THE ORIENTAL INSURANCE CO. LTD.,NEW DELHI vs. DCIT (LTU), NEW DELHI

The assessee is in the business of insurance other than life insurance business. The insurance business of the assessee is primarily classified in three categories, namely, Fire, Insurance, Marine Insurance etc. For the Asstt. Year 2008-09, they have filed their return of income on 26.9.2008 declaring nil income and book profit of 2 Rs.3,36,17,06,542/-. Assessment was completed by order dated 7.12.2010 u/s 143(3) by making certain additions like Rs.5,70,03,36,179/- on account of profit on sale/redemption of investment,. Rs.1,55,13,166/- by disallowing the expenses u/s 40(a)(ia) of the Act and also computing the income u/s 115JB of the Act.

In appeal, learned CIT(A) confirmed these additions and method of computation and allowed the appeal in part. Hence, the assessee is before us mainly challenging the addition of Rs.570,03,36,179/- on account of profit on sale/redemption of investments in view of CBDT Circular No.528 dated 16.12.1988, disallowance of expenses to the tune of Rs.1,55,13,166/- u/s 40(a)(ia) and the computation of income of the assessee u/s 115JB of the Act including the addition of Rs.5,38,40,920/- by invoking Section 14A read with Rule 8D of the Rules. Though the assessee preferred the appeal on as many as 8 grounds, at the time of arguments, assessee withdrew grounds Nos.2 and 2.2 and argued ground Nos. 1,3 & 4 while submitting that ground no.5 is only consequential in nature.So also ground No.6 in respect of interest . Ground Nos.7 & 8 are general in nature. Ground No.1: 4. Learned AO made an addition of Rs.570,03,36,179/- on the profit realized by the assessee on the sale/redemption of investment and the learned CIT(A) following his order in assessee’s case for the AY 2011-12 passed on 16.11.2005 in Appeal No.40/13-14/CIT(A)-22 dismissed this appeal.

During the year the assessee has not deducted or short deducted the tax at source and the amount involving no deduction of tax till 31.3.2008 was added to the total or the tax has been deposited before filing of return. On a perusal of Annexure ‘F’ attached to Form 3CD, learned AO found that the assessee has not at all deducted tax or 4 deducted but not deposited within stipulated time in some cases, as such learned AO made an addition of Rs.1,01,98,334/-. However, learned AO on a reappraisal of the material available before him and looking at the breakup of the amount of Rs.4,01,14,419/- found that in respect of a sum of Rs.1,55,13,166/- there has been a tax deduction but full amount of deduction was not made.

Though the learned CIT(A) considered the submissions of the assessee that since it was only a case of short deduction but not a case of non deduction or not payment, the disallowance should not have been made but have confirmed the deduction on proportionate basis on the expenditure corresponding to short deduction only and directed the AO to recomputed the disallowance u/s 40(a)(ia) of the Act by substituting the disallowance with the figure of Rs.1,55,13,166/-.

Learned AR relied upon the decision of the Cochin Bench of the Tribunal in the case of Apollo Tyres vs DCIT (2013) 155 TTJ 470 where the Tribunal vide para 13 observed that Section 40(a)(ia) does not envisage a situation where there was short deduction or lesser deduction as in case of section 201(1A) of the Act and there is an obvious omission to include short deduction/lesser deduction in Section 40(a)(ia)of the Act and therefore, in cases of short or lesser deduction of the tax, the entire expenditure whose genuineness was not doubted by the AO, cannot be disallowed.

As already stated, ground nos.7 & 8 are general and do not require any adjudication.