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TMI Blog2025 (2) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... ollow the principle laid down in such binding presidents. Provisions based upon actuarial valuation are well accepted in several decisions. Hon'ble Supreme Court has explained the difference between accrued and contingent liabilities in the above decisions. Merely because these decisions may have dealt with the issue of leave encashment for employees or payment of bonus to the employees or warranties provided by the assessee, we cannot agree with Mr Chhotaray's contention that these decisions are entirely irrelevant or do not apply to the facts of this case. The ratio decidendi of the above precedents is not much coloured by the factual aspects of how those decisions were delivered. However, the principle involved is important, and this principle has been followed to reject the Revenue's contention that the provisions or expenditures were toward some unascertained liability or contingent liability. Besides, in the present case, since the assessee is obliged to maintain its accounts in terms of the IRDA directives or to adopt the actuarial method of valuation, there was no error in the first appellate authority and the ITAT holding that no additions could have been made in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provision of section 30 to 43B of the Income Tax Act, in computing the profits and gains of a business? B. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in allowing Rs. 72,56,060/- u/s 14A r.w. Rule 8D (2) (ii) without appreciating the fact that the assessee had failed to provide evidences that the interest and other expenses are not attributable towards earning of exempted income and had not used in investment? 3. Mr Chhotaray submits that the substantial question of law at (B) above was involved in Income Tax Appeal Nos. 711 of 2013 and 688 of 2013. Accordingly, by order dated 20 July 2015, both these Appeals have been admitted, inter alia, on such question. He submits that consistency would require admission of this Appeal on both the substantial questions of law as proposed. 4. Regarding question (B), we are satisfied that the same is involved in this Appeal. Therefore, we admit this Appeal on substantial question of law (B) and direct that this Appeal be heard along with Income Tax Appeal Nos. 711 of 2013 and 688 of 2013. 5. In so far as substantial question (A) is concerned, since we had our reservations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38 or the rules made thereunder or the provisions of the Insurance Regulatory and Development Authority Act, 1999 or the regulations made thereunder subject to the adjustments prescribed in Clauses (a),(b) and (c). Clause (a) provides that subject to other provisions of this rule, any expenditure or allowance including any amount debited to the profit and loss account either by way of a provision for any tax, dividend, reserve or any other provision as may be prescribed which is not admissible under the provisions of Sections 30 to 43B in computing the profits and gains of a business shall be added back. 11. As noted earlier, there is no dispute that the Assessee has prepared the profit and loss accounts in terms of the IRDA Act, Regulations and Directives. These require the assessee to follow actuarial valuation when preparing the accounts. This actuarial valuation method has been recognised and approved as a scientific method for valuing liabilities by various Court decisions. The records in this case show that for several previous years, even the Revenue accepted the provisions made by the Assesse based on the actuarial valuation method. However, for the assessment year 2010-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 245 ITR 428, Rotork Controls India P. Ltd Vs. Commissioner of Income Tax (2009) 314 ITR 62 (SC) and Metal Box Company of India Ltd Vs. Their Workmen (1969) 73 ITR 53. 15. The principle which emerges from these decisions is that liability is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources and in respect of which a reliable estimate of the amount of obligation is possible. The fact that Rotork Controls (supra) concerned an army of items of sophisticated goods manufactured and sold by the assessee or Metal Box Company (supra) pertained to an army of employees due to retire in future or Bharat Earth Movers (supra) was concerned with the provision made by the Assessee for meeting the liability incurred under Leave Encashment Scheme, are no grounds not to follow the principle laid down in such binding presidents. Provisions based upon actuarial valuation are well accepted in several decisions. 16. The Hon'ble Supreme Court has explained the difference between accrued and contingent liabilities in the above decisions. Merely because these decisions may have dealt with the issue of leave encashment for employees or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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