Section 44 of the Income Tax Act
Income-tax Act, 2025: s.55
Section 44 of the Income-tax Act, 1961 corresponds to section 55 (Insurance business) of the Income-tax Act, 2025.
Read section 55 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 44 is Metal Box Co. of India Ltd. v. Their Workmen (73 ITR 53), cited in 276 of the 223 judgments on BharatTax that turn on this section.
Leading authorities on Section 44
A provision for gratuity liability, calculated on an actuarial basis and spread over a number of years, is an allowable business expense. Such a provision is considered a charge against profits rather than a reserve.
A liability for gratuity, even if actuarially valued and claimed as ascertained, is deductible under Section 37 only for amounts actually paid, especially when no formal provision for the amount has been made.
The assessment of profits for an insurance business is exclusively governed by the specific rules prescribed in the First Schedule to the Income Tax Act and Section 44, thereby precluding the Assessing Officer from applying general computation provisions, such as sections 28 to 43B, disallowances under Section 14A, or making adjustments outside these specific statutory rules.
A provision made for Unclaimed Prior Revenue (UPR) is not an item to be added back to book profit under Explanation 1 to section 115JB(2) of the Income Tax Act, 1961.
A provision for warranty liability, even if quantified on an estimated basis, is considered a definite and certain business liability, qualifying for deduction under Section 37(1) of the Income-tax Act, and is not a contingent liability.
A UPS is an integral part of a computer and is eligible for depreciation at 60%.
Reinsurance premium payments made to non-resident reinsurers are deductible business expenses, and disallowance on this ground is unsustainable.
The assessment of profits for insurance companies is governed by specific rules within schedules, and the Assessing Officer (AO) cannot make adjustments if Section 44 has been invoked. Insurance businesses may be entitled to exemptions under Section 10(15) even when Section 44 applies, as Section 44 does not exclude such claims.
Section 14A of the Income-tax Act is not applicable to insurance businesses governed by specific provisions of Section 44 and Schedule 1. Profit on sale of investments by insurance companies is not taxable, especially after the deletion of sub-rule (b) of Rule 5 of the First Schedule.
