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TMI Blog2016 (11) TMI 1256X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Solatium fund during the subject Assessment Year were as per the scheme introduced by the Central Government and as directed by IRDA. This provision was to be made at the rate of 1% of the premium received during the subject Assessment Year as done in the earlier Assessment Year also. This was to provide for contribution to a fund to be formed to make payment to victims of hit and run accident. In this case, the liability of making a contribution to the Solatium fund at 1% of premium received, is a certain liability in view of IRDA letter dated 13th May, 2004. Therefore, it is not a contingent liability during the subject Assessment Year. In fact, this Court in Shrikant Textiles v/s. CIT [ 1970 (3) TMI 40 - BOMBAY High Court ] has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited an amount of ₹ 3.46 Crores being a provision made for its contribution to Solatium funds. The Assessing Officer called upon the Respondent-Assessee to explain its above claim. The Respondent-Assessee in response, by letter dated 15th September, 2008 explained that the Solatium fund, is a scheme framed by the Central Government to compensate the victims of hit and run motor accidents. The Motor Vehicle Act defines a hit and run motor accident as an accident arising on use of motor vehicle/ motor vehicles whose identity cannot be ascertained in spite of reasonable efforts. Therefore, Insurance Regulatory and Development Authority (IRDA) by a letter dated 18th March, 2003 directed all General Insurance Companies to contribute to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 3.46 Crores being the expenditure provided for as contribution to the Solatium fund to the Central Government was disallowed. 5. Being aggrieved, the Respondent-Assessee carried the issue in appeal to the Tribunal. The Tribunal by the impugned order holds that the provision made for contribution to the Solatium fund as directed by the IRDA was an ascertained liability for the subject Assessment Year made in terms of directions dated 18th March, 2003. The impugned order holds that in the subsequent Assessment Year, the payment to be made to the fund was scaled down in May 2005 by IRDA to 0.1% of the premium and payment was made into the fund in September, 2005 would not make the liability in the subject Assessment Year a contingent li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by IRDA. This provision was to be made at the rate of 1% of the premium received during the subject Assessment Year as done in the earlier Assessment Year also. This was to provide for contribution to a fund to be formed to make payment to victims of hit and run accident. The Apex Court in Bharat Earth Movers Ltd., v/s. CIT 245 ITR 428 has observed as under: The law is settled: if a business liability has definitely arises in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a further date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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