DEPUTY COMMISSINOER OF INCOME TAX,, CHENNAI vs. CHOLAMANDALAM MS GENERAL INSURANCE COMPANY LIMITED, CHENNAI

आदेश / O R D E R

PER ABY T. VARKEY, JM: These are cross appeals preferred by the assessee as well as the Revenue against the respective assessment year orders of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, dated 07.03.2024 for the Assessment Years (hereinafter referred to as ‘AY‘) 2011-12, 2012-13, 2016-17, 2017-18 & 2018-19.

2. The learned Commissioner of Income Tax (Appeals) erred in deleting the disallowance made in respect of reinsurance premium to non-resident reinsurers (NRRI) without deducting tax at source without appreciating that as per sub section 2 of 195 the assessee was required to make an application to the AO for non deduction which was not done.

4. The learned Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 30,51,684/-u/s 14A without appreciating that the AO had established that certain expenditure would have been incurred for earning the exempt income and therefore rightly computed the disallowance applying Rule 80.

5. The learned Commissioner of Income Tax (Appeals) erred in deleting the disallowance of Rs.71,63,000/- representing the provision made for IBNR and IBNER claims without appreciating that the assessee had failed to establish that this provision was made on a reasonable and scientific basis and was of the nature of unascertained liability, therefore not allowable u/s 37(1) of the Act on the ground that liability has not crystallized during the relevant Financial Year and also without appreciating that in the assessee's own case for AY:2014-15 the Hon'ble ITAT had remanded back the issue to the file of the AO to verify the actual utilization towards IBNR and IBNER.

6. The learned CIT(A) has erred in allowing the assessee's appeal and directing the AO to allow the depreciation on motor vehicles 60% without appreciating that the said vehicles were not engaged in the business of public transport or in the business of hire of vehicles.

7. The learned CIT(A) erred in directing the AO to delete the disallowance of commission paid to motor vehicle dealers of Rs.20.81 crores without appreciating that the said dealers concerned had themselves deposed before the DGCA that no services were rendered by them to the assessee.

8. The learned CIT(A) has erred in deleting the disallowance made u/s 40(a)(ia) in respect of reimbursement made by Third Party Administrators (TPAs) on behalf of the assessee for settlement of claims under cashless scheme without appreciating that TDS is required to be made considering the nature of these reimbursements made on their behalf by the TPAs and if not the assessee, the TPAs should have been instructed to make TDS at the time of reimbursement.

9. The learned CIT(A) has erred in holding that the provisions of Section 115JB are not applicable to insurance companies without appreciating that the 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 4 ::

provision of section 115JB do not allow any specific exemption for computation and taxation of book profits to insurance companies.

10. The appellant craves leave to add or amend any ground of appeal

before it is finally disposed off.

4. Ground No.1 is general in nature and hence, doesn’t require any adjudication, therefore, we move to Ground No.2, which is the Issue 1: i.e. Disallowance in respect of reinsurance premium paid to Non-Resident Reinsurers ('NRRIs'):

Assessment Year Appeal by Ground No. AY 2011-12 Department(ITA No.1438/2024) Ground no. 2 AY 2012-13 Department(ITA No.470/ 2024) Ground no. 2 AY 2016-17 Department (ITA No.1462/2024) Ground no. 10 AY 2017-18 Department (ITA No.1463/2024) Ground no. 2 AY 2018-19 Department (ITA No.1339/2024) Ground no. 3 4.1 Ground No.2 pertains to the disallowance of reinsurance premium paid to Non-Resident Re-insurers (NRRIs) for non-deduction of withholding tax under Section 40(a)(i) of the Act. The AO noticed that the assessee has made payments towards reinsurance ceded to the NRRIs during the current year, as detailed hereunder;- , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 5 ::

Category of re- Countries with Countries Countries Total Re- insurance Specific Re- without Specific where DTAA do insurance premium paid Insurance Re-insurance not exist Amount Ceded Exclusion Exclusion Clause in DTAA Clause in DTAA Directly to non- resident re insurance companies, where Double 34,948,920 481,639,116 - 516,588,036 Taxation Avoidance Agreement ('DTAA') exists To non-resident re-Insurance companies through non- - 12,957,385 - 12,957,385 resident brokers, where DTAA exists To non-resident re-insurance companies 72,653,552 32,542,813 - 105,196,365 through resident brokers, where DTAA exists Direct to non- resident re- insurance - - 672,886 672,886 companies, where DTAA does not exist To non-resident re-insurance companies through resident - 382,333 382,333 brokers, where DTAA does not exist Total 107,602,472 527,139,314 1,055,219 635,797,005

3.1.2 After allowing the re-insurance ceded to NRRIS with specific clause excluding reinsurance from the purview of PE as per the DTAA amounting to Rs. 10,76,02,472, the AO disallowed the balance re- insurance ceded to NRRIs amounting to Rs.52,81,94,533.

4.2 The AO disallowed the reinsurance premium paid to NRRIs for non- deduction of tax at source, under section 195 and consequently , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. disallowed the same under Section 40(a)(i) of the Act on the following reasons/conclusions: i. The reinsurance premium ceded to the NRRIs accrues or arises in India and hence there is a business connection being established in India towards such transactions. ii. Agency PE - The remittance of the re-insurance premium through the re-insurance brokers constitutes Agency PE of the NRRIs. iii. Service PE – Reinsurance premium ceded to Mitsui Sumitomo, Japan, JV Parter. The employees of the JV Partner were seconded to India for the purpose of business promotion and hence will tantamount to Service PE. iv. The Assessee had not approached the department to seek permission as per the provisions of Section 195(2) of the Act for the non-deduction of tax on reinsurance payments to NRRIs.

4.3 Being aggrieved by the aforesaid action of the AO, the assessee preferred an appeal before the Ld.CIT(A) who after considering the assessee’s submissions, and having taken note of the Tribunal order on the issue in the assessee’s own case in for AY 2014-15 dated 26.08.2022 was pleased to allow the grounds of appeal and directed deletion of the disallowance made by the AO.

4.4 Aggrieved by the aforesaid action of the Ld.CIT(A), the Revenue is before us.

4.5 We have heard both the parties and perused the records. We note that the issue raised by the Revenue is no longer res integra; and in this regard, it is noted that similar issue had come up before this Tribunal in 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. the assessee’s own case for AY 2014-15, wherein, this Tribunal after discussing the issue threadbare and after considering host off case laws on the subject, decided in favour of the assessee as under:

i) Whether the Assessing Officer was right in disallowing reinsurance premium u/s.40(a)(i) of the Act; , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. ii) Whether the CIT(A) was right in rejecting partially the appeal filed by the assessee; & iii) Whether the CIT(A) was justified in restricting claim of the assessee to 15% instead of confirming order passed by the Assessing Officer.

The Hon'ble High Court of Madras also observed that the Tribunal shall decide above questions alone and nothing more and decision shall be taken based on the available material and the assessee & the Revenue are not entitled to place any fresh materials before the Tribunal so as to enable the Tribunal to take decision. Therefore, from the above, it is very clear that controversy with regard non-compliance with provisions of Insurance Act, 1938 and regulations made there under by the IRDA is put to rest by the Hon'ble High Court and the Tribunal does not have power to examine legality or otherwise of payment made by the assessee to non-resident reinsurance companies. Therefore, issue on hand should be decided only in the context of payment made by the assessee to NRRI in light of provisions of Income Tax Act, 1961, and relevant DTAA between India and other contracting States.

12. The Assessing Officer has disallowed reinsurance premium ceded to non-residents on the sole premise of non-deduction of tax at source u/s.195 of the Income Tax Act, 1961. According to the Assessing Officer, income of NRRI are accrued or arose in India and or deemed to have accrued or arose in India, because they have business connection in India in respect of reinsurance business. Therefore, the Assessing Officer held that wherever there is no DTAA between India and other contracting States, to whom the assessee has ceded reinsurance premium, question of examining case with reference to DTAA and more particularly, concept of PE does not arise. Therefore, the Assessing Officer held that in respect of reinsurance premium ceded to NRRI, where there is no DTAA between India and other contracting States, sum paid by the assessee to NRRI is taxable in India in terms of section 5 read with section 9(1) of the Income Tax Act, 1961, and consequently, the assessee is liable to deduct TDS u/s.195 of the Income Tax Act, 1961. As regards REINSURANCE PREMIUM ceded to NRRI where there is DTAA between India and other contracting States, the Assessing Officer was of the opinion that there is agency PE of NRRI in India, because of availing services of insurers brokers by the non-resident insurer companies in India. The Assessing Officer had also imputed concept of service PE on the basis of press release dated 08.01.2003 with reference to joint venture partnership between Mitsui Sumitomo, Japan and the assessee and argued that Japanese joint venture partners has dispatched three representatives to India to assist and liaisoning reinsurance business in India. Therefore, opined that there is service PE and income of NRRI is liable to be taxed in India and consequently, the assessee is liable to deduct TDS u/s.195 of the Income Tax Act, 1961. The Assessing Officer had also taken support from the decision of the Hon'ble Supreme Court in the case of Transmission Corporation of Andhra Pradesh Vs CIT (1999) 239 ITR 587 and observed that a person making payment to non-resident is duty bound under section 195(2) of the Income Tax Act, 1961 to file an application to the income-tax authority, if payment is not chargeable to tax or smaller amount is chargeable to tax. If no such application is filed, then tax has to be withheld on whole of such sum. The sum and substance of observations of the Assessing Officer is that income of NRRI is taxable in India and thus, the assessee is liable to deduct tax at source u/s.195 of the Act. Since, the assessee has failed , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. to deduct TDS u/s.195 of the Income Tax Act, 1961, the Assessing Officer has disallowed reinsurance premium ceded to NRRI u/s.40(a)(i) of the Income Tax Act, 1961.

13. We have given our thoughtful consideration to the reasons given by the Assessing Officer in light of arguments advanced by the learned counsel for the assessee as well as ld. Sr. standing counsel for the department and we ourselves do not subscribe to the reasons given by the Assessing Officer for simple reason that provisions of section 195 of the Act will be applicable only in a case where income is actually chargeable to tax in India. In order that there is obligation to deduct TDS, the revenue must establish that income was chargeable to tax in India both in terms of Act as well as in terms of relevant DTAA. If the recipients are non-residents, income was chargeable u/s.5 r.w.s. 9(1) of the Act, only if income is received or deemed to have been received or income accrues or is deemed to accrue in India. Further, wherever DTAA applies, income chargeable to tax has to be additionally considered under terms of relevant DTAA. In the present case, reinsurance premium ceded to non-resident reinsurers is not chargeable to tax in India under the Income Tax Act, 1961, because income is not received in India, which is evident from fact that except for payment to Indian brokers in few cases, all other payments of reinsurance premium to NRRI have been paid outside India to non-resident brokers or NRRI bank account. Further, payment to brokers in India would not tantamount to receipt in India, having regard to ratio of the judgement of the Hon'ble Supreme Court in the case of Toshoku Ltd. Vs. CIT (1980) 125 ITR 525 (SC), where it was held that amounts credited in favour of non-resident were not at the disposal or control of statutory agent and therefore, cannot be charged to tax on the basis of receipt of income, actual or constructive in the taxable countries. Further, even assuming for a moment, payment to resident brokers is treated as received in India, but one can avail provisions of the DTAA which are more beneficial whereby premium would be taxed in India only in case PE to foreign enterprise is situated in India. Further, income of NRRI does not accrue or arise in India, because accrual of income is said to take place in country, where revenue generating functions are carried on. Thus, in respect of sale, it is place where sale takes place, and in case of rendering service, place where service is rendered and in case of interest, where the money is lent etc. In this case, foreign reinsurers do not carry out their business functions in India, in fact, during the relevant assessment years they were statutorily prohibited from doing so. The reinsurance premium they receive is recompensated for risk there may be exposed in which event insurer makes a claim on them, in which event assets of the reinsurer that are situated outside India that were utilized to make good the claim and thus premium accrues where their funds and assets are situated, which is outside India. The source of income of NRRI is also outside India. Therefore, in our considered view observations of the Assessing Officer regarding taxability of reinsurance premium ceded to NRRI in India is absolutely contrary to facts and also well settled law. Further, only activity in reinsurance contract is bearing of risk and activity of indemnifying an Indian insurance company by foreign reinsurer takes place overseas and hence, foreign re-insurers bears risk abroad. Therefore, reinsurance premium paid to NRRI cannot be said to accrue or arise in India. Insofar as observations of the Assessing Officer with regard to reinsurance contracts were signed in India is not relevant as held by the Hon'ble Supreme Court in the case of Ishikawajima Harima Heavy Industries Ltd. Vs. DIT (2007) 288 ITR 408 (SC), where it was observed that contract signed in India is of no material consequence, since all activities , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. in connection with off shore supply were outside India and therefore, cannot be deemed to have accrued or arose in India. Further, income may accrue not at place where asset or property is located or where insurer is resident, but where risk is borne. In the present case, the risk is borne where the non- resident reinsurer resides or where he has funds to make good loss. Therefore, insurance premium cannot be said to accrue in India.

14. We further noted that income of NRRI are not deemed to accrue or arise in India, because reinsurance premium ceded to non-resident foreign insurers are raising in India only where the same arises out of business connection in India and even if, exists business connection, the business operations are carried out in India. In the present case, nor do foreign insurers have any fixed place of business in India, neither do they carry on any business operations in India. The term ‘business connection’ is defined in Explanation 2 below section 9(1)(i) of the Act. None of the conditions that are required to be fulfilled before existence of business connection can be established or complied with. Although, the Assessing Officer has heavily based his finding in light of reinsurance brokers insofar as with NRRI, but fact remains that brokers are merely acting as facilitator or communication channel and do not engage themselves in negotiation of terms or finalize percentage of reinsurance contract. The brokers act in their independent capacity as service provider and are neither agents of the assessee nor agents of the NRRI. The Revenue has not brought any material on record to show that brokers are agents of the NRRI. Although, allegations were made that brokers sign treaty, settle accounts and verify claim, but nothing was brought on record by way of evidence before us to justify their stand. Therefore, in our considered view, findings of the learned CIT(A) and Assessing Officer that brokers are agents of NRRI is sans any evidence. Further, brokers have also declared that they merely act as facilitator and do not have any authority to conclude contract. Even the IRDAI (Insurance Brokers) Regulations, 2002, makes it clear that reinsurance agent / broker merely acts as facilitator and do not have authority to conclude contracts on behalf of the NRRI. This apart, amount collected by reinsurance broker in India is only as trustee of insurance money and same is to be held in separate bank account. Therefore, in our considered view, in absence of any authority to conclude contracts on behalf of foreign reinsurer, brokers cannot constitute business connection of foreign reinsurer in India in terms of Explanation 2 to section 9(1)(i) of the Income Tax Act, 1961.

principal to principal basis and in such scenario; there is no question of any business connection in India. Although, the Assessing Officer observed that place of signing of agreement is material to decide business connection, but it was categorically held by the Hon'ble Supreme Court in the case of Ishikawajima Harima Heavy Industries Ltd. Vs. DIT, 288 ITR 408 (SC) that contract signed in India is of no material consequence. In the present case, signing of reinsurance treaty is either in India or outside India cannot be a ground that income has deemed to accrue or arise in India.

16. Let us now come to chargeability of reinsurance premium ceded to NRRI under DTAA. It is an admitted fact that provisions of Act or provisions of DTAA, whichever is more favourable to the assessee, can be invoked to determine taxability of premium paid to reinsurance companies. It is an undisputed position that reinsurance premium is business profits for reinsurer and therefore, taxability thereof will have to be tested in terms of Article 7 of the respective DTAAs. As per Article 7, business profits are taxable in India only if, foreign reinsurers have PE in India. The assessee has paid reinsurance premium to various NRR. In some cases, NRR are resident of countries where India is having DTAA and in some cases, NRR are resident of country, where India does not have DTAA with other countries. In case of DTAA with Switzerland, Thailand, Malaysia, Qatar and Kuwait, it excludes reinsurance premium paid to non-resident insurer from the scope of chargeability, as there is no permanent establishment (PE) of non-resident insurer in India. In fact, the learned CIT(A) has deleted disallowance in cases, where there is specific exclusion in the DTAA and the Department has not appealed against order of the learned CIT(A) for all assessment years, except assessment year 2009-10. In our considered view the view taken by the CIT(A) is perfectly in order, because, in those DTAAs there is specific exclusion of reinsurance premium from the ambit of business profits and thus, reinsurance premium ceded to NRRs where there is specific exclusion, same cannot be taxed in India and thus, provisions of section 195 is not applicable while making payments and consequently, the assessee is not required to deduct TDS. In other cases, where there is no specific exclusion of reinsurance premium, said amount can be taxed in India only if foreign reinsurance companies have PE in India. It is the allegation of the Assessing Officer that reinsurer had fixed place of PE or an agency PE or service PE in India. Most of the DTAAs define PE to mean fixed place of business, through which business of the enterprises is wholly and partly carried on and includes branch, office, factory, workshop etc. In the case of foreign reinsurers to whom the assessee has remitted reinsurance premium during the subject assessment years do not have any fixed place of PE in India and thus, question of fixed place of PE in India within the meaning of Article 5 of the DTAA does not arise. In fact, the assessee has obtained declaration from foreign reinsurers which are part of paper book filed by the assessee. Thus, in our considered view there is not fixed place of PE of NRRs.

17. The Assessing Officer alleged that there is agency PE of NRRI in India on the basis of availing services of reinsurance brokers. During the subject assessment years, the assessee has remitted reinsurance premium through non-resident brokers outside India. In order to attract agency PE, the Revenue has to establish that person act on behalf of NRRI in India and such person is economically and legally dependent on the NRRI. In the present case, reinsurance brokers act in their independent capacity and they are not dependent agency of the assessee as well as non-resident insurers. They do , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. not conclude any contract for NRRI and thus, we are of the considered view that there cannot be said to constitute business connection for agency PE for foreign reinsurers in India. The Revenue has also not placed any material on record to demonstrate that reinsurance brokers constitute agency PE for NRRI under DTAA.

4.6 Since the Revenue couldn’t point out any change in facts or law, respectfully following the decision of this Tribunal in the assessee’s own case for AY 2014-15 (supra), we hold that re-insurance premium ceded to ‘NRRIs’ can’t be disallowed u/s.40(a)(i) of the Act, consequently, the Ld.CIT(A) rightly held that payments made to NRRIs can’t be disallowed. , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 13 ::

Therefore, the Ld CIT(A) directed the AO to delete the addition made towards disallowance of re-insurance premium ceded to NRRIs as not taxable in India under the Income Tax Act, 1961; or under DTAA between India & respective countries, where NRRs are tax residents; and thus, on impugned payments, the assessee was not liable to deduct TDS u/s.195 of the Income Tax Act, 1961. Therefore, Ground No.2 of the Revenue stands dismissed and on the very same reasoning, similar grounds raised by the department in other appeals as noted in the chart supra stands dismissed.

5. Ground No.3 / Issue 2: Disallowance of excess depreciation on UPS

Assessment Year Appeal by Ground No. AY 2011-12 Department(ITA No.1438/2024) Ground no. 3 AY 2012-13 Department(ITA No.470/ 2024) Ground no. 3 AY 2016-17 Department (ITA No.1462/2024) Ground no. 11 AY 2017-18 Department (ITA No.1463/2024) Ground no. 3 5.1 Brief facts regarding this issue as noted by the AO are that the assessee claimed depreciation @60% on UPS by treating it as an integral part of its computer which according to the assessee, is necessary as a back-up for computers. However, the AO didn’t agree. According to the AO, UPS was a general plant & machinery and depreciation is allowable , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 14 ::

@15% and not @60% as claimed by the assessee. Therefore, he restricted the depreciation @15%, thus, disallowed Rs.20,84,875/-.

5.2 Aggrieved, the Revenue preferred a appeal before the Ld.CIT(A) who was pleased to allow the same by following the decision of the Tribunal in the assessee’s own case in for AY 2014-15 dated 26.08.2022 as well as the Hon’ble Madras High Court decision in the assessee’s own case in TCA Nos.93 to 100 of 2019 dated 28.01.2019.

5.3 Aggrieved, the Revenue is before us.

5.4 We have heard both the parties and perused the records. We note that the assessee’s claim for depreciation on UPS @60% has been restricted by the AO to 15% which action of the AO has been reversed and the depreciation allowed @60% by the Ld.CIT(A) by following the decision of this Tribunal upheld by the Hon’ble Madras High Court. In this regard, we note that the Hon’ble Madras High Court had an occasion to examine the action of the Tribunal allowing the depreciation @60% on the UPS by treating it as an integral part of computer; and the Hon’ble Madras High Court upheld the action of the Tribunal as correct by following its earlier decision in TCA No.41 of 2019 etc. cases by a 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. common judgment dated 18.1.2019 [CIT, Larger Taxpayer Unit, Chennai Vs. M/s.Royal Sundaram Alliance Insurance Company Limited].

5.5 Thus, the Ld.CIT(A) rightly allowed the depreciation claimed by the assessee on UPS @60%. Therefore, we confirm the order of the Ld.CIT(A) and dismiss the grounds of appeal of the Revenue.

6. Ground No.4 / Issue 3: Disallowance under section 14A of the Act

Assessment Year Appeal by Ground No. AY 2011-12 Assessee (ITA No.1282/2024) Ground no. 1 to 5 AY 2012-13 Department (ITA No.470/ 2024) Ground no. 4 AY 2016-17 Assessee (ITA No.1283/2024) Ground no. 1 to 5 AY 2017-18 Assessee (ITA No.1284/2024) Ground no. 1 to 5 AY 2018-19 Assessee (ITA No.1285/2024) Ground no. 1 to 5 6.1 Brief facts as noted by the AO for AY 2012-13 are that the assessee has earned dividend income of Rs.30,51,684/- and Rs.18,77,918/- towards tax free income – IRFS and claimed the same as exempt. The AO asked the assessee to disclose the expenditure incurred for earning the exempt income for which the assessee brought to his notice that on its own it has disallowed Rs.1,50,000/- in its RoI and pleaded that no further disallowance be made u/s14A of the Act. However, the AO invoked sec.14A r.w.r.8D(2)(iii) of the Income Tax Rules, 1962 (hereinafter referred to as ‘the Rules‘) and disallowed an additional , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. amount of Rs.11,40,323/- towards expenditure related to earning of exempt income.

6.2 Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who deleted the addition by following the decision of the Hon’ble Madras High Court in TCA No.839 of 2018 dated 18.11.2021 as well as the decision of the Tribunal in the assessee’s own case in for AY 2014-15 dated 26.08.2022 by holding sec.14A of the Act is not applicable to general insurance companies and therefore, he deleted the disallowance made by the AO.

6.3 Aggrieved by the aforesaid action of the Ld.CIT(A), the Revenue is before us.

6.4 We have heard both the parties and perused the records. We note that the assessee has earned exempt income of Rs.30,51,684/- and Rs.18,77,918/- towards tax free income – IRFS, and claimed the same as exempt and disallowed suo-moto Rs.1.5 lakhs for earning the same. The AO not being satisfied with the claim of the assessee computed the disallowance u/s.14A r.w.r.8D(2)(iii) of the Rules at Rs.11,40,323/-. On appeal, the Ld.CIT(A) has deleted the same by holding that provisions of Sec.14A is not applicable to General Insurance Companies by relying on 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. the decision of the Hon’ble Madras High Court in the assessee’s own case (supra). In this regard, we note that the Hon’ble Madras High Court in the assessee’s own case, the High Court has framed the question of law on this issue as under:

(b) Whether the deductions under Section 14A of the Income Tax Act, 1956 stands excluded while computing income of an Insurance Company, in view of Section 44 of the Income Tax Act, 1956?

6.5 And answered the same as under:

"For computing the profits and gains of the business of insurance company, the AO had to resort to section 44 and the prescribed rules and could not have applied section 28 to 43B, since the same were excluded from the purview of Section 44. This necessarily includes the exception provision enshrined under section 144 of the Act. Therefore in our view, the AO could not have travelled beyond Section 44 in the first schedule of the Act"

6.6 In the light of the aforesaid binding decision of the Hon’ble Madras High Court, we hold that sec.14A of the Act stands excluded while computing the Income Tax on General Insurance Companies in view of the non-obstante clause contained in sec.44 of the Act. Hence, this ground of the Revenue stands dismissed. , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 18 ::

7. Ground No.5 / Issue 4: Disallowance of provision for Claims Incurred But Not Reported(‘IBNR’) and Incurred But Not Enough Reported (‘IBNER’).

Assessment Year Appeal by Ground No. AY 2011-12 Department(ITA No.1438/2024) Ground no. 4 AY 2012-13 Department(ITA No.470/ 2024) Ground no. 5 AY 2016-17 Department (ITA No.1462/2024) Ground no. 12 AY 2017-18 Department (ITA No.1463/2024) Ground no. 4 AY 2018-19 Department (ITA No.1339/2024) Ground no. 2 7.1 The fourth issue relates to disallowance of provisions on account of Incurred But Not Reported (IBNR) and Incurred But Not Enough Reported (IBNER) claims charged to profit and loss account. The AO noticed that the assessee company had claimed deduction from the profits on account of IBNR and IBNER and noted that in this regard, it had made provision for Rs.71,63,000/- in its accounts for the year AY 2012-13.

7.2 The AO show caused the assessee ‘as to why’ such a claim should not be disallowed because according to him, such provisions are unascertainable. Pursuant to it, the assessee submitted that provisions in respect of IBNR and IBNER represents claims which are quantified and accounted by the Assessee on the basis of actuarial valuation as per the Regulations framed by the IRDA. And that the methodology adopted to 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. determine such liability is certified by an actuary in accordance with norms issued by the Institute of Actuaries of India and the IRDA. And that the accounts of the insurance companies are prepared in accordance with IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulation, 2002. Thus, the assessee asserted that the claims made in this regard are actual obligation incurred which is accounted on the basis of claims reported till the end of the financial year and based on statistical data as certified by the appointed actuary and was not in the nature of a provision, but liability on processing of the claims. However, the AO disallowed the claim of Rs.71,63,000/- stating that the claims are unascertained and that the IRDA guidelines cannot be a deciding factor for computation of income under the Income tax Act.

7.3 Aggrieved, the Assessee preferred an appeal before the Ld.CIT(A) who deleted the addition by holding that the claim made by the assessee in this regard as an ascertained liability and therefore, an allowable expenditure. For such a proposition, the Ld.CIT(A) relied on the judgment of the Hon’ble Bombay High Court in the case of General Insurance Company v. ACIT dated 14.10.2019.

7.4 Aggrieved by the aforesaid action of the Ld.CIT(A), the Revenue is before us and pointed out that this Tribunal has held against the assessee , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. in the assessee’s own case for AY 2014-15 wherein the Tribunal has remanded the issue back to the file of the AO to verify the actual utilization towards IBNR & IBNER.

7.5 We have heard both the parties and perused the records. We note that the assessee company had claimed deduction from the profits on account of IBNR & IBNER by making a provision of Rs.71,63,000/- which was disallowed by the AO on the ground that provisions made in this regard are unascertainable and that IRDA guidelines can’t be a deciding factor for computation of income under the Act. On appeal, the Ld.CIT(A) has allowed the claim of the assessee by holding as under:

3.4.21 I have carefully considered the submissions of the Appellant as well as the Judgements relied on by the Appellant. The Assessing Officer considered the IBNR & IBNER provision made as unascertained liability because ultimately the settlement of claim happens when the claims are settled later. According to the Appellant, the provisions of IBNR & IBNER are made based on the happening of the actual incident, in accordance with the guidelines provided by insurance regulatory and development authority of India (IRDAI) and certified by the Actuary in accordance with the guidelines and norms issued by the Institute of Actuaries of India (IAI) and therefore it is an ascertained liability. The incident triggering the claims had occurred on or before 31st March of the relevant previous year, certified by the actuarial valuation with respect to the methodology adopted in making such provisions. In my view, the Appellant is right in providing for the claims of insured on the occurrence of the loss, which is in accordance with the guidelines of the IRDAI. I also find that the judgements relied on by the Appellants on this issue supports this position. Given the same, I direct the Ld. AO to delete the addition made and the Grounds of appeal no. 9 to 15 are accordingly allowed.

7.6 The Revenue has assailed the aforesaid action of the Ld.CIT(A) mainly on the ground that in the assessee’s own case for AY 2014-15, this Tribunal has taken a view against the assessee and remanded the matter , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. back to the file of the AO for verifying the actual utilization towards claim arising from IBNR & IBNER and therefore, the Ld.DR wants us to reverse the order of the Ld.CIT(A) and uphold the action of the AO.

7.7 We have gone through the order of this Tribunal in the assessee’s own case for AY 2014-15 and also the decision referred to by the Ld.CIT(A) viz the decision of the Hon’ble Bombay High Court in the case of General Insurance Corporation of India dated 14.10.2019 wherein it was observed by their Lordships regarding this Tribunal order for AY 2014-15 that -

"....the Chennai Bench decision of the Tribunal has ignored the co-ordinate bench -decision of Mumbai and Kolkata benches of the Tribunal. Therefore, prima facie per incurium."

7.8 We further note that after the aforesaid observation of the Hon’ble Bombay High Court in the case of General Insurance Corporation of India, this Tribunal in a recent decision in the case of Royal Sundaram General Insurance Co. Ltd., in dated 08.01.2025, [wherein one of us was party], after duly considering this Tribunal view in the case of United India Insurance Company for AY 2014-15,(which decision was followed by Tribunal in assessee’s own case, which Ld DR relied upon) has adjudicated similar issue by deviating from earlier view, and held in favor of assessee as under: , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 22 ::

13.0 The next issue raised by the revenue vide 494, 495 & 496 /Chny/2018, AYs: 2011-12, 2012-13, 2013-14, 2014-15 is regarding disallowance of provisions for claims incurred but not reported (IBNR) and incurred but not enough reported (IBNER). Brief factual matrix of the controversy at hand is that in the assessee’s line of business claims arise qua insurance policies sold by it to its customers. With a view to factor in its liabilities arising on account of claims, the assessee creates provisions qua claims incurred but which have not been reported and claims incurred but which have not been enough reported. The only difference between the two being quantity of claims made. The assessee had been claiming by way of provisions the impugned claims. It is an undisputed fact on records that the impugned provisions are required to be created by the assessee in compliance to the directions of the parent body of insurance sector being insurance regulatory development authority(IRDA). It is also an undisputed facts on record that the respective claims for IBNR and IBNER in respect of the assessee are calculated by an actuarial valuer appointed by the IRDA. It is the case of the revenue that the impugned claims are unascertained contingent liabilities and hence cannot be allowed as deduction u/s 37(1). The same have been added by the Ld. AO in the case of the assessee. The Ld. First Appellate Authority held that the impugned liabilities is an ascertained liability and directed the Ld.AO to delete the addition.

13.1 We heard rival submissions in the light of the material available on records. The Ld. Revenue’s counsel vehemently protested against the impugned action of the Ld.First Appellate Authority and argued that IBNR and IBNER claims are unascertained contingent liabilities and hence cannot be allowed as deduction u/s 37(1). The Ld. Counsel for the revenue heavily relied upon the decision of the Hon’ble Coordiante Bench of this tribunal in the case of United India insurance company limited vide / Chny / 2017 dated 19.07.2024 and invited our reference to the following parts of the decision and accordingly requested for restoring the order of the Ld. Assessing Officer:-

“……10. The next common issue that came up for our consideration in the appeals of the assessee for the assessment years 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 & 2019-20 is disallowance of provision for IBNR and IBNER.

11. The learned counsel for the assessee submitted that during the relevant assessment years, the assessee has made provision for claims incurred, but were not reported (IBNR) and claims incurred, which were not enough reported (IBENR) and such provision has been made for all unsettled claims on the basis of claim lodged by insured persons. According to the learned counsel, date of damage/loss was considered for recognizing the claim in a particular year. In certain circumstances, damages / loss were not reported in the balance sheet of the insurance company and such claims are known as claims incurred, but not reported. Sometimes, damage/loss incurred may be reported, however, it was not enough reported and therefore, the assessee has made provision as per IRDAI guidelines. The liability of the assessee company is determined based on the actual loss / damage. Therefore, such provision is in accordance with guidelines and norms issued by IDRAI and thus, is deductible u/s.37(1) of the Income Tax Act, 1961.

12. On the other hand, the Ld. Sr. Standing Counsel for the Revenue submitted that the assessee has created provision in anticipation of settlement of claims that were not ascertained. What is reported to the assessee is damage/ loss caused to the insured persons. According to the Sr. Standing Counsel, the assessee is yet to assess loss and determine amount to be compensated. Therefore, it is unascertained liability and same cannot be allowed as deduction. The Sr. Standing Counsel further submitted that this issue is covered by the decision of the ITAT., Chennai in assessee’s own case for earlier assessment years, where the Tribunal has held that provision made for IBNR and IBNER is not deductible, because merely incident happened during the year which is basis for making claim, that cannot be a reason for allowing compensation payable by the assessee in the subsequent financial years.

13. After hearing both the parties and going through material records, we find that an identical issue has been considered by the Tribunal in assessee’s own case in &Ors. vide order dated 28.08.2018 for relevant assessment years and after considering relevant facts held that provision for IBNR & IBNER is not deductible u/s.37(1) of the Income Tax Act, 1961, because such provision is only on unascertained liability, which is not accrued to the assessee for the relevant assessment year. The relevant findings of the Tribunal are as under:-

, 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 23 ::

“43. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee made provision in respect of claims incurred but not reported and in respect of claims incurred but not enough reported. The compensation for making insurance claim arises on the date of loss or damage occurred to the insured property. But, the actual liability to make the payment arises on the date on which the loss or damage was assessed and the amount was determined. In this case, the accident or loss was reported to the assessee but the actual loss or compensation was not determined during the assessment year 2009-10. Therefore, as rightly submitted by the according to the Ld. Sr. Standing Counsel for the Revenue, the liability to make the payment accrues to the assessee only in the year in which the loss or damage was ascertained and compensation payable to insured person is determined. Admittedly, the compensation payable to insured person was not determined during the assessment year 2009-10. Therefore, this Tribunal is of the considered opinion that merely because the incident happened during the year which is the basis for making claim, that cannot be a reason for allowing the compensation payable by the assessee for the assessment year 2009-10. In other words, the compensation payable by the assessee has to be allowed in the year in which the amount of compensation was determined. Since the amount was not determined during the year under consideration, this Tribunal is of the considered opinion that the same cannot be allowed for assessment year 2009-10. Hence, the CIT(Appeals) is not correct in allowing the claim of the assessee. Accordingly, the order of the CIT(Appeals) is set aside and that of the Assessing Officer is restored.”

14. In this view of the matter and consistent with view taken by the co-ordinate Bench, we are of the considered view that the assessee is not entitled for deduction towards provision created for IBNR & IBNER and thus, we uphold the findings of the learned CIT(A) on this issue for the assessment years 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20 and reject grounds taken by the assessee. Further, the assessee has also pleaded that with respect to AY 2017-18, the amount disallowable with respect to provisions for IBNR and IBNER claims cannot exceed Rs.1250.89 crores being the amount debited to the revenue accounts of the assesse. The assesse submitted that the additional amount of Rs.1582.58 crores being the amount not debited to the profit & loss account be deleted. We are in conformity with the views of the assessee that amount of monies, as provisions, not debited to the profit & loss account cannot be a part of the disallowance. Accordingly, the AO is directed to recalculate the disallowance with respect to provisions for IBNR and IBNER claims and restrict it to the extent of the amounts debited to profit & loss account as per law during the assessment year 2017-18. Accordingly, the grounds of appeal raised by the assessee on this issue for AYs 2014-15 to 2016-17 and 2018-19 & 2019-20 are dismissed and that of the AY 2017-18 is treated as allowed for statistical purposes…..”.

13.2 The Ld. Counsel for the assessee vehemently opposed the arguments of Ld. The Revenue and submitted that the matter now stands decided in assessee’s favour by the decisions of Hon’ble Delhi High Court, Bombay High Court as well as Coordinate Benches of Delhi, Kolkata and Mumbai Tribunals. The Appellant assessee has placed on records through its paper book, copies of the decisions of above authorities. The Ld. Counsel for the revenue submitted that there are favorable decisions of Hon’ble High Court in favour of revenue on the impugned subject. The revenue was asked to provide copies of the impugned orders for consideration, but the same were not placed on records. The Ld. Counsel for the assessee countered that even if there is any such favorable decisions of Hon’ble High Court in favour of revenue on the impugned subject, the same would not be helpful for the revenue given the ratio laid down by the Hon’ble Apex Court in the case of Vegetable Products.

13.3 Hon’ble Coordinate Bench of ITAT, Mumbai in the case of M/s.TATA AIG general insurance company limited / mum/ 2021 dated 08.03.2022 has ruled as under:-

“…..06. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer and merely referred to the order of the learned Assessing Officer and learned CIT (A) stating relevant paragraph of the issues involved. It was submitted that the issues are decided in favour of the assessee by the co-ordinate Bench in assessee’s own case; however, the above Page | 5 Tata AIG General Insurance Co. Ltd.; AY 15-16 disallowance should not have been deleted by the learned Commissioner of Income-Tax (Appeals) for the reason given in assessment order y the ld AO. He extensively referred assessment order on all these [3] issues. 07. 08.

9. 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 , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 24 ::

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 and 1702/Mum/2011 and 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 Page |

6. ITA No.14/Mum/2021 Tata AIG General Insurance Co. Ltd.; AY 15-16 Incurred But Not Enough Reported (IBNER) amounting to ₹148,43,01,915/- held to be liable under section 37(1) of the Act by the learned Commissioner of income-tax (Appeals). 010.

11. 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 supported by the actual valuation and hence, he disallowed ₹148,43, 01,915/-. The ld CIT (A) after considering the decision of the honourable Supreme Court in case of Rotork controls India private limited versus Commissioner of income tax 314 ITR 62 considered that if there is a present obligation with respect to the provision, and it arises out of events involving outflow of resources and can be based on reliable estimation of such obligation then the liability incurred by the assessee company is allowable. He further held that the methodology to determine the liability is also certified by actuary in accordance with guidelines and norms issued by the Institute of actuaries of India and insurance regulatory and development authority of India. He further held that such provisioning relates to present obligation and involves outflow of resources. He further considered the provisioning made by the assessee in different years and actual utilization of such provision with respect to those financial years and then he found that the provision was made less than the actual amount incurred in settling those claims. He further held that the coordinate bench in case of DCIT vs. National Insurance co. Ltd. (2016) 72 taxmann.com 116 (Kolkata p Trib.) which has been affirmed by Hon'ble Calcutta High Court in of 2019. Therefore he held that such provisioning is allowable Page |

8. Tata AIG General Insurance Co. Ltd.; AY 15-16 u/s 37. (1) of the act and the addition made by the learned AO was deleted.

9. Tata AIG General Insurance Co. Ltd.; AY 15-16 Actuary, therefore, the assessee has incurred loss / expenses during the year, and hence, it is allowable under section 37(1) of the Income-tax Act. The Assessing Officer considered the same as unascertained liability because ultimately the settlement of claim happens then, only according to him such claims are settled. We find that the assessee is a General Insurance Company and is covered by the guidelines issued by IRDA. The Insurance Companies are required to settle the claims of insured on the occurrence of the loss, which is covered under insurance. Such claims are required to be accounted despite the fact that such claims would not have finally settled but are pending at various stages of processing. The settlement of such claims may happen in subsequent period. Such claims are accounted by the assessee by making a provision as the liability to pay to the insurer agreed during the year. The learned Assessing Officer held that it is an anticipation of settlement of claim and therefore it cannot be said to be a definite liability. We find that identical issue arose

ITA No.1282, 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. in the case of DCIT vs. Export Credit Guarantee Corporation of India Ltd. in wherein the co-ordinate Bench vide order dated 11.10.2017 vide para No.3.3 has allowed the identical claims. The learned CIT(A) while deciding the issue has relied upon the decision Page | 10 Tata AIG General Insurance Co. Ltd.; AY 15-16 co-ordinate Bench in DCIT vs. National Insurance Company Limited (supra) has held that the provisions made available the above claim are based on scientific calculation with a proper and rational and therefore, it could only be termed as ascertain liability. Though the above decision was rendered with respect to the computation of book profit under section 115JB of the Act, however, the learned CIT (A) applied it and allowed the claim of assessee for deduction under section 37(1) of the Act for the reason that the claim of the assessee is ascertained claim, supported by Actuarial valuation and also made on a scientific basis. To reach at this calculation, the learned CIT (A) obtained information for 6 different assessment years and found that the actual claim settled is always higher than the provisions made by the assessee. This it shows that the provisions made are not excessive. Further, it was stated before us that this claim is allowed to the assessee from year to year. In view of this, we find that assessee has incurred an expenditure, which is incurred during the year with respect to the provisions made for the IBNER and IBNR claims, on scientific basis and also certified by the valuer with respect to the methodology adopted in making such provisions. Thus, it satisfies the entire ingredient for its allowance u/s 37 (1) of the act. Thus, there is no Page | 11 ITA No.14/Mum/2021 Tata AIG General Insurance Co. Ltd.; AY 15-16 infirmity in the order of the learned CIT (A) in allowing the claim of ₹148,43,01,915/- under section 37(1) of the Act. Accordingly, the ground no.1 of the appeal is dismissed….”

It is noted that the Hon’ble Coordinate Bench has considered the ratios laid down by Hon’ble Coordinate Bench of Kolkata Tribunal as well as the decision of Hon’ble Calcutta High Court.

13.4 Further we have noted that Hon’ble Delhi High Court order in the case of Care Health Insurance Limited (164 taxmann.com 53) observed as under:-

……………………..

”

13.5 We have also noted that the latest decision on the subject has been delivered by Hon’ble Bombay High Court in the Writ petition No.2271 of 2019 as at 422 ITR 248 in the case of General Insurance Corporation of India holding as under:-

“…..11. So far as Issue No.1 above is concerned, the Petitioner submits that same stands concluded in its favour by virtue of the decision dated 11 October 2017 of the Mumbai Bench of the Tribunal in Dy. CIT V. ECGC (IT Appeal No. 7657 (Mum.) of 2014] and the Kolkata Bench of the Tribunal in the case of Dy. CIT v. National Insurance Co. Ltd. [2016] 72 taxmann.com 116 in favour of the Petitioner. However, the impugned order still directed a deposit of 10% of disputed demand on this Court in view of the decision of Chennai Bench of the Tribunal in the case of United India Insurance Co. Ltd. v. Jt. CIT [2018] 97 taxmann.com 466. We note that the Chennai Bench decision of the Tribunal has ignored the co-ordinate bench decision of Mumbai and Kolkata benches of the Tribunal. Therefore, prima facie per incurium. In any case the CBDT Circular No. 530 dated 6 March 1989 states that stay of demand be granted where there are conflicting decisions of the High Court. This principle can be extended to the conflicting decisions of the different benches of the Tribunal. Thus, in the above facts the complete stay of the demand on the above head i.e. Item No.1 of the above chart was warranted in the Petitioner's favour….”

13.6 The above judicial ratios were not available on records while adjudicating the appeal in the case of United India Insurance supra as at ITA 1085 / Chny /2017 dated 19.07.2024. The matter of allowance of IBNR and IBNER as an ascertained liability or as an unascertained liability has been considered. It is noted that in the case of appellant assessee the same meets the criteria laid down by the Hon’ble Coordinate Benches of Kolkata, Delhi and Mumbai as well as the Hon’ble , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 26 ::

Delhi and Mumbai High Courts. The impugned liability principally arising in view of guidelines formulated by IRDA and calculated by a IRDA approved actuarial valuer fulfills the ratio laid down by Hon’ble Apex Court mandating the that as long as a liability is properly ascertainable on the basis of empirical data or a known methodology, the same cannot possibly be held to be a contingent liability. The Hon’ble Supreme Court thus held that it is the right of an enterprise to make provisions for a liability which could be measured by a "substantial degree of estimation" and consequently that its allowance as an valid expenditure would be permissible. We have noted that facts of the case as existing in the present appeal are identical to those as in the cases adjudicated by the Hon’ble Coordinate Benches of Kolkata, Delhi and Mumbai Tribunals. No distinguishment of facts could be pointed out by the appellant revenue. Accordingly, respectfully following the ratio decided in the judicial decisions discussed herein above, we hold that IBNR and IBNER are ascertained liability and therefore allowable as a deduction. Accordingly we hold that the order of the Ld. First Appellate Authority does not requires any interference at this stage. The order of the Ld.CIT(A) is confirmed and the grounds of appeal raised by the revenue are dismissed.

7.9 As noted supra, this Tribunal in the case of M/s.Royal Sundaram General Insurance Co. Ltd.,(supra) has recently held that the claim made in respect of IBNR & IBNER are indeed an ascertained liability and that the liability in question principally arises in view of guidelines formulated by IRDA and calculated by a IRDA approved actuarial valuer fulfills, the ratio as laid down by Hon’ble Apex Court mandating that as long as a liability is properly ascertainable on the basis of empirical data or a known methodology, the same cannot possibly be held to be a contingent liability. The Hon’ble Supreme Court has observed that it is the right of an enterprise to make provisions for a liability which could be measured by a "substantial degree of estimation" and consequently that its allowance as a valid expenditure would be permissible. Thus, this Tribunal in M/s.Royal Sundaram General Insurance Co. Ltd., supra is noted to have deviated from its earlier view and followed the ratio laid down by the Hon’ble Delhi & Bombay High Courts as well as co-ordinate Benches of the Kolkata, Delhi and Mumbai Tribunals and held that the claim made in respect of 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 27 ::

IBNR & IBNER as ascertained liability and therefore, allowable as deduction. Coming back to the present case, we note that on the issue, the assessee was able to satisfy that the conditions as laid down by the Hon’ble Supreme Court in the case of Rotork Controls India (P) Ltd., vs. CIT,(180 Taxman 422) and had demonstrated that the provision was made in respect of ascertained liability on scientific basis [calculated by a IRDA approved actuarial valuer] and therefore the claim made in respect of IBNR & IBNER has been rightly held by Ld CIT(A) to be ascertained liability and allowed the deduction claimed on this account.

Hence, we confirm the impugned order of the Ld.CIT(A) and dismiss the appeal of the Revenue.

8. Ground No.6 / Issue 5: Disallowance of higher depreciation on motor vehicle

Assessment Year Appeal by Ground No. AY 2011-12 Department(ITA No.1438/2024) Ground no. 5 AY 2012-13 Department(ITA No.470/ 2024) Ground no. 6 AY 2016-17 Department (ITA No.1462/2024) Ground no. 13 AY 2017-18 Department (ITA No.1463/2024) Ground no. 5 8.1 Brief facts as noted by the AO for AY 2012-13 are that the assessee had claimed depreciation @50% on the additions made between 01.01.2009 and 30.09.2009 to the block of assets under the category of 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 28 ::

‘Commercial Vehicles’ which was restricted by the AO @15% on the ground that the assets for which depreciation @50% was claimed was not used in the business of transport/hire; so he disallowed Rs.4,54,180/-. On appeal, the Ld.CIT(A) allowed the claim of the assessee by taking note of the decision of this Tribunal in the assessee’s own case in for AY 2014-15 dated 26.08.2022 wherein it has been held as under:

, 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 29 ::

8.2 In this regard, it is noted that assessee had acquired commercial vehicles (which included light motor vehicles also) between 01.01.2009 and 30.09.2009 and claimed higher depreciation @50% on the ground that as per Motor Vehicle Act, commercial vehicle includes light motor vehicle and therefore, the benefit /allowance @ 50% was granted for acquiring new vehicles during specified period, need to be give to assessee and assessee is noted to have claimed higher depreciation @50% as detailed hereunder: , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 30 ::

Asst. Year Opening WDV >180 days <180 days Depn. Claimed 2012-13 12,97,658 - - 6,48,829 8.3 Since we note that there is no dispute regarding the depreciation claim of new motor vehicles (which includes light motor vehicle) which were acquired between 01.01.2009 and 30.09.2009 and put to use, then the depreciation need to be granted @50%. And since the Revenue couldn’t point out any changes in facts or law, respectfully following the decision of the Tribunal (supra), we confirm the action of the Ld.CIT(A) and hold that the assessee was entitled for higher depreciation @50% on motor vehicles acquired between 01.01.2009 and 30.09.2009; and dismiss this ground of Revenue.

9. Issue 6:Disallowance of payment made to Motor vehicle dealer

Assessment Year Appeal by Ground No. AY 2012-13 Department (ITA No.470/ 2024) Ground no.7 9.1 Brief facts as noted by the AO for AY 2012-13 are that the assessee had made payments amounting to Rs.20,81,84,599/- to various motor vehicle dealers which was disallowed by the AO on the ground that no services were rendered by such dealers to the assessee. According to the AO, the motor vehicle dealers have deposed before the DGCA that they , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. didn’t provide any services to the assessee and therefore, the AO disallowed the claim on the ground that there was no necessity for assessee to make any such payments.

9.2 Aggrieved the assessee preferred an appeal before the Ld.CIT(A) wherein the modus-operandi adopted by the assessee to sell/canvas its insurance policy through the motor vehicle dealers was brought to his notice that when a customer buys a motor vehicle, it was a statutory requirement to take a policy/third party insurance under the Motor Vehicles Act, 1988. Considering the aforesaid statutory requirement, the assessee entered into agreement with motor vehicle dealers [who are engaged in the sale of motor vehicles] as per which, at the time of sale of motor vehicles, these dealers offer the insurance policy to the customers who intent to purchase motor vehicles and if the purchaser of motor vehicle chooses the policy offered by the assessee, then the dealer would do the necessary paper work so as to enable the customer to get cover of insurance from the moment they drive the vehicle out of the showroom, and for such services rendered by the dealers, the assessee paid service charges to them [Motor Vehicle Dealers]. According to the assessee, the services rendered by the motor vehicle dealers includes a variety of services such as data processing services, policy servicing charges,

ITA No.1282, 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. inspection services, training, etc., and in consideration of these services, the assessee made payment/service charges to the dealers, and while making payment to them, duly deducted/withheld tax at source as well as remitted the service tax on it, which has been claimed as CENVAT; and the Ld.CIT(A) have found that the dealers had indeed rendered services to the assessee, which fact is evidenced by invoices and payments were through banking channel after deducting taxes at source. Considering the aforesaid relevant facts, the Ld CIT(A) noted that motor vehicle dealers have rendered services to the assessee justifying the payments made to them, directed the AO to delete the addition also by relying on the decision of Tribunal in the assessee’s own case in 784/Chny/2018 order dated 26.08.2022 read with MA order dated 29.03.2023 in MA No.139/Chny/2022, wherein, the Tribunal held as under:

9.3 Further it is noted that the sole reason for the AO to disallow the claim was based on the report of the DIT (Investigation), Chennai, which in turn was pursuant to the report/investigation carried out by the Service Tax Department. And the report of the Service Tax Department that the assessee has made payment without there being any services rendered by the motor vehicle dealers was based on certain statements of employees of the dealers. In this regard, it was brought to our notice that the assessee had challenged the action of the Service Tax authorities before the CESTAT, which Tribunal vide their order dated 24.02.2021 in SA No.40938/2017 wondered as to the stand of Department (Service Tax Department) and observed that if no services were rendered by the motor vehicle dealers, then why service tax has been collected from the dealers, , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. for which, there was no satisfactory response from Service Tax Department. Therefore, CESTAT held that motor vehicle dealers indeed provided services to the assessee and thus, allowed service tax credit taken by the assessee. Thus, it is noted that foundation on the basis of which the AO disallowed the service charges paid to Motor Vehicles has been knocked down and hence, this Tribunal in the assessee’s own case (supra) has allowed the claim of payments made to various motor vehicle dealers the tune of Rs.20,81,84,599/-. The legal maxim “sublato Fundmento Credit opus” is applicable to this case, meaning in case a foundation is removed, the super-structure falls; and therefore, we are of the view that the payments given to the motor vehicle dealers for the services rendered by them which are supported by the necessary invoices and such payments having been made through banking channel after deducting necessary tax at source, the AO ought not to have made disallowance of the ibid payments; and therefore, the Ld.CIT(A) has rightly deleted the addition made on this issue and hence, the ground raised by the Revenue stands dismissed.

10. Issue 7: Disallowance of payment made to Third Party Administrator (‘TPA’) , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 36 ::

Assessment Year Appeal by Ground No. AY 2012-13 Department (ITA No.470/ 2024) Ground no. 8 10.1 The next issue raised by the Revenue appeal for the assessment years 2012-13 is disallowance of payment made to Third Party Administrators to the tune of Rs.6,36,38,529/-. The facts in respect of impugned dispute are that the assessee is noted to be in the business of General Insurance, had entered into agreements with Third Party Administrators (TPA) like M/s. Paramount Health Services, and by virtue of such agreements, they (TPAs) makes payment to hospitals for cashless treatment to insured persons on behalf of the assessee company. The Assessing Officer has disallowed payment made to Third Party Administrators u/s.40(a)(ia) on the ground that the assessee ought to have deducted TDS on such payments. It was the contention of the assessee that as per CBDT Circular No.8/2009 dated 24.11.2009, it is the responsibility of third party administrators (TPAs) to deduct TDS while making payments to hospitals, but not the assessee.

10.2 However, the AO didn’t agree and disallowed such payments on the ground that no tax was withheld/deducted at source as required u/s.194H of the Act at the time of such payments to the FLOAT account maintained with the TPAs. On appeal, the Ld.CIT(A) has allowed the grounds of 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. appeal of the assessee on this issue relying on the decision of this Tribunal in the assessee’s own case in for AY 2014-15 dated 26.08.2022, wherein it was decided by the Tribunal as under:

We have heard both the sides and considered relevant materials on record. There is no dispute with regard to applicability of provisions of section 194H of the Act to payments made by the assessee to hospitals through third party administrators. However, as per CBDT circular No.8/2009 dated 24.11.2009, it is very clear that services rendered by hospitals to various patients of primarily medical services and therefore, provisions of section 194J are applicable on payment made by the TPAs to hospitals etc. In the said circular, it was clarified that TPAs who are making payment on behalf of insurance companies to hospitals for settlement of medical/insurance bills etc., are liable to be deduct TDS u/s.194J on such payments. Therefore, we are of the considered view that when the CBDT itself clarified that payments made by the assessee to hospital through TPAs are subjected to TDS from the TPAs, question of deducting TDS on such payments by the assessee does not arise. It is practically impossible to deduct TDS on payment made to beneficiaries / hospitals, when the assessee is not directly making payment to hospitals. The learned CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer and thus, we are inclined to uphold findings of the learned CIT(A) and reject grounds taken by the Revenue for the assessment years 2010-11 & 2013-14.

10.3 And, it is no longer res-integra that Circular issued by the CBDT is binding on the Income Tax Authorities. And, on this issue, the assessee’s contention is that the CBDT vide Circular No.8/2009 dated 24.11.2009 has clarified that TPAs who are making payment on behalf of insurance companies to hospitals for settlement of medical/insurance bills etc., are liable to be deduct TDS u/s.194J on such payments. Therefore, the AO erred in disallowing the claim of assessee on the failure on the part of assessee not deducting TDS on such payments is arbitrary and can’t be 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. countenanced. Therefore, the Ld.CIT(A) rightly allowed the claim of assessee by following the decision of the Tribunal and hence, we confirm the action of the Ld.CIT(A) and dismiss the ground raised by the Revenue.

11. Issue 8: Pertains to AY 2018-19, which is related to refund of excess Dividend Distribution Tax (‘DDT’) paid over and above the Double Taxation Avoidance Agreement (‘DTAA’) rate:

Assessment Year Appeal by Ground No. AY 2018-19 Assessee (ITA No.1285/2024) Ground no. 6 to 10 11.1 The grounds raised by the assessee in its appeal in are as under:

Issue 2 - Refund of excess Dividend Distribution Tax ('DDT') paid over and above the Double Taxation Avoidance Agreement between India and Japan ('DTAA') rate

6. The Learned CIT(A) has erred in not providing the refund of excess DDT paid over and above the rate as per the DTAA between India and Japan.

7. On the facts and circumstances of the case and in law, the Appellant prays that the benefit of applicable DTAA be extended qua the rate of tax on payment of dividend to the shareholders.

8. The Learned CIT(A) has erred in not appreciating the fact that section 90 of the Act overrides all the provisions of the Act including the provisions of section 115-0 of the Act. This is inter-alia for the reason that section 90 of the Act aims to give effect to the international fiscal agreements entered into between India and other Government.

9. The Learned CIT(A) has failed to recognize that the dividend income is that of the non-resident recipient, who was subject to the provisions of the relevant DTAA.

, 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 39 ::

10. The Learned CIT(A) erred in not appreciating the fact that the DDT paid in excess of amount to be paid as per DTAA shall be granted as refund based on the provisions outlined in Section 237 of the Act read in conjunction with Article 265 of the Constitution of India, which stipulates that only rightful taxes can be retained.

11.2 On this issue, the Ld.CIT(A) has noted that assessee neither made any claim in the return of income (RoI) nor had raised the same during assessment proceedings, but raised it before him for the first time, wherein he noted that assessee had claimed to have paid excess tax in respect of dividend paid to foreign company viz., M/s Mitsui Sumitomo.

The Ld.CIT(A) taking note of the co-ordinate Bench decision of Mumbai Tribunal in the case of DCIT v Total Oil India Pvt. Ltd has held that that where dividend is declared, distributed or paid by a domestic company, to a non-resident shareholder, it attracts DDT referred to in Section 115-O of the Act, and that such DDT payable by the domestic company shall be at the rate mentioned in Section 115-O of the Act and not at the rate of tax applicable to the non- resident shareholder as specified in the relevant DTAA with reference to such dividend income.

11.3 Aggrieved the assessee is before us.

11.4 Assailing the action of the Ld.CIT(A), the Ld.AR submitted that the intent of Article 10(2) of the India-Japan DTAA is to restrict tax levied in 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. source country irrespective of the manner of levy (i.e., whether on distributing company or on the recipient shareholder). Stressing on the language of Article 10 of the India-Japan DTAA, Ld AR urged that the scope is restricted to the tax levied in the source country (i.e. India in the present case) on dividend declared, by a company which is a tax resident of such source country to the rate prescribed (i.e.) 10% in the present case). Therefore, according to him, the restriction on the rate should be interpreted to have a broad application even to cases where tax is levied on the company distributing the dividends instead of on its shareholders.

Therefore, levy of DDT ought to be considered as falling within the ambit of this restriction. He reminded us that section 90(2) of the Act provides, that provisions of the Act or the DTAA whichever are beneficial to the assessee will be applicable; override all the provisions of the Act including the provisions of section 115-O of the Act. This is inter alia for the reason that section 90 of the Act aims to give effect to the international fiscal agreements entered into between India and other Governments. In view of the same, rate as per the Act or DTAA whichever is beneficial would be applicable thereby making it 10%. Hence, the Ld.AR prayed to grant refund of INR 74,27,818 (i.e. excess of DDT paid as per the Act vs. DDT as per the India-Japan DTAA). , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 41 ::

11.5 Per contra, the Ld.DR pointed out that the issue stands covered against the Assessee by the Special Bench decision of the Tribunal in the case of M/s Total Oil India Pvt. Ltd (ITA No.6997/Mum/2019), and therefore, does not want us to interfere in the impugned action of the Ld.CIT(A). In his rejoinder, the Ld.AR submitted that the Hon’ble Calcutta High Court has admitted the substantial question of law in the case of Exide Industries Limited in ITA/23/2024 vide its Order dated 31.01.2024 which is pending disposal and therefore, prays reconsideration of the issue.

11.6 Having heard both the parties, we note that the Ld.CIT(A) has decided the issue against the assessee by following the biding decision of the Special bench order in the case of M/s.Total Oil India Pvt. Ltd., (supra). Therefore, we decline to interfere with the impugned action of the Ld.CIT(A) and confer it. This ground of appeal of assessee stands dismissed.

12. Ground No. 9/Issue 9 of AY 2012-13 i.e. Applicability Minimum Alternative Tax (MAT) u/s.115JB for Insurance.

, 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 42 ::

Assessment Year Appeal by Ground No. AY 2011-12 Assessee (ITA No.1282/2024) Ground no. 6 to 8 AY 2011-12 Department (ITA No.1438/2024) Ground no. 6 AY 2012-13 Department (ITA No.470/ 2024) Ground no. 9 AY 2017-18 Department (ITA No.1463/2024) Ground no. 6 AY 2018-19 Department (ITA No.1339/2024) Ground no. 4 12.1 Brief facts are that when the AO proposed applicability of MAT u/s.115JB of the Act (i.e. book profit), it was objected by the assessee stating that provisions of Sec.115JB would not be applicable to the assessee, since the assessee is an insurance company, which prepares the P & L a/c as per IRDA guidelines, and not as per part II and III of Schedule VI of Companies Act. And for such a proposition, the assessee placed its reliance on the decision in the case of M/s.ICICI Lombard General insurance Co. Ltd (ITA No.4286/Mum/2009) dated 10 October 2012, wherein the Mumbai Tribunal decided the issue in favour of the assessee stating that the provisions of 115JB are not applicable to insurance companies. However, the AO didn’t agree, and consequently made adjustment u/s.115JB of the Act. On appeal, the Ld.CIT(A) held that provisions of Sec.115JB of the Act are not applicable for Insurance Companies till AY 2012-13 by relying on the decision of the Hon’ble Madras High Court in assessee’s own case in TCA No.93-100 of 2019 , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. dated 28.01.2019 as well as Tribunal order in the assessee’s own case in for AY 2014-15 dated 26.08.2022. The Ld.CIT(A) has allowed the grounds of appeal of the Revenue by holding as under:

3.9.5 I have carefully considered the facts of the case, assessment order and the submission of the Authorized Representatives.

3.9.6 A conclusion can be drawn on the basis that the amendment of the sub- section (2) to section 115JB of the Income-tax Act by the Finance Act, 2012 was with a specific purpose. The specific inclusion of companies to which the proviso to sub-section (2) of section 211 of the Companies Act, 1956 is applicable clearly indicates that prior to the subject amendment, the provisions of Section 115JB of the Act did not apply to such companies.

3.9.7 I find that the issue regarding applicability of MAT provisions u/s 115JB to the case of the appellant is covered by the decision of Hon'ble High Court of Madras in the Appellant's own case for A.Y.09-10 in TCA No. 93 to 100 of 2019 dated 28.01.2019 wherein after considering the provisions of sec 115JB, it was held that the provisions of sec 115JB are not applicable to the appellant.

3.9.8 Following the above decision of the Jurisdictional High Court in the Appellants own case, I allow the Ground of Appeal No.37 raised by the appellant for non-applicability of section 115JB. As the provisions of section 115JB are held to be not applicable, the adjustments made by the AO in calculation of the book profits u/s 115JB and the consequent grounds raised by the Appellant against such adjustments are irrelevant and accordingly directed to be deleted.

12.2 Since there is no change in facts or law, respectfully following the decision of the Hon’ble Madras High Court in the assessee’s own case, we confirm the action of the Ld.CIT(A) for AY 2012-13 and AY 2011-12.

12.3 However, it is noted that there has been an amendment brought in by Finance Act, 2012, and by virtue of the said amendment, insurance companies which were covered under proviso to sec.211(2) of the Companies Act, 1956 were brought into the ambit of section 115JB of the 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 44 ::

Act. The relevant portion of section 115JB of the Act (post amendment) which deals with the companies for which the relevant provision is applicable is as follows:

"....(2) Every assessee,-

(a) being a company, other than a company referred to in clause (b), shall, for the purposes of this Section, prepare its statement of profit and loss for the relevant previous year in accordance with the provisions of Schedule III to the Companies Act, 2013 (18 of 2013); or (b) being a company, to which the second proviso to sub-Section (1) of Section 129 of the Companies Act, 2013 (18 of 2013) is applicable, shall, for the purposes of this Section, prepare its statement of profit and loss for the relevant previous year in accordance with the provisions of the Act governing such company: 12.4 Therefore, we find that post 1st April 2013, section 115JB of the Act is applicable to insurance companies and hence additions proposed to be made to the Book Profits can only be done from AY 2013-14, and therefore, MAT provisions are applicable for insurance companies from AY 2013-14 and therefore it is held that MAT u/s.115JB is applicable for AYs 2017-18 & 2018-19. However, it has been brought to our notice that assessee on this issue didn’t raise any grounds of appeal before Ld CIT(A) for AY 2017-18 & 2018-19 i.e. against applicability of MAT u/s 115JB.

Therefore, the grounds raised by the department in its appeal for AY 2017-18 & 2018-19 are infructuous. Such a contention of the assessee couldn’t be controverted by the Revenue. Therefore, this ground of the 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 45 ::

Revenue for AY 2017-18 & 2018-19 is found to be infructuous and dismissed.

13. Issue 10: Addition of 14A for the purpose of computing the book profits under section 115JB of the Act

Assessment Year Appeal by Ground No. AY 2016-17 Assessee (ITA No.1283/2024) Ground no. 6 & 7 AY 2017-18 Assessee (ITA No.1284/2024) Ground no. 6 & 7 AY 2018-19 Assessee (ITA No.1285/2024) Ground no. 11&12 13.1 The AO consequent to the disallowance made u/s.14A of the Act under the normal provisions of the Act, has added the same for computation of book profit u/s.115JB of the Act which was deleted by the Ld.CIT(A) on the ground that no adjustment can be made in this regard by holding that disallowance made u/s.14A of the Act r.w.r.8D can’t be adjusted while computing book profit u/s.115JB of the Act by relying on Special Bench decision of the Tribunal in the case of ACIT v. Vireet Investments Pvt. Ltd. reported in [2017] 165 ITD 27 (Delhi Trib.)

(Special Bench). We, therefore, confirm the impugned action of the Ld.CIT(A) by taking note of the decision of the Special Bench in the case of Vireet Investments Pvt. Ltd. (supra) wherein, it was held that provisions of Sec.14A r.w.r.8D will not apply while computing the book , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. profit u/s.115JB of the Act; and therefore, it is held that the Ld.CIT(A) rightly deleted the disallowance made by the AO invoking provisions of Sec.14A r.w.r.8D while computing book profit u/s.115JB of the Act; and hence, this ground of Revenue stands dismissed for AY 2016-17 & AY 2018-19.

Assessment Year Appeal by Ground No. AY 2011-12 Department (ITA Ground No.7 No.1438/2024) AY 2016-17 Department (ITA Ground no. 14 No.1462/2024)

14.1 The AO made addition for AY 2011-12, in respect of UPR to the extent of Rs.99,49,02,000/- claiming that the same is reserve as per the Explanation 1(b) of section 115JB of the Act for the purpose of computation of book profit u/s.115JB of the Act, which was deleted by the Ld.CIT(A) on the ground that provisions of Sec.115JB of the Act is not applicable for the insurance companies by relying on the decision of the Hon’ble Madras High Court in the assessee’s own case in TCA No.92/2018 dated 28.01.2019, which action of the Ld.CIT(A) is confirmed. Therefore, department appeal for AY 2011-12 stands dismissed. , 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 47 ::

14.2 Coming to the appeal preferred by the Department for AY 2016- 17, it is noted that the AO while going through the P&L A/c noted that the assessee has reduced insurance premium amount of Rs.366,70,24,553/- from the profit of the business during the current year as the same is related to premium for the purpose of "reserve for unexpired risks". The AO noted that assessee has been allocating the reserve for unexpired risks for the premium collected under the following portfolios of the insurance business:

14.4 On appeal, the Ld.CIT(A) has deleted the addition by relying on the decision of the Tribunal order passed in the assessee’s own case for AY 2013-14 which means after the amendment made in sec.115JB of the Act by Finance Act, 2012 as noted supra. The Tribunal in the assessee’s own case is noted to have considered the additions made by the AO in respect of Unexplained Premium Risk (UPR) while computing book profit u/s.115JB of the Act by observing as under:

“3. We have heard the rival submissions and perused the materials available on record. We find that the assessee is a German re- insurance company Munchener Ruckversichrungs Gesellschaft Aktiengesellschaft in Munchen (Munich Re) which provides re- insurance solutions worldwide and operates in three segments namely, non-life reinsurance, life insurance and health solutions. The assessee is registered with Insurance Regulatory and Development Authority of India ('IRDAI') from 01/02/2017 and carries on various activities through its Indian Branch including receipts of premium on re-insurance treaties and purchase / sale of investment as per IRDAI guidelines. The assessee is regulated by the IRDAI and it maintains books of account as per the IRDAI guidelines. The assessee maintains its regular books of accounts by preparing a policyholders account (called revenue account) and shareholders account (profit and loss account) separately and a 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. balance sheet as a whole which is mandated by IRDAI. The assessee is also audited under the regulation of IRDAI. The creation of reserves, accounting of liabilities, etc. is determined by the actuary in accordance with the Insurance Regulatory and Development Authority of India Act, 1999 ('IRDA Act') and its regulations related thereto.

4. We find that the expenditure and "reserves" are created as per IRDAI guidelines and one such entry booked by the assessee pertains to "reserve for unexpired risk". The "reserve for unexpired risk" is an amount calculated using statistical method for covering risks which have not expired on the reporting date but the premium for which is received during the year under consideration and it reflected the same as a reduction from the premium earned. Hence, the reserve for unexpired risk is not ad-hoc but a sum created statistically to cover the risk of reinsurance policies underwritten by the assessee. We find that the assessee has claimed a deduction for the "reserve for unexpired risk" to the extent of Rs. 5,24,000/- in accordance with Rule 6E while computing its total income under the normal provisions of the Act. However, while computing its book profits u/s 115JB of the Act, no adjustment was made in respect thereof as it would not fall within any of the items specified in clause (a) to (k) of Explanation 1 to section 115JB(2) of the Act. However, the ld. AO restricted the allowance in terms of rule 6E to Rs. 8,75,44,500 as evident from page 15 of the assessment order. The ld. DRP deleted the addition of Rs. 5,32,31,500/- made by the ld. AO under the normal provisions of the Act. This has been accepted by both the assessee as well as the revenue and no appeal is preferred before this Tribunal on the same.

5. We deem it fit and appropriate to narrate the facts relevant for the issue in dispute and the basis of disallowance made by the ld. AO in respect of provision for unexpired risks and premium deficiency while computing the book profits u/s 115JB of the Act as under:-

a) The ld. AO passed a draft assessment order making an adjustment of Rs. 14,13,00,000/- on account of provision for unexpired risk and premium deficiency reserve of Rs. 7,73,000/- totaling Rs. 14,20,95,000/- for the year under consideration for the purpose of calculating book profits u/s 115JB of the Act. b) The ld. AO in his draft assessment order relied on clause (b) of Explanation 1 to section 115JB(2) of the Act which provides that the amount carried to any reserves, by whatever name called, should be added and held that the entry passed in respect of the reserve for unexpired risk should be added for the purpose of computation of book profit. The ld. AO observed that the word 'any reserve’ in 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. clause (b) of Explanation 1 to section 115JB(2) of the Act refers to all kinds of reserves and encompasses all types and categories and only excludes the reserve specified under section 33AC of the Act. c) The ld. AO observed that the assessee has deferred its income by creating 'the Reserve for Unexpired Risk' but has not deferred the expenditure incurred for earning the same during the year and is accumulating the premium over time by a reserve for unexpired risk without any taxation. The ld. AO observed that the accounting treatment of the assessee does not fulfil the matching concept of accounting. d) Further, the ld. AO while making the adjustment, considered the reserve for unexpired risks as an unascertained liability which is required to be added and included for the purpose of book profits u/s 115JB of the Act. The reliance placed by the assessee on Bharat Earth Movers v. CIT (2000) 245 ITR 428 (SC) was disregarded on the basis that it is in respect of actuarial valuation of leave encashment and not applicable to facts of the assessee.

accounts while preparing financial statements for the year under consideration.

IRDAI-GI-TR has stated that liabilities of the assessee have been determined in the manner prescribed in IRDAI Regulations, 2016 and the amount of liabilities are fair and reasonable. Further, the statutory auditor has also certified that the outstanding claims reserves are estimated using statistical methods determined by the actuaries. Based on the above, it is submitted that the regulatory requirement for creation of a reserve for unexpired risk is created using statistical methods under the IRDAI guidelines and certified by the statutory auditor and actuary and, therefore, it is an ascertained liability and it cannot be construed as an adhoc or contingent liability. Hence the same would not fall under clause (c ) of Explanation 1 to section 115JB(2) of the Act also under the category of unascertained liability. We find that the Hon’ble Supreme Court in the case of Bharat Earth Movers reported in 245 ITR 428 (SC) has held that the provision for leave encashment based on actuarial valuation is allowed although the liability may have to be quantified and discharged at a future date. The fact that it is capable of being estimated with reasonable certainty although actual quantification may not be possible and such liability cannot be a contingent one. This decision would be squarely applicable for the reserve for unexpired risk and premium deficiency made by the assessee in the instant case as they are not only estimated but are also derived based on statistical method and the same has been duly certified by the actuary and the auditors of the assessee. Hence we hold that the same should be excluded for the purpose of computing book profit.

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 Rs.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 Rs.169,45,00,000/- in computing the Book profit. The assessee submitted that as per the Insurance Act, 1938, in case of an Insurance Company carrying on General Insurance business, Premium is recognised as income over the contract period or the period of risk, whichever is appropriate. Premium received in 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. advance which represents Premium Income not relating to that particular accounting period in which the said Premium has been received, is separately disclosed in the Financial Statements of an Insurance Company. That part of income which is attributable to the succeeding accounting period or periods is reduced from the total Premiums received during an accounting period by way of creation of a Reserve for Unexpired Risk in accordance with Section 64V(l)(ii)(b) of the Insurance Act, 1938. The aforesaid Reserve is to be created for a minimum amount as prescribed under the above mentioned section. Appreciating the special nature of the Insurance Business, the Lawmakers prescribed special procedure for Computation of Total Income of an Insurance Company carrying on Business of Insurance other than Life Insurance which are to be found in Rule 5 of the First Schedule to the Income-tax Act, 1961, read with Rule 6E, of the Income-tax Rules, 1962. This particular procedure has to be mandatorily complied with in making the assessment for Income-tax purposes.

Every year adjustments are made to the existing Reserve for Unexpired Risk by way of crediting or debiting by the amount of difference between the Reserve created in the immediate preceding year and the Reserve required to be credited during the current accounting year. This cannot be considered as any alleged "Amount carried to any Reserve" debited to the Profit & Loss Account, but it should be appreciated that this Reserve represents that part of Premium Income which does not relate to the current accounting period. It must be appreciated that as per the Mercantile System of accounting, it is only that Income/Expenditure which relate to the current accounting period, should find places in 'the Revenue/Profit & Loss Account of the year. Hence it was submitted that in case of an Insurance Company (carrying on General Insurance Business), the creation of "Reserve for Unexpired Risk" 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 submitted that the ld AO may kindly be directed to delete the addition of Rs.169,45,00,000/-made by him in computing the Book profit u/s 115JB of the Act.

, 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. :: 54 ::

11.1 The ld CITA observed that the provisions contained in Rule 6E of the Income-tax Rules, 1962 has also been considered. Section 115JB(2)- Explanation (1)(b) requires increasing "the amounts carried to any reserve, by whatever name called, other than a reserve specified u/s 33AC" if such amount is debited to the Profit & Loss Account. It is held that the Reserve for Unexpired Risk has not been debited in the Profit & Loss account at any point of time, therefore Explanation 1 to sub-section 2 of section115JB is not applicable in the peculiar facts of the general insurance business carried out by the assessee. In the assessee's case, firstly the concerned reserve for Unexpired Risk has not been created through any debit entry made in the Profit & Loss Account. The reserve has been created in accordance with the relevant provisions of the Insurance Act, 1938, by way of debiting the premium received for adjusting the amount of premium that may be related to future year or years. It is noted that Rule 5 of the First Schedule of the Income-tax Act, 1961, which specifies the procedure to be followed for computing the business income of a General Insurance business, specifically allows deduction for reserve carried over for Unexpired Risk and Rule 6E of the Income-tax Rules, 1962 provides that such deduction will be allowed to the maximum extent of 50% of the net premium received during the relevant year. Hence, this creation of reserve out of the premium received during the year, is a statutory requirement and the same is duly recognised by the Income-tax Act/Rules. As already mentioned hereinabove, this particular reserve does not fall in the category of those reserves which have been specified in Explanation 1 (b) to section 115JB(2). Therefore, this reserve viz., the reserve for Unexpired Risk in the case of a General Insurance business, should not be added back for the purpose of computation of Book Profit u/s. 115JB(2) for MAT purposes. On the basis of this observation, it was held that the ld AO's action in adding back a sum of Rs.169,45,00,000/- being reserve created for Unexpired Risk, was not in accordance with the relevant provisions of the Income-tax Act, 1961 and accordingly deleted the addition.

11.2 Aggrieved, the revenue is in appeal before us on the following ground:—

"4. The CIT(A) erred on the facts of the case and in law in holding the sum of Rs.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 1283 to 1285/Chny/2024 (AYs 2011-12, 2016-17, 2017-18 & 2018-19) & 1339, 1438, 1462 & 1463/Chny/2024 (AYs 2012-13, 2018-19, 2011-12, 2016-17 & 2017-18) M/s. Cholamandalam MS – General Insurance Co. Ltd. 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.

10.1. We further find that this decision of Kolkata Tribunal has been subsequently affirmed by the Hon’ble Calcutta High Court in of 2019.

11. Before we conclude the issue, we would also like to address the issue in dispute that Rule 5 of the First Schedule of the Act specifies the computation mechanism of profits/gains arising from general insurance business and specifically allows deduction for reserve for unexpired risk while computing taxable income for the year under consideration. Rule 6E of the Income-tax Rules, 1962 prescribes certain percentage of the net premium for creating reserve for unexpired risks which is allowed as a deduction. Accordingly, in view of the special nature of insurance business, the Act prescribes special procedure for computation of total Income of an Insurance Company. The creation of a reserve for unexpired risk out of the premium received during the year, is a statutory requirement and the same is duly recognised by the provisions of the Act. Accordingly, it can be inferred that the intent of the law has been to allow the said reserve for unexpired risk created by the insurance companies to the extent of specified limits which is derived as a percentage of net premium. Therefore, in our considered opinion, making an addition of reserve for unexpired risk u/s 115JB of the Act would defeat the purpose of the Act which allows deduction of the said reserve to the extent of prescribed limits. Further, the provisions of section 115JB of the Act do not specifically provide for any adjustment in connection with the reserve for unexpired risk and no adjustment is permitted to such profits other than those listed in Explanation 1 to section 115JB of the Act. Reliance in this regard is rightly placed on the decision of Hon’ble Supreme Court in the case of Apollo Tyres Ltd reported in 255 ITR 273 (SC).

12. We further find that the premium deficiency of Rs 773000 has been allowed by the ld. AO under the normal provisions of the Act but the same has been added back while computing book profits u/s 115JB of the Act. As stated supra, this is not an item contemplated to be added in the Explanation 1 to section 115JB(2) of the Act. Hence the revenue grossly erred in adding back the same while computing book profits u/s 115JB of the Act.

115JB of the Act. Accordingly, the grounds raised by the assessee are allowed.”

65. In this view of the matter and consistent with the view taken by the co-ordinate Bench, we direct the Assessing Officer to delete additions made towards UPR to book profit u/s.115JB of the Income Tax Act, 1961, for both the assessment years.

15. And thus, we find no infirmity in the action of the Ld.CIT(A) deleting the additions made by the AO in respect of UPR while computing the book profit u/s.115JB of the Act, since the Tribunal in the assessee’s own case (supra) for AY 2013-14 & 2014-15 has found that no adjustment can be made on this score. Therefore, we confirm the action of the Ld.CIT(A) and dismiss the ground of the Revenue.