ACITCORPORATE CIRCLE-3(1) , CHENNAI vs. M/S. UNITED INDIA INSURANCE CO. LTD., CHENNAI

PER BENCH: Out of this bunch of 14 appeals, seven appeals each filed by

assesse and Revenue are directed against separate orders of

the learned Commissioner of Income Tax(Appeals)-11, Chennai

/ CIT(A), NFAC, New Delhi for the relevant assessment years.

2 ITA No. 1085/Chny/2017 & 13 Ors

The facts and issues involved in these cross appeals are

common and thus, all appeals were heard together and are being

disposed off, by this consolidated order for the sake of

convenience. It is admitted position that facts as well as issues

are quite identical in all the years and our adjudication in any one

year shall equally apply to the other years also. We take up the

assesse appeal in ITA No.1085/Chny/2017 for assessment year

2013-14 as lead year.

3 ITA No. 1085/Chny/2017 & 13 Ors

cause shown for the period of delay, we condone the delay and admit the appeals for adjudication. ITA No. 1085/Chny/2017 (AY 2013-14):

3.The grounds raised by the assesse read as under:-

“1.The Commissioner of Income Tax (Appeals) erred both in law and on the facts of the case in: i)upholding the disallowance upto the extent of 15% of the reinsurance premium ceded by the Appellant to non-resident reinsurers (NRRs) u/s 40(ia)(i) of the Act amounting to Rs. 91,85,50,704. ii)upholding the disallowance of Rs.21,26,33,319 being amortization of premium paid on purchase of securities; iii)restricting the deduction of Reserve for Unexpired Risk (URR) to the extent of the premium proportionate to the risk period of the subsequent year as against the claim of the Appellant of URR based on Rule 6E of the Rules; and iv)Upholding the amount added to the Book Profits to the extent of disallowance made by the Appellant u/s 14A of the Act under the normal provisions of the Act (Rs. 1,31,12,819). 2.The Commissioner of Income Tax (Appeals) (CIT(A)) erred in upholding the disallowance u/s 40(a)(i) upto the extent of 15% of the reinsurance premium ceded by the Appellant to the NRRs (other than countries where DTAAs provide specific exclusion clause with regard to non-taxability) on the ground that 15% of the reinsurance premium ceded by the Appellant is income chargeable to tax in India and that tax should have been deducted by the Appellant at source as per provisions of section 195 of the Act. 3.The CIT(A) failed to appreciate that the reinsurance premium ceded by the Appellant to the NRRs non-resident reinsurers was towards risk undertaken by the reinsurers outside India (for risks can be taken based on the financial capacity of the reinsurer which exists only in the country where all his assets exist-which admittedly is not in India) and therefore the reinsurance premium are not liable to tax in India. 4. Even assuming but not admitting, that the reinsurance premium ceded by the Appellant is taxable in India, the CIT(A) failed to appreciate the basic principle in insurance is that the reinsurers' results would be in the same pattern of the original insurer and in the Appellant's case (the original insurer) there has been a loss in its insurance operations and therefore there is no income that can be taxed in India. 5.The CIT(A) failed to appreciate that in respect of investments for which amortization of premium has been claimed: (a) related interest is offered to

4 ITA No. 1085/Chny/2017 & 13 Ors

income; (b) the amortization of premium is directly linked to the interest - therefore the expenses are revenue in nature, 6.The CIT(A) erred in not appreciating the fact that the amortization of premium paid on purchase of securities was made as per the guidelines of the regulations of the Insurance Regulatory Authority of India (IRDA) and that such amortization cannot be added in the absence of a specific provision to disallow the same. 7.The CIT(A) failed to appreciate that the amortization of premium paid on purchase of securities is neither an expense nor an allowance that can be disallowed under Rule 5 of First Schedule of Act and that the CIT(A) (as per the provisions of Section 44 of the Act) has the power to disallow only the expenses which are not admissible under the provisions of section 30 to 43B of the Act. 8.The Appellant submits while ascertaining the Book Profits: a)The CIT(A) failed to appreciate that the amount debited as Reserve for Unexpired Risk (URR) cannot be treated as a "reserve" as contemplated in Clause (b) to Explanation 1 to Section 115JB of the Act and the carry forward of Reserve for Unexpired Risk cannot be restricted only to the extent of the premium proportionate to the risk period of subsequent year. b.The CIT(A) erred in not appreciating the fact that the aforesaid change in the accounting treatment of URR would result in 'change in accounting policy' adopted by the Appellant and such changes are not in line with provisions of Section ll5JB of the Act. c.The CIT(A) erred in upholding the addition to the Book Profits (u/s 115JB of the Act) to the extent of the amount disallowed u/s 14A by the Appellant under the normal computation of the Act, even though the exempt income in the computation of Book Profits is lower than the amount under the normal provisions of the Act. 9.The Appellant therefore prays that: i) the disallowance of the reinsurance premium ceded to NRRs be deleted; ii.the disallowance of amortization of premium paid on purchase of securities be deleted; iii.no addition to book profits be made in respect of URR; and iv.addition to Book Profits u/s 14A of the Act be deleted.”

General Insurance Company, carrying on general insurance

5 ITA No. 1085/Chny/2017 & 13 Ors

business in India. The assesse filed its return of income for

assessment year 2013-14 on 25.09.2013 admitting loss of Rs.

9,70,50,297/- as per normal provisions and Rs.465,29,18,269/-

under provisions of section 115JB of the Act which was revised

on 31.03.2015 admitting loss of Rs.97,60,08,011/- and book

profits of Rs.465,29,18,269/-. The case was selected for scrutiny

and notice u/s.143(2) & 142(1) were issued and the assessment

was completed by the Assessing Officer on 27.3.2016 by

arriving at Rs.567,07,55,787/- after adjustment of brought

forward loss and assessed book profit of Rs.986,60,74,714/-.

Aggrieved, the assesse preferred an appeal before the

Ld.CIT(A), who partly allowed the appeal of the assesse against

which the assesse is in appeal before us.

in its appeals for our consideration relevant to assessment years

2013-14 to 2016-17 and by the Revenue for the assessment

years 2017-18 to 2019-20 is against disallowance upto the

extent of 15% of the reinsurance premium ceded by the Appellant

to non-resident reinsurers (NRRs) u/s 40(a)(i) of the Act. At the

outset, the learned counsel for the assesse submitted that an

identical ground has been raised by the Revenue in assesses

6 ITA No. 1085/Chny/2017 & 13 Ors

own case for the assessment year 2007-08 and the co-ordinate

Bench of this Tribunal in ITA No.1692/Chny/2011 dated

28.06.2023 has considered the issue at length as per directions

of the Hon’ble High Court of Madras, since the assesse preferred

an appeal before the Hon’ble High Court, in favour of the assesse

and dismissed the ground raised by the revenue by following the

earlier decision of the Tribunal in ITA Nos.1673, 1688, 1689,

1691/Chny/2011 dated 26.08.2022 in assesses own case for

assessment years 2003-04 to 2006-07 and 2008-09 to 2010-11.

The Learned Sr.Standing Counsel for the Revenue also fairly

agreed that this issue is covered in favour of the assesse by the

decision of this Tribunal in assessee’s own case for earlier

assessment years.

co-ordinate Bench of this Tribunal in assessee’s own case in ITA

No.1692/Chny/2011 dated 28.06.2023 by following the earlier

decision of the Tribunal in ITA Nos.1673, 1688, 1689,

1691/Chny/2011 dated 26.08.2022 in assessee’s own case

came to the conclusion that reinsurance premium ceded to

NRRs, is not taxable in India under the Income Tax Act, 1961 or

under DTAA between India and respective countries, where the

ITA No. 1085/Chny/2017 & 13 Ors

NRRs are tax residents, and thus, reinsurance premium cannot

be disallowed u/s.40(a)(i) of the Act, for non-deduction of TDS

u/s.195 of the Act. The relevant portion of the findings of the

Tribunal in para 6 & 7 of the order in ITA No.1692/Chny/2011

dated 28.06.2023 are extracted herein below:-

“6. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the Tribunal in the assessee’s own case in ITA Nos.1673, 1688, 1689, 1691/Chny/2011 for AYs 2003-04, 2004-05, 2005-06, 2006-07, order dated 26.08.2022, and after considering relevant facts held that reinsurance premium ceded to NRRs, is not taxable in India under the Income Tax Act, 1961 or under DTAA between India and respective countries, where the NRRs are tax residents, and thus, reinsurance premium cannot be disallowed u/s.40(a)(i) of the Act, for non-deduction of TDS u/s.195 of the Act. The relevant findings of the Tribunal are as under: 10. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The assessee is an insurance company engaged in the business in General insurance in terms of IRDAI regulations and Insurance Act, 1938. The business of the assessee is regulated by IRDAI through various regulations. All the insurance companies which are carrying on insurance business in India have to necessarily comply with provisions of the Insurance Act, 1938 as amended and rules there under. The contract of insurance and contract of reinsurance are two separate and distinct contracts. The reinsurance contract is completely independent of contract of insurance between insured and insurer. The term ‘reinsurance’ was not defined under the Insurance Act, 1938 until 2015. However, by Insurance Laws (Amendment) Act, 2015, definition of term ‘reinsurance’ was inserted in the Insurance Act, 1938. As per which, the term ‘reinsurance’ means insurance of part of one insurer’s risk by another insurer, who accepts risk for mutually acceptable premium. Therefore, the assessee being in general insurance business as part of their strategy has taken reinsurance policy with reinsurance companies. Further, every insurance company in India has to place their reinsurance program 45 days prior

ITA No. 1085/Chny/2017 & 13 Ors

to commencement of financial year before the IRDAI in terms of para 3.4 of IRDAI (General insurance, Reinsurance) Regulation, 2000, and within 30 days of commencement of the financial year, every insurance company has to file reinsurance treaty slips with IRDAI in terms of para 3.5 of IRDAI (General insurance, Reinsurance) Regulation, 2000. As per IRDAI Regulation, 2000, the insurance companies in India have to mandatorily reinsure with the Indian reinsurer being General Insurance Corporation (GIC). However, over and above specified percentage of reinsurance, general insurance companies in India can have their reinsurance arrangement with foreign reinsurer in terms of para 3.7 of said regulations. In this case, there is no dispute with regard to fact that the assessee has complied with provisions of Insurance Act, 1938 and regulations made there under by the IRDAI. In fact, the Assessing Officer has accepted fact that the assessee has complied with reinsurance regulations by taking required percentage of reinsurance contract with General Insurance Corporation of India. But disputed reinsurance premium ceded to non-resident reinsurer companies. In the earlier round of litigation, the Tribunal had discussed the issue of payments made to non-resident reinsurer, in light of provisions of section Insurance Act, 1938 and IRDAI Regulations on reinsurance and concluded that the assessee has violated provisions of Insurance Act, 1938 and consequently, reinsurance premium ceded to NRRI is not deductible u/s.37 (1) Of the Income Tax Act, 1961. The matter travelled to the Hon’ble High Court of Madras and the Hon’ble High Court has remanded the issue back to the Tribunal and directed the Tribunal to decide the issue on three points:- i) Whether the Assessing Officer was right in disallowing reinsurance premium u/s.40(a)(i) of the Act; 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 IRDAI 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………………………………………………………………………………………………………… …………………………………………………………………………………………………………..

9 ITA No. 1085/Chny/2017 & 13 Ors

resident reinsurer is not taxable in India under the Income Tax Act, 1961 or under DTAA between India and respective countries where NRRs are tax residents and thus, on impugned payments the assessee is not liable to deduct TDS u/s.195 of the Income Tax Act, 1961. Consequently, payments made to NRR cannot be disallowed u/s.40(a)(i) of the Act, 1961. Hence, we direct the Assessing Officer to delete additions made towards disallowance of reinsurance premium ceded to NRRs u/s 40(a)(i) of the Act. 7. In this view of the matter and consistent with view taken by the coordinate Bench in the assessee’s own case, we are inclined to uphold the findings of the Ld.CIT(A) and direct the AO to delete the disallowance of reinsurance premium paid to NRRs u/s.40(a)(i) of the Act, for failure to deduct TDS u/s.195 of the Act.”

decision of the co-ordinate Bench of this Tribunal, we set aside

order of the Ld.CIT(A) in restricting the claim of the assessee to

15% of payment made to NRRs of other countries and direct the

Assessing Officer to delete the additions made towards

disallowance of reinsurance premium ceded to NRRs

u/s.40(a)(i) of the Act for the assessment years 2013-14 to 2016-

for the assessment years 2013-14 to 2016-17 is allowed and

that of the Revenue for the assessment years 2017-18 to

2019-20 is dismissed.

with regard to disallowance towards amortization of premium

10 ITA No. 1085/Chny/2017 & 13 Ors

paid on purchase of securities for the assessment years 2013-14

to 2019-20. The learned counsel for the assessee submitted that

similar issue had been raised by the assessee for consideration

in the assessment year 2003-04, wherein the Ld.CIT(A) decided

the issue against the assessee by following his predecessor’s

order and on further appeal, the Tribunal confirmed the order of

the CIT(A). Even in subsequent assessment years 2004-05 to

2013-14 also, the Tribunal decided the issue of amortization of

premium paid on purchase of securities against the assessee.

Pertinently, in ITA No.2107/Chny/2008, in assesse’s case for

AY 2004-05, the co-ordinate Bench of this Tribunal has observed

as under:-

“37. The next issue arises for consideration is amortization of premium on securities. This issue arises for consideration in the assessee's appeals for assessment years 2004-05 to 2013-14. 38. Shri P.H. Arvindh Pandian, the Ld. Sr. counsel for the assessee, submitted that the CIT(Appeals) decided the issue against the assessee by following his own order for assessment year 2003-04. On appeal by the assessee against the order of the CIT(Appeals) for assessment year 2003-04, according to the Ld. Sr. counsel, this Tribunal confirmed an identical order of CIT(Appeals). 39. We heard Shri M. Swaminathan, the Ld. Sr. Standing Counsel also. This Tribunal for the assessment year 2003-04, confirmed a similar disallowance towards amortization of premium on securities. For the reason stated by this Tribunal for assessment year 2003-04 in I.T.A. No.801/Mds/2007, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.”

11 ITA No. 1085/Chny/2017 & 13 Ors

already decided the issue against the assessee in earlier

assessment years 2004-05 to 2013-14 vide its order dated

28.08.2018. Accordingly, we see no reason to interfere with the

order of the CIT(A) for the assessment years 2013-14, 2014-

15, 2015-16, 2016-17, 2017-18, 2018-19 & 2019-20 on the issue

of disallowance towards amortization of premium paid on

purchase of securities. Therefore, the ground raised by the

assessee on this issue of amortization of premium paid on

purchase of securities for the assessment years 2013-14,

2014-15, 2015-16, 2016-17, 2017-18, 2018-19 & 2019-20 is

dismissed. 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.

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

12 ITA No. 1085/Chny/2017 & 13 Ors

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.

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

13 ITA No. 1085/Chny/2017 & 13 Ors

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.

records, we find that an identical issue has been considered by

the Tribunal in assessee’s own case in ITA Nos. 2107/Chny/2008

&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:-

“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

14 ITA No. 1085/Chny/2017 & 13 Ors

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.”

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

15 ITA No. 1085/Chny/2017 & 13 Ors

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.

for assessment years 2014-15 to 2016-17 and 2018-19 and

appeal of the Revenue for assessment year 2013-14 is as

regards to disallowance of provision for IBNR and IBNER

claimed by the assessee in its return of income while computing

book profit u/s.115JB of the Act. The Ld.AO disallowed the claim

and the Ld.CIT(A) deleted the additions on this issue and allowed

16 ITA No. 1085/Chny/2017 & 13 Ors

the claim of the assessee for the assessment year 2013-14,

against which the Revenue came in appeal. Whereas, in respect

of AYs i.e 2014-15 to 2016-17 and 2018-19, the Assessing

Officer disallowed provision for IBNR and IBNER claim, and the

Ld.CIT(A) following the decision of the Tribunal, upheld the

orders of the Assessing Officer on this issue dismissed the claim

of the assessee, against which the assessee came in appeal for

AYs 2014-15 to 2016-17 and 2018-19. The learned counsel for

the assessee submitted that there was no disallowance of provision for IBNR and IBNER claim for the assessment years

2017-18 & 2019-20.

15.1 For this issue of provision towards IBNR and IBNER claim,

the assessee has raised the following ground which reads as

under:-

“8. The Appellant submits while ascertaining the Book Profits: (a)The CIT(A) failed to appreciate that the amount debited as Reserve for unexpired Risk (URR) cannot be treated as a "reserve" as contemplated in Clause (b) to Explanation to Section 115JB of the Act and the carry forward of Reserve for Unexpired Risk cannot be restricted only to the extent of the premium proportionate to the risk period of subsequent year.” The grounds raised by the assessee in other assessment years

is identically worded and facts and circumstances are exactly

17 ITA No. 1085/Chny/2017 & 13 Ors

similar and hence, we take up the facts for consideration from

assessment year 2013-14 in ITA No. 1085/Chny/2017 and will

decide the issue which will apply to other years also.

15.2 At the outset, the learned counsel for the assessee pointed

out that the Hon’ble High Court of Madras in Tax Case Appeal

Nos.339 & 342 of 2019 dated 08-12-2010 in the assessee’s own

case for the assessment year 2013-14 has remanded this issue

back to the file of the Tribunal for adjudicating the same on merits

by observing in para 7 as under:- “7. Since the provision has been made applicable to the Insurance companies as well with effect from 01.04.2003, the Tribunal has to decide the issue on merits for the assessment order 2013-2014 and decide as to whether the assessing officer was right in computing dis-allowance reserved for unexpired risk provision towards IBNR / IBNER claim and dis- allowance under section 14A read with Rule 8D and the Tribunal to take a decision on merits and in accordance with law, therefore, the matter has to be remanded to the Tribunal for fresh consideration, accordingly, the observations made by the Tribunal in the impugned order in Paragraph Nos. 55 and 56 are set aside, insofar as it relates to assessment year 2013-2014 and the matter is remanded to the Tribunal to decide the issue with regard to the computation under book profit and whether the assessing officer was right in his computation.”

15.3 In term of above, we take up these appeals and heard Shri

S.Sundararaman, learned counsel for the assessee and

Ms.Pushpa, Ld. Sr.Standing Counsel for the Revenue. The

Assessing Officer, while verifying the accounts of the assessee,

18 ITA No. 1085/Chny/2017 & 13 Ors

claimed that the assessee has deducted Rs.266,77,00,000/- in the profit & loss account and created provision towards ‘claim incurred but not reported’ (IBNR) and ‘claims incurred but enough reported’ (IBNER). The assessee was asked to explain as to why said provisions should not be disallowed and added back to the total income of the assessee. The assessee explained before the Assessing Officer the entire genet of the claim by filing a letter, which is reproduced in the order of the Assessing Officer. The Assessing Officer, while adjudicating the issue noted that provision for IBNR / IBNER is to be created considering the date of occurrence of the relevant event and not based on reporting of the event. Hence, the Assessing Officer noted that such provision for these two claims do not seem to be covered entire events that occurred during particular financial year but not reported. The assessee before the Assessing Officer explained this by filing the evidences that the same is based on actuarial valuation and relevant text of the letter reproduced by the Assessing Officer is being reproduced for the sake of clarity as under:-

19 ITA No. 1085/Chny/2017 & 13 Ors

“The provision for IBNR and IBNER made by the assessee for the relevant assessment year are based on actuarial valuation by an independent actuary. The valuation is worked based on an approved statistical model (approved by the Actuarial Society of India and IRDA) which takes into account various factors including (a) claims report, (b) claims paid; and (c) claims outstanding details from the Company for the past seven years. The Actuary, using the data furnished by the assessee based on the statistical model approved by Actuarial Society and IRDA, calculates the ultimate loss that will fall on the company under each portfolio (viz. Fire, Marine Cargo, Marine Hull,etc.) and on the so calculated amount reduces the Claims actually paid and also the Claims Outstanding accounted by the assessee to arrive at the shortfall on the ultimate loss. This shortfall will be certified by the Actuary to be the IBNR/IBNER to be accounted by the assessee. A copy of the report of the Actuary is enclosed for your reference (Annexure 3). From a reading of the report, one can appreciate that the Actuary recommended to the assessee to provide the above amount based on his study of the claim reporting pattern and the outstanding liability made in earlier years.”

15.4 According to the Assessing Officer, claim made by the

assessee, particularly with regard to third party motor insurance

claim, is without any time limitation and hence, claim made on

these two items by the assessee is unascertained liability and

hence, he disallowed provision created by the assessee by

observing that the assessee itself reverses the provision created in an earlier year, in subsequent year and creates new provision

based on reporting of the events. The Assessing Officer

20 ITA No. 1085/Chny/2017 & 13 Ors

disallowed this provision and also for similar reasons added back

this provision for the purpose of computation of book profit

u/s.115JB of the Act. Aggrieved, the assessee preferred appeal

before the learned CIT(A). The Ld.CIT(A), by following the earlier

year order for assessment year 2003-04 vide para 10.3.3 held

as under:-

“10.3.3 In A.Y. 2003-04, in the appellant's own case, my predecessor has made the following observation : "4.2 I have carefully considered the facts of the case and the various submissions made by the ld. AR. I have also gone through the decisions relied on by the ld. AR. I find that the appellant has provided for the above sums based on actuarial valuation which is a scientific basis. It was also submitted that it is the universal practice of all insurance companies to provide for IBNR/ IBNER and it is based on a statutory requirement. Hence, I am of the considered opinion, that the claim of the appellant has to be allowed. The Hon'ble Supreme Court in the case of Rotak Controls India (P) Ltd. (supra), has held as under: "The present value of a contingent liability, like the warranty expense, if properly ascertained and discounted on accrual basis can be an item of deduction under section 37. The principle of estimation of the contingent liability is not the normal rule. It would depend on the nature of the business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting adopted by the assessee. It would also depend upon the historical trend and upon the number of articles produced. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation ; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognised. The principle is that if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and the facts show that defects existed in some of the items manufactured and

21 ITA No. 1085/Chny/2017 & 13 Ors

sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37." The ratio of the above decision is applicable to the facts of the appellant. It is further seen that similar claims have been accepted in earlier as well as subsequent assessment years. In view of the above and respectfully following the above decision, the claim of the appellant is allowed. Accordingly, this ground is allowed." 10.3.4 In view of my predecessor's decision on the aforesaid issue, the AO's disallowance of the appellant's claim of provision of IBNR / IBNER amounting to Rs.266,77,00,000/- is deleted and the appellant's ground is allowed.”

15.5 Accordingly, the CIT(A) deleted the disallowance, against

which the Revenue is in appeal for AY 2013-14 and for the

assessment years 2014-15 to 2016-17 and 2018-19, the CIT(A)

by following the order of the Tribunal upheld the orders of the

Assessing Officer and thus, the assessee is in further appeal

before us.

15.6 The Tribunal in ITA No.1085/Chny/2017 for assessment

year 2013-14 has set aside the issue of IBNR/IBNER back to the

file of the Assessing Officer to determine as to whether provision

created towards IBNR/IBNER is ascertained liability or not. But,

the Tribunal has not adjudicated the issue and simplicitor decided

the issue on merits. But, as rightly observed by the Hon’ble

Madras High Court that the Tribunal has decided the issue of

applicability of provisions of section 115JB of the Act upto

22 ITA No. 1085/Chny/2017 & 13 Ors

assessment year 2012-13. This fact is noted by the Hon’ble

Madras High Court in its judgement in TCA No. 339 & 342 of

2019 dated 08.12.2019 vide para 4, 5 & 6 as under: 4. It may not be necessary for us to dwell deep into the factual matrix, as we find that the error crept in the order passed by the Tribunal while deciding the issue with regard to addition of reserve for unexpired risk while computing book profit under Section 115JB of the Act. The Tribunal in paragraph No.55 of the impugned Order has noted that this issue arises for consideration in the Revenue's appeal for the assessment years 2003- 2004, 2004-2005, 2007-2008 to 2013-2014 and in the assessee's appeals for the assessment years 2003-2004, 2007-2008 and 2012-2013. 5. It is not disputed by the learned counsel for the assesse that the issue does not arise for consideration for the assessment year 2013-2014. Both in the assessee's appeal as well as in the revenue's appeal, the issue arises only up to the year 2012-2013 and this is owing to the fact that there was an amendment to the Section 115 JB by substitution of Subsection 2 by Finance Act, 2012 with effect from 01.04.2013. The amended/ substituted Provision reads as follows:- ……….. ………… 6. In the light of the above, as per the amendment culled above in the Act, the issue has to be decided by the Tribunal, however, due to inadvertence, the Tribunal has observed in Paragraph No.56 of the Order that Section 115JB is not applicable to the insurance companies and therefore, held that there is no infirmity in the order passed by the CIT (Appeals).”

15.7 Now, before us, the learned counsel for the assessee

argued and admitted that the assessee is an insurance company

23 ITA No. 1085/Chny/2017 & 13 Ors

and it has not disputing applicability of provisions of section

115JB of the Act to it post-amendment to the Finance Act, 2013-

14 i.e AY 2013-14 onwards. He also stated that the Assessing

Officer has adjudicated this issue, but the CIT(A) again relying

on the earlier year order of the CIT(A) i.e for assessment year

2003-04, allowed the claim of the assessee on merits, but has

not adjudicated the issue whether this provision is allowable,

while computing book profit u/s.115JB of the Act and has not

also determined whether liability is ascertained or unascertained

in term of provisions of Explanation 1(c) to section 115JB of the

Act.

15.8 The Ld.Senior Standing Counsel for the Revenue has also

fairly agreed that this issue is neither adjudicated by the CIT(A)

nor the Tribunal, on merits and only some facts are available in

the order of the Assessing Officer. Hence, both the sides have

agreed that this issue can be remitted back to the file of the

Assessing Officer before whom the assessee will place all

evidences and will prove whether claim made by the assessee

is ascertained liability or unascertained liability. The Assessing

Officer will examine the claim and then decide the issue in

24 ITA No. 1085/Chny/2017 & 13 Ors

accordance with law as to whether liability is crystallized or not

during the relevant year in the given facts and circumstances of

the case.

15.9 After hearing both sides and going through the facts of the

case, we agree with the arguments advanced by both sides that

facts relating to provision created for IBNR/IBNER relating to

relevant assessment years are not available on record and

hence, the matter is to be restored back to the file of the

Assessing Officer for fresh adjudication for the reason that in

case, if the matter is restored to the file of CIT(A), he has to call

for remand report and the details cannot be examined at his

level. Hence, we remand this issue back to the file of the

Assessing Officer for detailed examination of this issue as to

whether provision created by the assessee on account of

IBNR/IBNER is ascertained liability or unacertained liability for

the purpose of computation of book profit u/s.115JB of the Act

only.

15.10 Accordingly, impugned orders of the Assessing Officer

and that of the CIT(A) on this issue are set aside and matter is

remitted back to the file of the Assessing Officer for fresh

adjudication in term of above. Consequently, identical issue

25 ITA No. 1085/Chny/2017 & 13 Ors

raised by the assessee for assessment years 2014-15 to 2016-

17 and 2018-19 and that of the Revenue for the assessment

year 2013-14 are remitted back to the file of the Assessing Officer

for fresh adjudication. Therefore, ground raised by the

assessee as well as Revenue on the issue of provision

created for IBNR/IBNER for computation of book profit

u/s.115JB of the Act in respect of assessment years 2014-

15 to 2016-17 and 2018-19 by the assessee and that of the Revenue for assessment year 2013-14 are treated as

allowed for statistical purposes.

assessee for assessment years 2014-15 to 2016-17 and 2018- 19 and appeal of the Revenue for assessment year 2013-14 is

as regards to provision created for reserve for unexpired risk. The

learned counsel for the assessee submitted that no disallowance

was made by the Assessing Officer for the assessment years

2017-18 & 2019-20. The addition was made by the Assessing

Officer and confirmed by Ld.CIT(A) except assessment years

2017-18 & 2019-20, while computing book profit u/s.115JB of

26 ITA No. 1085/Chny/2017 & 13 Ors

the Act by observing that unexpired risk cannot be treated as

reserve as contemplated under clause (b) to Explanation 1 to

section 115JB of the Act. For this, the assessee has raised

following ground 8(b):-

8(b) The CIT(A) erred in not appreciating the fact that the aforesaid change in the accounting treatment of URR would result in 'change in accounting policy' adopted by the Appellant and such changes are not in line with provisions of Section 115JB of the Act.”

16.1 The Assessing Officer while framing assessment added

reserve for unexpired risk by observing that reason for

unexpired risk is nothing but solvency margin created as per

guidelines laid down under IRDA Rules as well as Insurance Act

and hence, this reserve created is nothing but, amount set aside

for making unascertained liabilities. The Assessing Officer, after

discussing provisions of section 115JB of the Act and noting that

assessee is allowed to make 100% provision for the purpose of

unexpired risk in some of the segments of insurance business,

i.e.,

i) Premium received on Marine Hull;

ii)Premium allocated for the terrorism pool &

27 ITA No. 1085/Chny/2017 & 13 Ors

iii) Premium received on Fire & Engineering Insurance

It means the entire premium received during particular

accounting period has been treated as reserve by the assessee

and same being reduced in the profit & loss account prepared as

per IRDA guidelines, but, in any way, the same cannot be called

as ascertained liabilities. Hence, the Assessing Officer

disallowed the reserve created for unexpired risk of

Rs.238,13,11,883/- adjusted during the current year from the

insurance premium received and added back to the book profit

computed u/s.115JB of the Act. Aggrieved, the assessee

preferred further appeal before Ld.CIT(A).

16.2 The Ld.CIT(A) exactly on identical facts as in the above

issue of creation of IBNR/IBNER provision claimed by the

assessee observed that provisions of section 115JB of the Act

does not apply to insurance companies following the order for

assessment year 2003-04. But, the learned counsel for the

assessee now before us, stated that the matter has been

remanded back by the Hon’ble Madras High Court as the above

issue of provision created towards IBNR/IBNER, hence, on the

same lines, the matter has to be set aside to the file of the

28 ITA No. 1085/Chny/2017 & 13 Ors

Assessing Officer, because the facts are not at all available in the

records of the CIT(A)’s order. To this proposition, the Ld.Senior

Standing Counsel for the Revenue also agreed.

16.3 After hearing both the sides and going through records of

the case, we noted that the issue has been remanded back to

the Tribunal by the Hon’ble Madras High Court vide its order

dated 08.12.2020 at para nos. 4 to 6 in Tax Case Appeal Nos.

339 & 342 of 2019 [details are noted above in para 15.9 of this

order while dealing with the issue of provision created for

IBNR/IBNER] Hence, taking a consistent view as agreed by both

learned counsels for assessee as well as Revenue, we remit

this issue also back to the file of the Assessing Officer with

similar directions to the Assessing Officer mentioned in para

No.15.10 of this order.

16.4 Here, it is pertinent to note one fact as argued by the

learned counsel for the assessee that earlier there was no

decision available on the issue of reserve for unexpired risk, but

now, the ITAT., Kolkata Benches of this Tribunal in the case of

DCIT Vs National Insurance Co. Ltd. in ITA No.983/Kol/2012

29 ITA No. 1085/Chny/2017 & 13 Ors

has categorically held that reserve created for unexpired risk

need not be added back for the purpose of computation of book

profit u/s.115JB of the Act. The Assessing Officer, while doing

fresh adjudication can consider the decision of ITAT., Kolkata

Benches of this Tribunal in the case of DCIT Vs National

Insurance Co. Ltd. in ITA No.983/Kol/2012 and then decide the

issue in accordance with law.

16.5 In term of above, the impugned orders of the Assessing

Officer and CIT(A) are set aside for the assessment years 2014-

15 to 2016-17 & 2018-19 raised by the assessee and that of the

Revenue for the assessment year 2013-14 on the issue of

creation of reserve for unexpired risk and matter is remitted back

to the file of the Assessing Officer to decide the issue afresh as

per law, after considering entire facts of this case. In the result,

appeals filed by the assessee for the assessment years

2014-15 to 2016-17 & 2018-19 and that of the Revenue for

the assessment year 2013-14 on the issue of creation of

reserve for unexpired risk are treated as allowed for

statistical purposes.

30 ITA No. 1085/Chny/2017 & 13 Ors

Revenue for assessment year 2013-14 is as regards to

disallowance of exempt income by invoking provisions of section

14A r.w.rule 8D of the Income Tax Rules, 1962, while computing

book profit u/s.115JB of the Act.

17.1 At the outset, learned counsel for the assessee stated that

this issue is squarely covered by the decision of Special Bench

of the Tribunal in the case of ACIT vs. Vireet Investments (P)

Ltd. [2017] 165 ITD 27 (Delhi – Trib.) (SB), wherein the Special

Bench has considered an identical issue and after considering

relevant facts held that computation under clause (f) of

Explanation 1 to section 115JB(2) of the Act is to be made

without resorting to computation as contemplated u/s.14A read

with Rule 8D of I.T. Rules, 1962.The relevant portion of the

decision of Special Bench of this Tribunal in the case of ACIT

Vs. Vireet Investments is reproduced as under:-

"6.22 In view of above discussion, we answer the question referred to us in favour of assessee by holding that the computation under clause (f) of Explanation I to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules, 1962.”

31 ITA No. 1085/Chny/2017 & 13 Ors

17.2 For this proposition, the learned Sr.Standing Counsel could

not controvert the above position and could not bring any

contrary decision before us on this issue.

17.3 After hearing both the sides and going through the records

of this case, we find that the issue in hand is squarely covered by

the decision of the Special Bench of the Tribunal in the case of

ACIT Vs. Vireet Investments ( supra), wherein the Special Bench

has categorically held that provisions of section 14A read with

Rule 8D will not apply while computing the book profit u/s.115JB

of the Act. Respectfully following the Special Bench decision

cited above, we delete the disallowance made by invoking the

provisions of section 14A read with Rule 8D of Income Tax

Rules, 1962 while computing book profit u/s.115JB of the Act.

We, therefore, affirm the impugned order of Ld.CIT(A) on this

issue and allow the claim of the assessee for assessment year

2013-14 and reject the grounds taken by the Revenue for the

assessment year 2013-14. In the result, the ground raised by

the Revenue for assessment year 2013-14 on the issue of

disallowance by invoking the provisions of section 14A read

32 ITA No. 1085/Chny/2017 & 13 Ors

with Rule 8D of Income Tax Rules, 1962 while computing

book profit u/s.115JB of the Act is dismissed.

from the Revenue appeals for the assessment years 2014-15 to

2016-17 and 2018-19. The Assessing Officer has made

disallowance for assessment years 2014-15 to 2016-17 and

2018-19. However, for assessment years 2017-18 & 2019-20,

no disallowance was made by the Assessing Officer u/s.14A read with Rule 8D of the Income Tax Rules, 1962.

18.1 During the previous year relevant to assessment years

under consideration, the assessee has earned exempt income,

and made suomotu disallowance voluntarily towards

expenditure relatable to exempt income u/s.14A. The Assessing

Officer has disallowed expenditure relatable to exempt income

u/s.14A of the Act by invoking Rule 8D of Income Tax Rules,

1962, as substantial amount of investments in equities and

mutual funds have been made by the assessee and part of

remuneration and other expenses attributable to top executives are linked to this exempt income that would be earned out of

such investments and the assessee has also earned tax free

33 ITA No. 1085/Chny/2017 & 13 Ors

income. It was explanation of the assessee before the Assessing

Officer that provisions of section 14A of the Income Tax Act,

1961 does not apply to insurance companies and the assessee

relied on catena of judgements and urged that the Ld.CIT(A) has

decided the issue in favour of the assessee by placing reliance

on order of various High Courts in support of its claim. The

learned counsel for the assessee argued that there is no

satisfaction from the Assessing Officer as required u/s.14A(2) of

the Act having regard to books of account of the assessee that

suo motu disallowance made is not correct. The assessee relied

upon ITAT., Pune Bench in the case of M/s. Bajaj Alliance

General Insurance Company (ITA No. 1578/Pune/2008). The

assessee has also placed reliance on a plethora of judgements

on the matter of various Tribunals and High Courts viz., ITAT

Delhi: DCIT vs. Oriental Insurance Co. Ltd (2015-TIOL-139-

ITAT-DEL), Oriental Insurance Co. Ltd v s. ACIT (2009-TIOL-

172-ITAT-DEL), ITAT Mumbai in the case of DCIT v. ICICI

Prudential Life Insurance Co. Ltd (2015 (1) TMI 9), ICICI

Lombard General Insurance Co. Ltd vs. ACIT (ITA No.

4287/Mum/2009), Reliance General Insurance Co. Ltd vs. DCIT

(2010-TIOL-473-ITAT-MUM), Birla Sun Life Insurance Co. Ltd

34 ITA No. 1085/Chny/2017 & 13 Ors

vs. DCIT (2010-TIOL-535-ITAT-MUM), the Hon’ble Delhi High

Court in the case of Oriental Insurance Co. Ltd. In ITA No.172 of

2020 dated 04.03.2020 and other cases mandating that

provision of section 14A were not applicable in the case of

insurance companies which were taxed under the provisions of

section 44 of the Act. It was also submitted that the department

has accepted the order of the Ld.CIT(A) and not filed any appeal

before any appellate authority. The Ld. Sr. Standing Counsel,

however relied upon the order of the Assessing Officer on this

issue.

18.2. We have heard the rival submissions in the light of

materials available on records. Insurance Companies are liable

for taxation within the meaning of section 44 of the Act. The said

section begins with a non-obstante clause thus precluding

application of computation of income u/s.28 to 43 which has

bearing with section 14A . Accordingly, we concur with the

findings of the Hon’ble Tribunals cited supra as well as the

Hon’ble High Court of Delhi and hold that no interference can be

made to the assesse’s income by provisions of section 14A.

Accordingly, the grounds of appeal raised by the Revenue

35 ITA No. 1085/Chny/2017 & 13 Ors

for AY 2014-15 to 2016-17 and 2018-19 are therefore

dismissed and thus, the Ld.AO is directed to delete

additions made.

assessee appeal for the assessment year 2017-18 is

disallowance of Rs.17.25 crores u/s.36(1)(va). The Ld.AO

disallowed a sum of Rs.17,25,27,756/- on account of failure to

deposit Employees’ contribution to PF before due date as

specified under the Act. On appeal, the Ld. CIT(A) confirmed the

disallowance of Employee’s Contribution made by the Assessing

Officer, as said late payments are not covered u/s.43B and by

following the latest decision of the Hon'ble Supreme Court in the

case of M/s.Checkmate Services dated 12.01.2022. Aggrieved

by the order of Ld.CIT(A), the assessee is in further appeal

before us.

19.1 Heard both sides and perused materials available on

record. Since the Ld.CIT(A) has followed binding judicial

precedent in the case of M/s.Checkmate Services dated

12.01.2022 by the Hon'ble Supreme Court, on the issue

disallowance of Employee’s Contribution to PF and confirmed

36 ITA No. 1085/Chny/2017 & 13 Ors

order of the Assessing Officer, the same do not require any

interference on our part. Thus, the ground raised by the

assessee on this issue is dismissed for the assessment year

2017-18.

from the Revenue appeals for the assessment years 2014-15 to

2019-20 is in regard to disallowance of commission paid to non-

residents u/s.40(a)(i) of the Act amounting to Rs.9.88 crores for

assessment year 2014-15. Briefly stated the facts are that the

Assessing Officer, while completing the assessment noticed that

the assessee debited commission payments in the profit & loss

account made to non-resident agents for receipt of reinsurance

premium during the year under consideration. During the course

of assessment proceedings, the assessee was required to

show-cause as to why payments made to foreign agents should

not be disallowed for non-deduction of TDS u/s.195 of the Act.

Though the assessee furnished reply, the Assessing Officer was

not convinced with the same and proceeded to disallow

commission expenses paid to foreign agents for non-deduction

of TDS under section 195 of the Acton account of the fact that

37 ITA No. 1085/Chny/2017 & 13 Ors

said commission has arisen and accrued to non-residents only

in India and there is also there is business connection between

the assessee and non-resident insurance companies. However,

on appeal, the Ld.CIT(A) by following decision of the Tribunal in

assessee’s own case in ITA Nos.1753 to 1610/Chny/2011 &Ors

dated 28.08.2018 for assessment years 2007-08 to 2013-14

allowed the claim of the assessee holding that amounts have

been paid to non-residents, who do not have any permanent

establishment or any distinct business activities in India and

further, amounts paid to non-residents were liable for taxation

for the respective foreign countries and thus, provision of

section 195 is not attracted in the present case. The learned

counsel for the assessee submitted that this has been decided

against the Revenue by the Hon’ble High Court of Madras in

TCA No.323 of 2019 in assessee’s own case and a copy of

which is placed on record as Annexure-3 at pages 162 to 173 of

the paper book filed by the assessee. In the impugned order, the

Hon’ble jurisdictional High Court, relying upon their own decision

in the case of M/s. Royal Sundaram Alliance Insurance

Company Ltd. In TCA No.41 of 2019, held that assessee is not

liable to deduct tax at source, qua, payments made to overseas

38 ITA No. 1085/Chny/2017 & 13 Ors

surveyors. The Ld.Sr. Standing Counsel has fairly agreed that

the issue is decided against the Revenue.

20.1 Heard rival submissions and perused materials available

on record. It emerges from record that assessee is not paying

any commission to insurance companies and such commission

was deducted by respective insurance companies themselves

from reinsurance premium. Therefore, when the assessee is not

making payment, the assessee is not liable to deduct tax. We

find that the Ld.CIT(A) has rightly allowed the claim of the assesseeby following the decision of this Tribunal in assessee’s

own case for assessment year 2007-08 to 2013-14. Further, the

order of the Tribunal dated 28.08.2018 on the issue of

commission paid for receipt of re-insurance premium in

assessee’s own case was affirmed by the Hon’ble High Court

of Madras in TCA No.323 of 2019 dated 14.06.2019. Thus,

respectfully following the said judgement, we confirm the

order of the CIT(A) on this issue and reject the grounds

raised by the Revenue in assessment years 2014-15 to 2019- 20.

39 ITA No. 1085/Chny/2017 & 13 Ors

Revenue appeals for the assessment years 2014-15 to 2019-20

is in regard to disallowance of expenditure incurred for the

purpose of survey fees paid to non-residents. u/s.40(a)(ia) of the

Act amounting to Rs.22,85,363/- for assessment year 2014-15.

21.1 The Ld.Senior Standing Counsel contended that the

assessee has paid survey fees for the purpose of quantification

of claim for making payment on the insurance claim which was

incurred outside India and said payments were made without

deducting TDS. When the Ld.AO required the assessee to

furnish details of survey fees paid outside India, the assessee

submitted that provisions of section 195 is not applicable on the

survey fees paid to non-residents. Therefore, not satisfied with

the reply filed by the assessee, the Ld.AO rightly estimated the

disallowance @ Rs.10,415/- for every claim of Rs.1 crore

towards marine insurance and disallowed Rs.22.85 Lacs

observing that though amount of survey fees was reimbursed to

the claimant since survey has been done on behalf of Indian

insurer, said payment of fees was made by the assessee to non-

resident surveyors.

40 ITA No. 1085/Chny/2017 & 13 Ors

21.2. The learned counsel for the assessee, on the other hand,

submitted that whenever there was damage or claim, surveyors

examined the insured property and estimated damages and

entire services were outside India and the non-residents have no

business connection in India. Further, the income of the

surveyors is not liable for taxation in India, thus, the assessee is

not liable to deduct tax, which is nothing but reimbursement of

expenditure incurred by surveyors. Therefore, theLd.CIT(A) has

rightly allowed the issue in favour of the assessee by following

the order of this Tribunal dated 28.08.2018 in assessee’s own

case for earlier assessment years 2003-04, 2011-12 to 2013-14.

21.3. Heard rival submissions and perused materials available

on record. We find that order of the Tribunal dated 28.08.2018

in assessee’s own case on the issue of survey fees paid to

non-residents u/s.40(a)(ia) was affirmed by the Hon’ble High

Court of Madras in TCA No.323 of 2019 dated 14.06.2019.

Thus, respectfully following the said judgement, we confirm

the order of the CIT(A) on this issue and reject the grounds

raised by the Revenue in assessment years 2014-15 to 2019-

20.

41 ITA No. 1085/Chny/2017 & 13 Ors

Revenue appeals for the assessment years 2014-15 to 2019-20

is in regard to disallowance of amount paid to motor car dealers

towards infra payment u/s.37 of the Act amounting to Rs.63.94

crores for assessment year 2014-15.

22.1 The learned counsel for the assessee, at the outset

submitted that this issue of payment made to motor car dealers

by the assessee towards infra payment u/s.37(1) of the Act is

also covered in favour of the assessee by the earlier decision

of this Tribunal dated 28.08.2018 in assessee’s own case for the

assessment year 2013-14, which was affirmed by the Hon’ble

High Court of Madras in TCA No.339 to 342 of 2019 vide order

dated 21.06.2019 and a copy of which is placed on record as

Annexure-4 at pages 174 to 181 of the paper book filed by the

assessee. The Ld. Senior Standing Counsel fairly agreed that the

issue is decided against the Revenue.

22.2 Heard rival submissions and perused materials placed on

record. In the judgement of the Hon’ble High Court of Madras

dated 21.06.2019, it was observed that the addition was made

as sequel to information received from the service tax

42 ITA No. 1085/Chny/2017 & 13 Ors

department whose own enquires had not reached finality. The

Hon’ble High Court laid down that the Revenue would be free

to exercise its authority under the Act in the event of Service

tax department holding against the assesse. Respectfully

following the said judgement of the Hon’ble High Court of

Madras dated 21.06.2019, we confirm the order of the CIT(A)

on the issue of infra payments made by the assessee to

motor car dealers and reject the grounds raised by the

Revenue in assessment years 2014-15 to 2019-20.

assessee appeals is non-adjudication of following issues raised

by the assessee before CIT(A).

i) Taxes paid u/s.115O of the Act amounting to Rs.13,61,70,020/-

not given credit for AY 2017-18;

ii) Levy of interest u/s.115P of the Act to be restricted to

Rs.5,58,29,709/- for AY 2017-18,

iii) Addition of an amount of Rs.1,85,41,38,188/- under the head

‘profits and gains from business in tax computation sheet

annexed with assessment order for AY 2019-20,

iv) Non-credit u/s.115JAA of Rs.7,44,96,34,633/- for AY 2018-19.

43 ITA No. 1085/Chny/2017 & 13 Ors

v) Non-credit of TDS Rs.40,09,467/- for AY 2018-19.

23.1 The assessee also filed an additional ground in ITA

13/Chny/2023 seeking permission to adjudicate the issue of

credit for TDS amounting to Rs.2,29,99,898/- for AY 2017-18

and submitted that though the said ground was raised before the

Ld.CIT(A), which was omitted to be adjudicated by the Ld.CIT(A).

The Ld. Senior Standing Counsel has no objection to admit the

ground for adjudication as the same was non-adjudicated by the

Ld.CIT(A).

23.2 The Ld. Counsel for the assessee argued that the AO has

made the impugned additions / interference to its returned

income by ignoring material facts on the records and/or not

providing any basis for the proposed interference. The Ld.CIT(A)

omitted to adjudicate the above issues as raised in the

respective assessment years. The Ld.AR accordingly argued

that the matter may be restored back to the file of Ld.CIT(A) for

adjudication.

44 ITA No. 1085/Chny/2017 & 13 Ors

23.3 We have heard the rival parties and examined material on

records. The assessee is legally entitled for all benefits under the

Act as long as the facts supports its case. Accordingly, the

Ld.CIT(A) is directed to adjudicate the issues raised above which

were omitted to have been adjudicated in the light of material

placed by the assessee on records and as per law. The Ld..

Senior Standing Counsel did not have any objection to the same.

The assessee is directed to provide all necessary details to the

first appellate authority and comply with its notices. To that

extent, on the issue non-adjudication of grounds raised by

the assessee for AY 2017-18, 2018-19 and 2019-20 [on the

issues mentioned above in para 23 and 23.1 of this order]

and additional ground of appeal raised by the assessee

before us in ITA No.13/chny/2023 for assessment year 2017-

18 are remitted back to the file of the Ld.CIT(A) for fresh

adjudication. Therefore, these grounds raised by the

assessee for the relevant assessment years are allowed

for statistical purposes.

dealt as under:-

45 ITA No. 1085/Chny/2017 & 13 Ors

ITA Nos Assessment Result Year 1085/Chny/2017 2013-14 Appeal of the assessee is partly allowed for statistical purposes. 1585/Chny/2019 2014-15 Appeal of the assessee is partly allowed for statistical purposes 1584/Chny/2019 2015-16 Appeal of the assessee is partly allowed for statistical purposes 639/Chny/2020 2016-17 Appeal of the assessee is partly allowed for statistical purposes 13/Chny/2023 2017-18 Appeal of the assesse is partly allowed for statistical purposes 1108/Chny/2022 2018-19 Appeal of the assesse is partly allowed for statistical purposes 42/Chny/2023 2019-20 Appeal of the assessee is partly allowed for statistical purposes 1571/Chny/2017 2013-14 Appeal of the Revenue is Partly Allowed for statistical purposes 1670/Chny/2019 2014-15 Appeal of the Revenue is Partly Allowed for statistical purposes 1671/Chny/2019 2015-16 Appeal of the Revenue is Partly Allowed for statistical purposes

46 ITA No. 1085/Chny/2017 & 13 Ors

426/Chny/2021 2016-17 Appeal of the Revenue is Partly Allowed for statistical purposes 128/Chny/2023 2017-18 Appeal of the Revenue is Dismissed 129/Chny/2023 2018-19 Appeal of the Revenue is Dismissed 130/Chny/2023 2019-20 Appeal of the Revenue is Dismissed. Order pronounced on 19th July, 2024 at Chennai. Sd/- Sd/- (महावीर �संह) ( अिमताभ शु�ा ) (Mahavir Singh) (Amitabh Shukla उपा�य / Vice-President लेखा सद&य /Accountant Member चे(नई/Chennai, )दनांक/Dated: 19th July, 2024. KB/- आदेश क� ��त+ल,प अ-े,षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु.त/CIT - Chennai 4. ,वभागीय ��त�न1ध/DR 5. गाड� फाईल/GF