DCIT CIR 3(1)(2), MUMBAI vs. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD, MUMBAI

HTEiizyeder_iat & " rz Income-tax Appellate Tribunal "J"Bench Mumbai Tdeft 71z, da WRTW4 T7 fik R;TTR Befofe S/Sh Rajendra Accountat Member & Pawan Singh, Judieial Member 3144< efl #4LA/7657/Mum/2014, Aerfxv Tf /AsseSSment Year: 2010-11 Dy.CIT, Circle- 3(1)(2) Mls. Export Credit Guarantee Corporation Room No.607, Aayakar Bhavan Vs, of' India Ltd,,Sth Floor; Nirmal Bldg: Mumbai-400 020, Nariman Point,Mumbai-400 021, PAN:AAACE 0296 K (TTfiTeff /Appellant) (Taeff Respondent) C.O No.IOS/Mum/2016 (Arising out_of HITA ua#/LT.4,/7653/Mum/2OL4, Ftufrw ad /Assess = Men ( Ms. Export Credit Guarantee Year; 2010-11' Dy.CIT, Circle- 301)(2) Corporation of India LtdSth Floor; Nirmal v/s. Room No.607. Aayakar Bhavan Bldg_. Nariman Point; Mumbai-400 02 1 Mumbai-400 020. (nflarff /Appellant) (Taf Respondent) Revenue by: Shri Alok Johri-DR Assessee by: Shri Vijay Mehta-AR TNTf # Trw Date 0f Hearing: 25/07/2017 #r9Tr # TTc Date of Pronouneement: 1/10/2017 3147r wfeftw,1961 # eTrt 254(1)* #nfa &aw Order u/s.254(1)of the Ineome-tax Aet,1961(Act) ITR } E ER RAJENDRA AM- Challenging the Orcer dated 26/09/2014 of CIT(A)-6, Mumbai the Assessing Officer has filed the present appeal.The Assessee ha: (iled Cross Objection (CO) for the year under consideration Assessee-company,cngaged in (he business of insuring credit risk of exporters and bankers from India not realising their dues of their export business from India,filed its relurn of income on 28/09/2010,declaring toial income at Rs. 128.19erores The AO completed the assessment Ws. 143(3)of the Act,C on 1 1/03/2013,determining the income of the assessee at Rs.5,48,73,42,470/-, 2.First Ground of appeal is about allowing prior period expenditure of Rs.24.63 lakhs. During the assessment proceedingsAO found that the assessee had added back sum of Rs. 18.69 crores On account of prior period adjustments;that the total prior period expenses incurred during the year were to the tune of Rs.24.63 lakhs He directed the assessee to furnish details of prior period expenses Alter considering the submission of the assessee,dated 1/ 01/2013,he held that the assessee Ias following mercantile system of accounting that expenditure incurred during the relevant previous year were allowable,that the expenses of Rs.24.63 lakhs did not pertain to the year under appealthat treatment given by it to (he said 7657/m/148C.0.105/M/16- EZGCLtd expenditure was not in accordance with (he provisions of the Act i.e. section /45 of !he Act Finally,he disallowed an amount of Rs.24,63,854/-. 2.1.Aggrieved by thc ordcr Of the AO the assessee preferred an appeal before the First Appellatc Authority(FAA) and made elaborate submissions Aftcr consider) ring the available material,he held that thc addition 0f Rs.24,63,854/- was not an expenditure was inadmissible Ws.30-431 ofthe Act,that the addition made by the AO could be deleted if the items of prior pcriod income had been Oftered t0 tax in earlicr ycars He directed the AO t0 delete the addition altcr vcrification of Ihe fact (hat the items of prior period income had been offered to tax in the earlier years_ 2.2.During the course of hearing beforc !S,the Departmental Represcntative (DR)argued that FAA had not appreciated the fact properly,that he passed cryptic order without assigning reasons,that he did not consider the arguments ofthe AO, thal under the mercantile system of accounting thc azsessee had kept income ad expenses Out of P&L account,that the true picture of profit Iere not eergingthat there wcre difficulties in making verificalion in absence of detail: liled by the {issessea that the lacts considered by the Tribunal for thle AY $ 2007-08.2009-[O(/TA/1979MMum/2011,d:. | V12/201SandlTA/6449/Mum/2013,dt.12/5/2017) were (ifferent from the facts Of case under consideration He relied upori the case of Falwal Co-operztive Sugar Mills of the Hon'ble Punjab .& Haryana High Cour(2S4ITR E 1 83). The Authorised Rcpresentative(ARJargued tliat (he cssessee IaS {ollowing the practice 0f passing entries about the prior period expenses consistently that the assessee claimed the net expcndittre lor the year under Appeal,uhat thc AQ added the gross incomne that during the Year uncer consideration the assesscc lirst considered the amount of Rs.65.47 crores and 0ffered Rs.18.69 crores for taxation He referred to Pg.60 and 150 of the PB. He relied upon the orders of th? Tribunal dtd.[1/2/2015 and 12/5/2017 (supra): 2,3.We Have heard ihe rival shmissicas We find that while deciding the cross appeals filed by the AO and the assessee for the AY 2009-10 on 12/5/17,(supra) the Tribunal had deliber:t ~ed epon the issue &S under "ulslould be s2er, gro"d no.[ %f both the app?als expenditure of Rs.2,33,22,600/- are on1 the common issue Bricfly; facts Of pricr period sector relating to this issue are, the assessee enterprise is engaged in the business of public India For tke insuring credit risk assessment year under of exporters and bankers in (ispute, 29.09.2009 the declaring assessee filed its return income of Rs.+38.04,88,9961- of income 0h1 40 on During examining the computation of income of thc the assessment prvceedings, the 4 sm of Rs.25.08,640/- t0 the total assessee noticed that assessee hcs included verification income O1 Gccount of prior period adjustment: of the finaneicl stutement and, On further more particularly; notes forming part of" the 7657/M/14&C.0.105/M/16- ECGC Ltd accounts;, he found that the assessee has shown year at Rs. 2,58,31,240/- und [Otal prior period expenses incurred during the debited an amount Q}4 Rs.25,08,afior_ adjhsting nrior_Period income % Rs.2,53,22,6oonghas facts,the 40 to the profit and loss account. called On the basis for the details 0f prior period aforesaid disallowance of such expenses: expenses In and explain the reason for evidence justifying its claim: reeporse, Gssessee submitted its reply along with supporting find merit in the same. He Afier perusing the reply of the assessee; the AO howevenpaid mnog of accounting; the expenditure incurred was of the view that since the assessee is following during mercantile system of the view that since the the relevant previous year is allowable: He waS assessment expenditure %f Rs.2,58,31,240/- was not relatable t0 the year; the same is not allowable. impugned Accordingly, prior period expenditure made by the after discounting the adjustment of the of Rs.2,33,22,600/ - assessee 0f Rs:25.08.640/- the AO added back &n amount [0 the income 0f the assessee Being assessee preferred appeal before the aggrieved of the addition S0 made, CIT(A) The learned CIT(A), after considering the submissions of the materials On record, ussessee and with the perusing the however,he was dethoughhagreed 51O %f notu adjustment made by Ihe assessee view that (he same is acceptable if mhe prior period offered t0 tax in earlier assessment income has years. He, been of Rs.2,33,22,600/- subject therefore; directed the AO to delete Ihe addition t0 period verification Of the fact whether the aSsessee has offered income in earlier assessment years: Being prior CIT(A) both the assessee and the aggrieved with the aforesaid decision of the 5., department The learned are before us. AR taking 15 through the audited profit & loss account and income for the impugned assessment year submitted /hoj the computation of prior period expenditure of Rs.2.58 assessee has not at all claimed the submitted, crores what inits profif d the [oss ussessee account. has done The learned AR is it has adjusted Rs.2,33,22,600/- against the prior period the prior period income of amount of Rs.25,08,640/ - expenditure %f Rs,2,58,31,240/- and offered the net as income. considered The learned AR submitted, the assessee has prior period income nor the prior period expenditure neither therefore, there is no question of disallowance in the profit & loss accout; aS it waS never claimed of prior period expenditure as the expenditure aS deduetion submitted, in the impugned the assessee is assessment year: The learned following the AR same there is a net adjustment accounting method consistently and whenever; on1 accOunt offered it 03 %f prior period incone and expenditure. the assessee has income in the earlier assessment years: He submitted, aforesaid accounting treatment and the AO has also accepted the years in assessment 'ineome %ffered by the assessee in Ihe preceding assessmene orders passed Ws:. 143(3) 0f the Act learned In support Of the said contention; AR furnished before uS a chart showing the income the prior period ineome and expenditure offered on account of adjustment of total in earlier assessment years along income aS well aS assessment orders with computation 0f was submitted by the passed for the relevant assessment years: Thus; it assessee that n0 be made in the disallowance On (CCOunt 0f prior period expenditurucan ipugned assessment year; 6. The learned DR relying on the observations of the treatment of prior period AO submitted that the accounting incomefexpenditure should have Accounting Standard $ been done in accordance with 7We have considered the rival submissions factual aspect %f the issue is and perused the materials on record As far as the coneerned, on that in the perusal 0f the profit and loss account, it is evident impugned Gssessment Year; the assessee has not claimed deductioo expenditure of Rs.2,58,31,240/- What is discernible 0f prior period the relevant previous year, the from the material placed before uS is; in and prior period assessee hGs shown prior period expenditure of Rs.2,58,31,2407 income of Rs.2,33,22,600/- im Rs.25,08,640/- hos its books cmnd been the net offered as income in the difference of evident, assessee has not claimed computation Of total income. Therefore, itiS Gny deduction %f prior period expenditure of Rs.2,58,51,24015 per se aS inferred by the AO. the expenditure to ihe total On the contrary the assessee has Voluntarily added back part of is also evident Utat irconiiafollowing Uhe consistent acconmting method adopted byft assessee is {( following similar method 0f accounting from earliev vears and offered similar income assessment on expenditure and account of adjuStment 0f prior period income and the AO in assessments completed Ws. 143(3) has accepted non only such 7657/m/148C.0.105/1/16- ECGC Ltd, accounting treatment given by the assessee but also the income assessee has not claimed any deduction offered. Therefore, when the 0n the profit & loss account Of prior period expenditure by _ debiting it t0 direct OfcChdn he disallowance made by the AO is totally unjustified deletion of the amount from the income Therefore, we assessee is allowed and that of the assessee of the The ground raised by the depart Respecti Iment is dismissed (fully following the above order 0/ the Tribunal e decide the first Ground of appeal against the AO.Before departing,we will like tO refer to the case relied upon by the DR We find that in the case of Palwal Co-operative Sugar Mills(supra)the Hon"ble Court has held that cryptic orders passed by the appellate authorities were violative of rules of natural justice In that matter the FAA had granted relief to the aSScsSce by recording one line observation in the following words; "In view of the explanation of the ussessee,the preseut (SSESSMent produetion incentive is allowable in the In vear Thereforesthe assessee gets relief of Rs. the case under consideration,the FAA has nof passed 4 one liner order and has granted relief to the assessee He has directed the AO to verify the facts and to allow the elaim only if certain conditions were fulfilled He has specifically mentioned that if the items of prior period income had been offered to tax in the earlier years only then expenses were to be allowed.In these cireumstances,We are of (he Opinion that the order of the FAA cannot be termed as cryptic. The FAA had referred to one of the well settled principles of tax jurisprudence and had asked the AO t0 follow itSuch an order cannot be held t0 an order passed without assigning any reason.The Tribunal has also followed the same principle while deciding the appeals. 2.3.- LReferring to the order of the Tribunal for the AY.2009-1O,the DR had argued that same was not based on correct appreciatlion of facts and it required & rectificalion.Before US,n0 cvidence was filed to prove that the AO filed ay application W/s.254(2)of the Act for rectif- ing the alleged mistakes lt is the AO.and not the DR,who has to arrive at the conclusion as t0 whether there Was any mistake in (he ordler of the Tribunal or not and as to whether to file a miscellaneous application or not Secondly,until and unless the order of the Tribunal is reversed same is valid order: We do not agree that it Was nOt based on correct appreciation of facts For us,it is an order that has altained finality_Judicial diseipline demands that earlier years orders should always be followed,if same are not reversed or for the subsequent AYs_ legal provisions Stand changed.In the case before us,both the factors are missing: Considering the above;we hold that there is no legal or factual infirmity in the order of the FAA So,upholding the same;we decide first ground of appeal against the AO.as stated earlier: 7657/04/148C.0.105/1/16- ECGC Lta, 3.Second GOA is about deleting the addition of Rs.418.63 crores, being provisions for insurance claim debited in the P&L ale During the assessment proceedings,the AO found that the assessee had claimed an amount of Rs.418,63,17,0[0/- in the P&L account . He called for explanation in that regard and after considering the same held that the outstanding claims were unascertained liabilitiesthat AS against claim debited to P&L account for actual claim settled the provisions were not taken into account,that claims made at first point Of time was not nccessarily sellled aS Such,that aS per the specific provisions of' the Act such provisions for claim were not admissible deductions. Relerring to the table of last two ycars submitted by the assessce in that regard,he held that the net claims settled against direct claims received was in the range of 26%-36% only Accordingly,he made an addition of Rs.4/8.63 crores 3.1.Aggrieved by the order of the AO the asscssce prelerred an appeal before the FAA and made claborate submissions After considering the available material,he held that the assessee was following guidelines issued by IRDA,that the audited accounts Of the assessee were subjeet to scrutiny of IRDA as well as C&AG auditthat both the agencies had accepted the accounts including the provisions made by iLthat the accounts contained provisions for claims Incurred But Not Reported (IBNR) as well as claims Incurred But Not Enough Reported '(IBNER)that the provisions were made as per certificate of actuarial valuation. Following the ratio of LIC of India(3J8ITR2I2) General General Insurance Corporation of India( (240 ITR/39),he held the claim made by the assessee could not be disallowed 4/s.30 to 43B of the Act: 3.2.Before us,the DR submitted that over the years(AY$ 09-10 to AY.13-I4)provisions for claim were provided in the range of Rs.675 crores to Rs.815 crores a5 against thc actual claim in the range of Rs.300 to 400 crores,that the actuarial certificate for estimation certiticate for IBNR aS on 3/.3.2010.based on data made available to them included IBNER of 830 crores, that the cumulative provisions up to 31.3.2010 worked out Rs 830 crores,that the balance sheet and the PeL &c reflected such provisions of claim atRs.1495.57 crores. Referring t0 annual report for FY.2009-1O,he contended that Pg-7 of the PB reflected summary of' various important figures Of the insurance business of the assessee of last 10 years,that as per the repOrt a5 against receipt Of premium of 330 crores (from FY.2000-0/)and claim paid of 212 crores the volume got increased to 813 crores ad 642 crores respectively,that the figure of Rs.830 crores was nOt & certified figure,that pages S6-57 reflected the provision for previous year at Rs.382.57 crores ,that the schedule 14 reflected that the provisions were not for such claims, that the provisions represented unexpired risks, premium deficiency wealth (aX and 7657/M/14&C.0.105/M/16-ECGC Ltd. proposed dividends that in the PeL account 'claims incurred net were reflected a[ 675.17 crores that the claim were routed through PL account,that the expenditure were covcred Ws. 30-4306) of the Acl,that the ratio of Hon'ble Supreme Court in the case of' General Insurance Corporation of India was applicable in favour 0f thc revenue: He also referred to 'the claims incurred net' and stated that as a foot note at Schedule-2 it referred to consider Note 13 which qualified the figure subject t0 confirmation and 'consequential adjustment if any Referring to Pg:74 of the PB,he stated details of Rs.1495.95 crores were not provided or discussed aS (0 what included in the figure,t that it was not clear aS t0 whether actuarial figure of Rs.830 crores was taken into consideration or not, Referring t0 the Schedule I6,the DR stated that the assessee had not submitted the bifurcation and data which 'vas before the actuarial though AO had specifically asked for such details, Ihat the matter Of dispute were IBNR and IBNER, that such claims were apprchended by the assessee on account of" some event,that such claims were neither preferred nor were received, thal such claims could be received in future aS per IRDA guidelines; that in absence of data it was not ascertainable that if any such provisions of IBNRIIBNER were provided in earlier years, that the provisions of IBNR and IBNER were contingent in nature, that thc allowability of sueh provisions was unascertained and depended on future events that contingent provisions-though required as per IRDA guidelines to protect the interest of the insured parties-were not allowable 4/s.37(1) of the Act The Authorised representative(AR)contended that the AO had never raised any objection with regard to details of IBNR and IBNER,that the DR had raised the issue for the first time before the Tribunal that as per Rule $ claim in respect of IBNR and IBNER had [0 be aS per actuarial valuation(Page 173 of PB 2),that the assessee could not modify the figures certified by the cxperts; that both the items i.e: IBNR and IBNER are nOt based 0n apprehension of the assessee, the same were based on experts 'valuation and were Statutor ~ily binding on the assessee; that it Was following the guidelines and regulations of IRDA , that in the earlier years claims had been consistently made in respect of IBNR and IBNER,that same had becn allowed by the AO in the assessments completed u/s.143(3) of the Act,that the authentieity, correctnessgenuineness or validity of the actuarial valuati- on was never under challenge either in any of the carlier years r (Or the year under consi ~deration,that rule of consistency were applicable t0 income ta.x proceedings,that the assessee was required to make provisions as per IRDA guidelines, that the claim made by it had to be allowed. He referred t0 clause 1 of schedule 17 that was referred t0 by the DR and stated that the submissions made by (he DR were factually incorrect He submitted the position of provisions and referred Pg.63 of the PBHe contended that the assessee 7657/m/14&C.0.105/M/16- ECGC Ltd_ would bear risk for whole Of the principle amount,that it would earn insurance premium at average Rs.0.30 per hundred Rupees With regard (o the proposal of the DR to set aside the issue to the file of the AO,he stated that non furnishing Of details was not objected by the AO nor any such grievance had been raised in the grounds 0f the appeal,that the issue raised al the belaled stage had to be rejected, that he AO should not be given one more opportunity as he had accepted the claim in the carlier AYs_ 3.3,We have heard the rival submissions and perused the material before US We find that the assessee is wholly owned by government of India,that it is required to draw its accounts as per the rules and regulations issued by IRDA,that CRAG appointed auditors audit its accounts,that in note 8 of Schedule 16 of the accounts gives details of liability 0n account of claims and accounting Of estimated recoveries;(hat it would accept claims made during the year by the policy holders,that it has included IBNR and IBNER under the head claims received,that IBNR and INBER Were based on actuarial valuation,L that the AO had held that the provisions made for insurance claim reeeived during the year rcpresented unascertained liability. 3.3.1.As an Insurance company,the assessce has t0 follow rules and guidance issued by IRDA,that in pursuance of the directions of IRDA the assessee had prepared its books of accounts,that Statutory Auditors had not raised any objeetions about IBNR and IBNER,that € & AG had nOt expressed any doubts about the accounts maintained by it,that it was following the notification issued by IRDA with regard (0 gencral insurance business,that Para 5 of Part of the schedule,as preseribed by IRDA,deals with claim made by the assessee under the heads IBNR and IBNER(Pg.172-73 of the PB.), ( that both the items were based 0n actuary valuation report In our opinion provisions made on the basis of an actuarial valuation cannot be considered contingent liability The basic thing t0 be remembered is that unlike other businesses;life insurance business is being regulated by IRDA Regulatory body issues instructions time to time One of the instructions was about follow actuarial valuation while preparing the accounts The actuarial method of valuation has been recoginsed an approved method for valuing liabilities by various courts So,we hold that method followed by the assessee for valuing its liabilities cannot be rejected.Besides Rule 5(a)of the First Schedule deals with provisions pertaining to expenditure or allowance or Other prescribed liabilities and not in respect of incomeIn short thc AO is nOt authorised to disturb any income reflected in the PeL accoUmt Here;We would like to reproduce the relevant portion Of the judgment in the case of General insurance Corporation of 'India(supra)and it reads as under: 7657/m/148C.0.105/M/16- ECGC LId. "Section 44 0f the Income-tax Acl, 1961, is special provision taxable income earned from business governing computation of of insurance. It opens with thus has an non-ohstante clause and overriding effect over other provisions contained in the Act. It mandates the aice ting authorities '0 compute the taxable inconte for husineas Qf 'ingurance imaccardanke with the provisions %f the First Schedule A plain reading of rule makes it clear that in order to attract the 5(a) of the First Schedule firstly be applicability of the said provision the amount should an expenditure Or allowance. Secondly; provisions of sections 30 [0 43A it should be one not admissible 1nder the If the question of amount is not testing (I expenditure Or allowance, the its eligibility for adjustment would not arise by reference t0 rule 5(a) 0f the First Schedule at all. There is another approach (0 the same issue Section 44 of the Income-tax Actread Rules contained in the First Schedule (0 the Act lays down wHh the profits and gains ( artificial mode of computing the 0f insurance business For the purpose %f income-(ax; the figures in the accounts %f the assessee drawn Up in accordance with the provisions the Income-tax Actand of the First Schedule t0 satisfying Ihe requirements %f the Insurance Aetare bindingean vhe Assessing Officer under the Income-tax Actand he has no general power to correct me in the accounts of an insurance business and undo the entries made errors therein XXXXX In Life Insuranee Corporation of Inalia v CIT dealing [1964] 51 ITR 773 (SC) , their Lordships with the pari materia provisions contained in the Indian were court analysed the Scheme Income-tax Act, 1922. Tne underlying the relevant provisions 0f the Insurance Acl, 1938,and the Indian Income-tax Act, 1922, and held that where the accounts engaged in insurance business of an insurance company are required to be submitted and approved by the Controller Of Insurance; the Income-tax Ofjicer has no power t0 change the figures in the aceouototlec assessee, 4. K Sarkar 1 , recorded in his opinion (page 778) "The assessment of the prolits ofan insurance business is rules in the Schedule and there is no completely governed by the power t0 do anything not comtained in iL The reason may be that the accounts of an insurance business are fully controlled by the Comtroller %r Insurance under the provisions Of (he Insurance ACL by him. He has They are cheeked power to See that various provisions of' the Insurance Act are complied with by an insurer S0 that the persons iho have insured with it to suffer by are nO[ made mismanagcment A tampering with the accounts of an insurer by Income-tax Oflicer may seriously affect the an working of insurance companies But apart from this consideration, We feel no doubt that the the Schedule to the Income-tax language of section 10(7) and Act makes it perfectly certain that the Income-tax Officer could not make the adjustment that he did in these cases. M Hidayatllah J (as His Lordship then WaS}. observed (page 788) Income-tax Act contemplates that the assessment 0f insurance be carried OUt not according to the companies should ordinary principles applicable to business concerns as laid down in Section 10, but in quite a different manner . Tlc view so taken has been followed by this court in Fandyan [1965] 55ITRZLS and CIT v Calcutta Insurance Company Ltd. CTT [1965] 5Z ITR Hospital and Nursing Home Benefits Association Ltd 342 (SC) . In the Iater case, their Lordships have also observed the balance (page 320) of profits as disclosed by thc accounts submitted to the Oicintendent of insurance and accepted by him would be binding on the Income-tae Ohiceh except thai the Income-tax Officer would be cntitled dngcludee xconditure other than expenditure permissible under the provisions 0f section I0 Of the Ac urs common ground in this casg; Ihat Ihe reserves Which were added to the balance of profits were not expenditure 3.3.2.One more aspeet,to be considered here, is the rule of consistency.As per the taxation jurisprudence,if basic facts remain same orders for the earlier year should followe It is said that principles Of res judicata do not apply to tax proceedings,L but principles of consistency 7657/M/14&C.0.105/M/16- ECGC Ltd_ are very much applicable The Hon'ble jurisdictional high court has, in the matter of Gopal Purohit(336 ITR 287),held as under: the Tribunal has observed in paragraph &.1 0f its judgment that the assessee has followed a consistent practice in regard to the nature of the activities; the manner of keeping records and the presentation of shares Gs investment Gt Ihe end of the year, in all the years. The Revenue Submitted that 4 different view should he taken for the year under consideration; since the principle of res judicata is not applicable to assessment proceedings The Trihunal correcily accepted the position, that the principle of res judicata is not attracted since each assessmemt Year is separate in itself The Tribunal held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, parficularly in the casse %f the assessee, This approach 0f the Tribunal cannot be faulted. furnish The Revenue did not any justification for adopting divergent approach for the assessment year in question Question (b) therefore; does not also raise any substamtial question 0f Iaw. The assessee was following the method of creating provisions based on actuarial valuation and the AO had accepted it while passing orders W/s.143(3)of the Act Without bringing changed circumstances the AO should not have held that liabilitics were contingent: 3.3.3.It was brought to our notice that (he AO had observed that reinsuranee ceded and recoveries were nOt considered While calculating the liabilities and that the observation were factually incorrect We find that if the details of provisions for claim are analysed it hecomes clear that the working of the assessee is based on net of reinsurance(Pg.63 of the PB)and thus the observation made by the AO is contrary to the facts_ 3.3.4.We find that the AO had not raised any objection about non filing of bifurcation of data which was made available to the Actuary therefore;in our opinion the DR cannot make totally fresh case before us at this stage about non filing of bifurcation Neither the AO nor the FAA had dealt with the issue The DR has a definite role in helping the bench to deeide the mattersButthere are limitation of representation In any case the assessee had followed Rule 5 in respect of IBNR and IBNER,as mentioned earlier Therefore;we do not find any force in the argument advanced by the DR in that regard. Considering the above;we are ol the opinion that the order of the FAA does not sufler from any Icgal or factual infirmity Soupholding the same,we decide ground no.2 against the AO. CQLOSMuW20L6 : 4.First ground of the CO is about carlier years expenses The FAA had direct the AO to verify 45 t0 whcther the items Of the prior period income had been offered to tax in the earlier years while deleting the addition made by the AO.In our opinion, there is nothing wrong in the directions No claim can be allowed without verification The FAA has followed 4 well recognised principlc of taxation disputes Besides;we have deeided the issue against the AO 7657/m/148C.0.105/w/16- ECGC Ltd. while adjudicating the GOA-| filed by the AO.So,we (reat the first ground of CO,raised by the assessee,aS infructous. 5.Second ground of CO is about disallowance made by the AO uls. 14A of the Act that was confirmed by the FAA.It was stated that identical issue was decided in favour of the assessee by the Tribunal whilc adjudicating the appeal for the AY.2007 -08, that similar disallowance made under section [4 A of the Act for the A.Y. for the A.Y. 2009-10 has been deleted by the Hon'ble Tribunal vide its order dated 12/05/2017.The AR also referred to the case of ICICI Prudential Insurance Company Ltd (ITA/6gS4/MUM/2O 0,dated 14/09/2012).We are reproducing thc relevant portion 0f the order of the Tribunal for the AY.2007-08 and it reads as under: "20.We have heard the rival contentions and also the relevant finding given in the impugned orders AAs Stated earlier; the assessee company is engaged in the business of General Insurance and under the specific provisions given in the Income-tax Act, its inecome has t0 he computed strongly in accordance with section 44 Wv First Schedule. Itis a non-obstante clause having overriding effeet over the Other provisions contained in the Acl For making the disallowance of any expenditure or allowance, whieh falls under the provisions of sections 30 to 43B. It should be firstly, be an expenditure or allowance and secondly, should not he admissible under sections 30 t0 43B Otherwise no other disallowance ean be made. Eer_the_LurLose Of_Iucome-tax_firsLLalLthelgures_OL_the_income OL_Ihe_aSseSSee isO be_drawn-ULin accordancewith the previsions_PL_the first schedule tq Lh lucowe-(44 AcLaudsutisfiiug threuirelL eL_Iusurauce AcLuudlsuch L determination oLincolgi binding QLlleAQandshereisDe t linker_withsuchand accoWut This proposition has been upheld by the Hon'ble Supreme Court in the case of General insuranee Corp of India v. CIT, reported in [1990] 240 ITR 139. Thus, when the income %f the assessee as well as the ependiture are governed by specific provision which have an overriding effect, then it is not open for the 40 t0 invoke the other provisions of the Aet for carrying 01 the disallowance of adjustment in the income. Thus, we hold that, no disallowance Ws 14A can he made in the case of the assessee and hence grouds raised in the Cross Objections are allowed (Emphasis supplied) Considering the above second ground of the CO is deeided in (avour of the assessce. As result, appeal filed by the AO is dismissed and the CO of the AO is allowed in part: waa: fefftaft afe7T E1 &rfadt erra TT # -Tdf & &irr fulfrat TT Tley 391a: Hvjr fijzt JTTT 14 Lk Order pronounced in the open court on Oerober; 2017. Me1 # Yyr @a PITITaY # fnnt I} BR, 2017 FT #T T 1 sJ} SJ/ TTT Fr Pawan Singh) (Trz RAJENDRA) RINT 4TFT / JUDICIAL MEMBER Jar TTT ACCOUNTANT MEMBER T4 Mumbai; faiT/Dated Ml.10.2017, JuSrPS %8 #fftanidCopy o{ the_Order_forwurded t2 HAppellamt /&ffaireff 2. Respondent /arff 3.The concerned CIT(A)7i4Z &f-fly HTTFr %rITh, 4.The concerned CIT Fii4z &NIT MTT 10