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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 ..... Hon'ble ITAT was justified in deleting the addition made by the AO on account of provision for uncertain liability of an insurance company other than Life Insurance Company without appreciating the fact that the same is not permissible deduction under Rule-5 (a) of First Schedule of the I.T. Act, and it should be treated as per 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulatory and Development Authority Act, 1999 ('the IRDA Act, 1999'), the IRDA Regulations or even the IRDA Directives squarely apply. At least, Mr Chhotaray raised no dispute about this. 8. Mr Chhotaray's only contention was that a plain reading of Rule 5(a) of the first schedule to the IT Act, 1961 provides that the subject amount, which the Assessing Officer added to the Assessee's income should firstly be an expenditure or allowance and secondly it should not be one admissible under the provisions of Sections 30 to 43A. He submitted that the provisions made by the Assessee were like contingent or unascertained liabilities and, therefore, were correctly disallowed by the AO, inter alia under Section 37 of the IT Act, 1961. 9. Mr. Cho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 2010-2011, the AO has sought to add the provisions made to the Assesse's income on the ground that such provisions relate to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or to undo the entries therein. The ITAT has relied upon this decision as also several other decisions referred to in General Insurance Corporation (supra). 14. On the issue of unascertained liability or contingent liability, we are afraid we cannot accept Mr Chhotaray's contentions either on facts or on law or on both. He suggested that as long as a liability is not fully crystallised or an insurance claim fully adjudicated upon, the same would remain an unascertained liability or contingent liability. This contention not only overlooks the facts on record as referred to by the first appellate authority and the ITAT but also runs counter to the law laid down by the Hon'ble Supreme Court in the case of Bharat Earth Movers Vs. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Works P. Ltd (1992) 198 ITR 297 to urge how precedents must be construed from the questions involved in this case. 17. 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. 18. 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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