DY CIT - 8(3)(1), MUMBAI vs. M/S TATA AIG GENERAL INSURANCE CO.LTD., MUMBAI

This appeal [ITA No. 14/Mum/2021] is preferred by the Dy. Commissioner of Income Tax on 08.03.2001, Mumbai (the learned Assessing Officer/AO) for the Assessment Year 2015-16 against the order passed by the Commissioner of Income-Tax (Appeals)-15 [The Learned CIT(A)], Mumbai dated 28.02.2020.

Ld AO has raised 3 grounds of appeal as under:-

This appeal preferred by the learned Assessing Officer on 5 January 2021 is delayed by 249 days. The learned Assessing Officer has also submitted an application for condonation of delay stating that in

It was also noted that assessee has also filed an appeal against the same order of the learned CIT(A) which was heard by different co-ordinate Bench earlier i.e. on 2nd September, 2021 vide ITA No. 1718/Mum/2020, but order is awaited. When this question was pointed out to the learned parties at the time of hearing, both the parties confirmed that there were no connected issues in both the appeals, though they are against the same order by both the parties. Nevertheless, parties submitted that it does not have any implication even if the appeal of the assessee has already been heard and if the appeal of the Revenue can now be heard and disposed off, they do not express any objection. Now as the appeal of the assessee has been heard, parties are also advocating that issues in both appeals are

The Authorised Representative submitted that the appeal of the Revenue deserves to be dismissed in view of the issues already decided in favour of the assessee by the co-ordinate Bench in assessee’s own case for earlier years as well as in case of other insurance companies involving similar issues. He placed on record the decision of ITAT in assessee’s own case in ITA No. 3535 and 1702/Mum/2011 and ITA No. 1584 and 3596/Mum/2011 preferred by both the parties for Assessment Year 2006-07 and also appeal for Assessment Year 2008-09 dated 20/11/2015. He also submitted a case law compilation to support that issues are covered in this appeal.

We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also considered the order of the coordinate bench in assessee’s own case as well other decision of coordinate benches involving similar issues.

First ground of appeal is related to the provisions for claim Incurred but Not Reported (IBNR) and claim

Fact shows that the assessee has debited the above sum to the profit and loss account and claimed as allowable. The Assessing Officer questioned the same and assessee submitted that the above claims are incurred on account of the contractual obligations between the insurance company and the insurer. Assessee, insurance company, has an obligation to settle claims incurred. Such settlement of claim involve time so cannot be finally settled during the financial year. Above provision are created as per the guidelines prescribed by the IRDA, the method of provisioning a scientific calculation, it is ascertained liability under section 37(1) of the Act. Therefore, it is an allowable expense.

The learned Assessing Officer held that it is a provisions created by the assessee in anticipation of claims and it is not ascertained liability so it cannot be allowed. He further noted it is not known that how much liability is good enough to pay out above claims and therefore, it is purely a contingent liability and cannot be allowed as deduction. The Assessing Officer further held that the above claim is not

We have carefully considered the rival contentions and perused the orders of the lower authorities. The facts show that during the year the assessee has made a provision of ₹148,43,01,950/- towards claims Incurred But Not Reported (IBNR) and claims Incurred But Not Enough Reported (IBNER). The above deduction was claimed under section 36(1) of the Act. The basis of the claim was that the provision has been made for all the unsettled claims on the basis of the claims alleged by insured persons. Certain times the loss incurred are not reported in the balance sheet of the insurance company and therefore, such claims are classified as claims incurred but not reported. Certain times such claims are reported, however they were not adequately reported. These are called claims incurred but not enough reported. The assessee made the provisions on the basis of the guidelines provided by insurance regulator and development authority of India. The claims made and provided for, are certified by the Actuary in accordance with the guidelines and norms issued by the Institute of Actuaries of India (IAI) and Insurance Regulatory and Development Authority (IRDA). As according to the assessee, the claims have been approved by

The ground no. 2 of the appeal is with respect to the non-deduction of tax at source on co-insurance fees of ₹41,49,00,000/- and therefore, same is disallowed under section 40a(ia) of the Act.

The brief facts of the case show that assessee has paid on amount of Rs . 1,38,33,000 as coinsurance administration fees without deduction of tax at source. The assessee was asked to explain why the amount paid should not be disallowed and added to the total income since the expenditure is hit by the provisions of Section 40 (a) (ia) of the act the assessee submitted that the above expenditure is not covered within the provisions of Section 194H as there is no relationship of principal and agent between the assessee and the insurer. Therefore, no tax is required to be deducted at source. The learned assessing officer rejected the claim of the assessee and held that the above sum is included under the provisions of Section 194H of the act as commission or brokerage. With respect to the decision of the coordinate bench in assessee’s own case for assessment year 2006 – 07, 2007 – 08 and

After hearing both the parties, we find that identical issue is covered in favour of the assessee by paragraph No. 27 in ITA No.3535 and 1702/11 and 4167/12, 1584 &3596/2011. The co-ordinate Bench in Para No. 31 held that no disallowance is warranted under section 40a (IA) of the Act in case of co- insurance fees paid. The coordinate bench in ITA number 3535 and 1702/MU M/2011 and ITA number 4167/MU M/2012 for assessment year 2006 – 07 to 2008-09 in Tata AIG Gen insurance Co Ltd versus additional Commissioner of income tax Mumbai dated 20/11/2015 held as Under:-

We have carefully considered the decision of the coordinate bench in assessee’s own case wherein it has been held that no disallowance can be made u/s 40 (a) (ia) of the act in respect of whom insurance fees paid by the assessee. We have also perused the decision of the honourable Bombay High Court in case of the assessee in 111 taxmann.com 92 wherein the question was examined with respect to the tax deduction at source u/s 194D of the act. The honourable court decided the issue in favour of the assessee. However the issue before us is that the disallowance has been made by the learned assessing officer for the reason that the impugned payment according to AO falls under the provisions of Section 194H of the act. In the decision of the

Based on the above, the honourable High Court has already held that the provisions of Section 194D do not apply to such commission. Therefore it is pertinent to examine whether the provisions of Section 194H applies to it or not. Before us, the assessee has relied merely on the decisions. There are neither the copies of agreement of

The third ground of appeal is with respect to the disallowance of expenditure of ₹29,46,886/- incurred by the assessee for purchase of pen drives and laptop adapters.

The facts clearly shows that the assessee has incurred an expenditure of ₹29,46,886/- on non EDP and EDP equipments under IT expenses. This expenditure is related to purchase of Pen drives, laptop adapters, batteries and hard disk, etc. The learned Assessing Officer made the disallowance based on his order for Assessment Year 2014-15 holding that these are capital expenditure. He granted the depreciation on this items at the rate of 60% and disallowed the balance sum of ₹11,75,755/-. This disallowance was challenged before the learned CIT (A) vide ground no.17. The learned CIT (A) held that as in assessee’s own case, the co-ordinate Bench for Assessment Years 2006-07 to 2008-09 has deleted the identical disallowance holding that these are revenue expenditure. Thus, he deleted the disallowance of the above expenditure.

On hearing both the parties, we find that identical issue arose in case of the assessee for Assessment