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TMI Blog2019 (12) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A while computing the income of the assessee under the normal provisions of the Act and not for computation of book profit u/s 115JB of the Act. It was further held that unless an item is debited in the profit and loss account, the same could not be the subject matter of addition to book profits under clause (f) of Explanation to section 115JB of the Act and it is only the actual expenditure incurred by the assessee in relation to the exempt income, which is debited to the profit and loss account, can be added. In the present case, the assessee company had already disallowed expenses incurred in relation to the exempt income suo moto and keeping in view the same, we do not find any infirmity in the impugned order of the Ld. CIT(A) deleting the further disallowance made by the A.O. u/s 14A by applying Rule 8D while computing the book profit of the assessee company u/s 115JB of the Act. Ground of the Revenue s appeal is accordingly dismissed. - I.T.A. No. 1030/Kol/2018 - - - Dated:- 11-12-2019 - Shri P.M. Jagtap, Vice President (KZ) And Shri S.S. Godara, JM For the Assessee : Shri Sanjay Bhattacharya, AR For the Revenue : Shri A.K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) has erred in holding that a sum of ₹ 488,59,39,000/-, being the reserve created for unexpired risk should not be considered while computing the book profit u/s 115JB of the I.T. Act. 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that disallowance u/s 14A should not be added to the total income while computing book profit of the assessee. 4. We have heard the arguments of both the sides and also perused the relevant material available on record. As agreed by the learned representatives of both the sides, the issue involved in Ground No. 1 is squarely covered in favour of the assessee by the decision rendered by this Tribunal in assessee s own case for A.Ys. 2005-06, 2007-08 and 2008-09 vide its common order dated 05.08.2016 passed in ITA Nos. 674, 982 983/Kol/2012, wherein a similar issue was decided by the Tribunal vide paragraph no. 9 of its order as under: 9. Disallowance of Investments written off The brief facts of this issue is that the assessee wrote off ₹ 4,22,26,000/- out of Investments by charging the said sum to its Profit Loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered as business or trading assets of the assessee. Any writing off of Investments which have been considered as bad, should be treated as writing off of Bad Debts. Hence, the assessee submitted that writing off of Investments should have been considered by the ld AO as writing off of Bad Debts which were allowable u/s. 36(1)(vii). The ld AO should have appreciated that income from those investments had always been shown under the head Business income and, therefore, the requirement of section 36(2) should have been considered as having been fulfilled by the assessee. The assessee further submitted that in respect of the Assessment Year 2002-03 (Ground No. 1) the ld CIT(A) vide his Appellate ITA Nos. 674-982-983/Kol/2012 National Insurance Co. Ltd., AYs 2005-06,2007-08 2008-09 order dated 24-01-2007 (Paragraph No. 7) deleted the disallowance in respect of the Bad Debts being Investment Written Off. On the basis of the above facts, the above-referred two decisions of the Hon'ble Supreme Court as well as the Appellate decision in the assessee's own assessment for the Assessment Year 2002-03, as referred to above, the assessee submitted that the disallowance of ₹ 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred Supreme Court decisions it is clear that if the particular item of dispute (debit entry made in the Profit Loss Account) falls under the category of expenditure or allowance or provision , and the same is not admissible under the Act, only then the concerned item can be added back in computing the income from general insurance business. From the above facts it appears that the disallowance of the writing off of investments, made by the Assessing Officer is not in accordance with the prescribed specific procedure in the appellant's case. 25. Respectfully following the above-referred two Supreme Court decisions, submissions of the appellant and the Appellate Orders for the Assessment Years 2000-01, 2002-03 and 2004-05 ITA Nos. 674-982- 983/Kol/2012 National Insurance Co. Ltd., AYs 2005-06,2007-08 2008-09 of the CIT(A)-VI, Kolkata and in the facts and circumstances of the case as mentioned hereinabove, it is held that because of the restrictions contained in section 44 read with Rule 5 of the First Schedule, there could not be any disallowance of the amount written off out of investments and, accordingly, the disallowance of ₹ 4,22,26,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with the provisions of section 44 read with Rule 5 of the First Schedule to the Income Tax Act. According to the aforesaid provisions, the profits and gains of the insurance business other than life insurance shall be taken to be the balance of profits disclosed by the Profit Loss Account copy of which are required under the Insurance Act, 1938 to be furnished to the Comptroller of Insurance subject to the following adjustments :- a) Any expenditure or allowance which is not admissible under the provisions of section 30 to 43B shall be added back. b) Amount carried over to a reserve for any unexpired risks as prescribed in this behalf shall be allowed as a deduction. The assessee also submitted that the Hon'ble Supreme Court in the case of General Insurance Corporation of India vs CIT reported in (1999) 240 ITR 139 (SC) had held that the Assessing Officer had no general power to make any adjustment in the accounts of a general insurance company. The assessee also submitted that the Hon'ble Supreme Court in the case of CIT vs Oriental Fire General Insurance Co Ltd reported in (2007) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was further submitted that since the assessee has been carrying on the General Insurance business and consequently its assessment is required to be made in accordance with the provisions of section 44 read with Rule 5 of First Schedule to the Income Tax Act, 1961, the ld AO is empowered to make additions / disallowances only in accordance with the above mentioned Rule 5. Any sum which has been amortised cannot be considered as either 'expense' or 'allowance' or 'provision'. It was submitted that in the above referred Rule 5 ITA Nos. 674-982-983/Kol/2012 National Insurance Co. Ltd., AYs 2005-06,2007-08 2008-09 of the First Schedule, it has been mentioned that certain expenditure or allowance or provision can be added back only if the same is not admissible u/s 30 to 43B of the Act and there is no specific mentioning of adding back of any amount amortised in relation to premium paid on investments. From the above referred Supreme Court decisions, it is clear that if the particular item of dispute (debit entry made in the profit and loss account) falls under the category of 'expenditure' or 'allowance' or 'provision' and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned orders of the Ld. CIT(A) giving relief to the assessee on this issue. Ground No. 2 of the Revenue s appeal is accordingly dismissed. 6. As regards the issue involved in Ground No. 3 relating to the deletion by the Ld. CIT(A) of the addition of ₹ 488,59,39,000/- made by the Assessing Officer towards reserve created for unexpired risk while computing the book profit of the assessee company u/s 115JB of the Act, the learned representatives of both the sides agreed that this issue is also squarely covered in favour of the assessee by the order of the Tribunal dated 05.08.2016, wherein a similar issue as involved for A.Ys. 2005-06, 2007-08 and 2008-09 was decided by the Tribunal vide paragraph no. 11 of its order as under: 11. Addition towards Reserve created for Unexpired risk u/s 115JB of the Act The brief facts of this issue is that while computing the Book Profit u/s. 115JB of the Act for the purpose of MAT, the ld AO considered a sum of ₹ 169,45,00,000/- being the Reserve for Unexpired Risk created as per the requirement of law, as allegedly required to be added back. The ld AO added back the aforesaid sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be considered to be similar to those Reserves which have been referred to in Clause (b) of Explanation (1) to Section 115JB(2). It may also be appreciated that the Reserve for Unexpired Risk can, in any case, not be considered as any provision made for meeting liabilities, other than ascertained liabilities as referred to in Clause(c) of Explanation (1) to Section 115JB(2). On the basis of the above facts it may kindly be appreciated that there has not been any requirement to add back any sum in relation to the Reserve for Unexpired Risk while computing Book Profit u/s.115JB(2) for the Assessment Year 2008-09. Accordingly, the assessee submitted that the Reserve for Unexpired Risks not being of the nature as specified in clause (b) of Explanation 1 to section 115JB(2), the action of the ld AO in making an addition of such Reserve should be held as unjustified. Hence, the assessee ITA Nos. 674-982-983/Kol/2012 National Insurance Co. Ltd., AYs 2005-06,2007- 08 2008-09 submitted that the ld AO may kindly be directed to delete the addition of ₹ 169,45,00,000/- made by him in computing the Book profit u/s 115JB of the Act. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case and in law in holding the sum of ₹ 1694500000 being the reserve created for unexpired risk should be considered as reserve for computing the Book Profit under section 115JB of the Income-tax Act. 11.3. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR vehemently relied on the order of the ld CITA. 11.4. We have heard the rival submissions. We find that the ld CITA had dealt this issue very elaborately and had given proper finding that the reserve created for unexpired risk need not be added back for the purpose of computation of book profits u/s 115JB of the Act. The revenue was not able to controvert the findings of the ld CITA before us. Hence we find no infirmity in the order passed by the ld CITA in this regard. Accordingly, the Ground No. 4 raised by the revenue for Asst Year 2008-09 is dismissed. The aforesaid decision rendered by the Tribunal for A.Ys. 2005-06, 2007-08 and 2008-09 vide a common order dated 05.08.2016 has been subsequently followed by the Tribunal to decide a similar issue involved in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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