company was that it was also entitled to a deduction with regard to the sum of ₹ 3,56,054, and what was urged was that this amount had to be credited to the Life Insurance Fund, that it constituted a statutory reserve for the policy-holders, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the extent of ₹ 3,56,054. This deficit was made good after three years. Not only was it made good, but there was actually a surplus in the fund to the extent of ₹ 37,429. Now, in law the insurance company could dispose of this surplus, viz., ₹ 37,429, as it pleased. It could declare a dividend out of it or it could give a bonus to the policy-holders or it could reserve it fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case it is clear that with regard to this sum of ₹ 3,56,054 no benefit whatever is conferred upon the policy-holders. This amount, by reason of the statutory obligation, goes to the life fund to make up the deficit which had arisen in the earlier period. This amount is earmarked to meet the liabilities due to the policy-holders. This amount is not intended to confer any benefit upon the poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company to do with it what it liked. It was not open to the company to utilise any part of this amount either for declaring dividend or giving benefits to the policy-holders. By statute this amount had to be credited to the life fund in order to make good the deficit which had occurred in the earlier years. Therefore, in our opinion, it could not be said of this sum of ₹ 3,56,054 that it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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