DEPUTY COMMISSIONER OF INCOME TAX, CHENNAI V. UNITED INDIA INSURANCE COMPANY LIMITED, CHENNAI

ITA 1222/CHNY/2023

AI Insights

The case involves cross appeals by the United India Insurance Company Limited and the Deputy Commissioner of Income Tax, Chennai, against the order of the Commissioner of Income Tax (Appeals), which pertained to various disallowances made during the assessment year 2020-2021. The primary issues revolved around the disallowance of provisions made for claims incurred but not reported (IBNR) and claims incurred but not enough reported (IBNER), the amortization of premium paid on securities, and the treatment of reinsurance premiums and commissions paid to non-resident entities. The Tribunal examined precedents and statutory provisions, including the Income Tax Act and regulations by the Insurance Regulatory and Development Authority of India (IRDAI), to arrive at its decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107082 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2020-2021
• Other Referred Cases: DCIT Vs M/s Royal Sundaram General Insurance Company Limited, Care Health Insurance Limited vs. DCIT, General Insurance Corporation of India vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUSHPA; STANDING COUNSEL
• Assessee Lawyers: S. SUNDARARAMAN; MAKING A
• Keywords: Set aside; TDS; Double taxation relief; Application of stay
• Section: 143(3); 195; 200A; 22; 13; 73; 37; 28; 115JB; 37(1); 40(a)(ia); 72; 20

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’’, Ɋायपीठ,चेɄई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय ŵी मनु क ुमार िगįर, Ɋाियक सद˟ एवं माननीय ŵी एस.आर. रघुनाथा, लेखा सद˟ क े समƗ BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1221/CHNY/2023 िनधाᭅरण वषᭅ/Assessment Year: 2020-2021 United India Insurance Company Limited, Door No.19, Ground floor, 4TH Lane, Uttamar Gandhi Salai, Chennai 600 034. Vs. The Deputy Commissioner of Income Tax, Corporate Circle 3(1) Chennai 600 034. आयकर अपील सं./ITA No. 1222/CHNY/2023 िनधाᭅरण वषᭅ/Assessment Year: 2020-2021 The Deputy Commissioner of Income Tax, Corporate Circle 3(1) Chennai 600 034 Vs. United India Insurance Company Limited, Door No.19, Ground floor, 4TH Lane, Uttamar Gandhi Salai, Chennai 600 034. PAN AAACU 5552C (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) Assessee by : Mr. S. Sundararaman, C.A. Department by : Ms. Pushpa, Sr. Standing Counsel for the Revenue सुनवाई कᳱ तारीख/Date of Hearing : 31.01.2025 घोषणा कᳱ तारीख/Date of Pronouncement : 31.01.2025 - 2 - ITA Nos.1221 & 1222 /Chny/2023 आदेश /O R D E R PER MANU KUMAR GIRI (Judicial Member) The captioned cross appeals are filed by the assessee and the revenue are directed against the order of the Ld. Commissioner of Income Tax(Appeals)(NFAC) Delhi [CIT(A)] both dated 06.09.2023 for Assessment Year 2020-2021. 2. The following are the grounds of appeal in Assessee’s appeal being ITA No.1221/Chny/2023: ‘1. The Commissioner of Income Tax (Appeals) (CIT(A)) erred both in law and in the facts of the case by sustaining the disallowances aggregating to Rs. 1595,97,79,000/-comprising of: a. provision made towards Claims Incurred But Not Reported (IBNR) and Claims Incurred But Not Enough Reported (IBNER) of Rs. 1582,52,00,000/- in the computation of income under normal provisions of the Act; b. Rs. 13,45,79,000/- being amortization of premium paid on purchase of securities. 2. The CIT(A) erred in upholding the disallowance of the provision made by the Appellant for claims made towards IBNR and IBNER as an contingent/unascertained liability and therefore not allowable u/s 37(1) of the Act even though the provisions were made based on scientific evaluations by a registered and approved actuary and in accordance with the directions of the Appellant regulator viz., the IRDAI. 3. 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 AO 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 438 of the Act. 4. 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 income; (b) the amortization of premium is directly linked to the interest; and (c) gains on sale of such investments are taxable and therefore the amortization of premium are revenue in nature. 5. The Appellant therefore prays that the disallowances aggregating to Rs. 1595,97,79,000/- made to the total income computed under the normal provisions of the Act, be deleted’’. - 3 - ITA Nos.1221 & 1222 /Chny/2023 3. The following are the grounds of appeal in Revenue’s appeal being ITA No.1222/Chny/2023: ‘’1. The order of the learned CIT(A) is contrary to law and facts and circumstances of the case. 2. Whether the CIT (A) was right in directing the AO to delete the disallowance of reinsurance premiutn paid to NRRs u/s 40(a)(i) of the Act, for failure to deduct TDS u/s 195 of the Act? 3. Whether the CIT (A) ought not to have appreciated that after ceding of the premium, the said income in it vests with the non-resident reinsurer and Non Resident Reinsurer effectively received the relevant percentage of the reinsurance premium in India and therefore liable to tax in India? 4. Whether the CIT(A) failed to appreciate that since the Non Resident Reinsurer received the reinsurance premium in India at specified percentage on the basis of the terms and conditions of the agreement, the transaction was taxable in India and hence the taxpayer was liable to withhold tax as per the provision of Income Tax law and upon failure to deduct tax at source, the same is liable for disallowance u/s 40(a)(i) of the Act? 5. Whether the CIT (A) was right in holding that the assessee is not liable to deduct TDS on commission paid for receipt of re-insurance premium without considering the fact that the decision to not deduct tax cannot be made unilaterally by the assessee and an application u/s 195(2) out to have been made before the Income-tax Authorities? 6. Whether the CIT (A) erred in holding that provisions of section 195 of Income-tax Act was not applicable on payments made to surveyors outside India and the assessee was not liable to deduct tax at source on such payments? 7. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored’. 4. Brief facts of the case are as under: The assessee is a company formed in pursuance of the General Insurance Business (Nationalization) Act, 1972 and is also a notified public financial institution u/s 2(72)(iv) of the Companies Act, 2013. The assessee carries on General Insurance business in accordance with the law as laid down by the legislature and the Insurance Regulatory and Development Authority of India - 4 - ITA Nos.1221 & 1222 /Chny/2023 ('IRDAI'). Its shares are fully owned by the Government of India (Ministry of Finance) and are under the administrative control of the Insurance Division of Department of Financial Services (Ministry of Finance), Government of India. The assessee, being an insurance company is assessable to income tax as per section 44 of the Income Tax Act, 1961 (\"the Act\") which is a complete code by itself. The assessment was completed and order u/s 143(3) of the Act was passed on 26th September 2022, wherein the following additions / disallowances, were made by the Assessing Officer. No. Particulars Amount (Rs.) Under the normal provisions of the Act (i) Default in TDS payment u/s 200A of the Act 4,13,03,271 (ii) Reinsurance Premium paid to reinsurers situated overseas u/s 40(a)(i) of the Act 1322,83,76,744 (iii) Provision made towards IBNR/IBNER Claims 1582,52,00,000 (iv) Amortization of premium paid on securities 13,45,79,000 (v) Commission paid to non-residents u/s 40(a)(ia) of the Act 6,24,13,281 (vi) Survey Fees Paid 14,68,515 Total 2929,33,40,811 The assessee had filed an appeal with the Commissioner of Income Tax, Appeals [\"CIT(A)\"] on 21.10.2022. The ld. CIT(A) vide order dated 06.09.2023 passed order on the issues and relevant paras of his order issue wise is mentioned below: - 5 - ITA Nos.1221 & 1222 /Chny/2023 No. Particulars Allowed/Not Allowed (i) Default in TDS payment u/s 200A of the Act Allowed (in Para 6.4.4) (ii) Reinsurance Premium paid to reinsurers situated overseas u/s 40(a)(i) of the Act Allowed (in Para 6.5.5) (iii) Provision made towards IBNR/IBNER Claims Not Allowed (in Para 6.6.3) (iv) Amortization of premium, paid on securities Not Allowed (in Para 6.7.4) (v) Commission paid to non-residents u/s 40(a)(ia) of the Act Allowed (in Para 6.8.4) (vi) Survey Fees Paid Allowed (in Para 6.9.4) In furtherance to the order of the CIT(A), the assessee had filed an Appeal on 03.11.2023 before this Hon'ble Tribunal for the additions/disallowances which were not allowed by the CIT(A). At the outset, the ld. Counsel stated that the Department has also filed an appeal before this Hon'ble Tribunal for the issues which were allowed by the CIT(A). Now both the parties are in further appeal before us. 5. Before us, the ld. Counsel for the assessee submitted that the following issues were subject matter of appeals in the earlier years i.e; up to the assessment years 2019-20 before the Income Tax Appellate Tribunal (‘ITAT’ in short) as under: The following issues were subject matter of appeals in the earlier years i.e., up to the assessment years 2019-20, before the Income Tax Appellate Tribunal (ITAT), Chennai (copy of the order dated 19th July - 6 - ITA Nos.1221 & 1222 /Chny/2023 2024 is enclosed as Annexure 1 in Page Nos. 1 to 46 of Book II) and the decisions are as detailed herein under: No Particulars Decision in the earlier years Para of the ITAT order Under the normal provisions of the Act (i) Disallowance u/s 40(a)(i) on reinsurance premium paid to foreign insurers The ITAT has allowed the matter in favor of the assessee. Para 5-7 (Page Nos. 5-9 of the Order) (ii) Disallowance of provision towards IBNR/IBNER claims Dismissed against the assessee by the ITAT and matter pending before the High Court. Para 10-14 (Page Nos. 11- 15 of the Order) (iii) Amortization premium paid on securities Dismissed against the of assessee by the ITAT and assessee's appeal is pending before High Court. Para 8-9 (Page Nos. 9-11 of the Order) (iv) Disallowance 40(a)(i) in respect of commission paid to non-resident agents Allowed in favor of the assessee by the ITAT and upheld by the High Court. Para 20 (Page 36-38 of the Order) (v) Survey fees paid Allowed in favor of the assessee by the ITAT and upheld by the High Court. Para 21 (Page 39-40 of the Order) However, the ld. Counsel for the assessee pointed out that on the issue of disallowance of provision towards IBNR/IBNER claims, the order of the Co- - 7 - ITA Nos.1221 & 1222 /Chny/2023 ordinate bench of the Tribunal in 1085/Chny/2017 dated 19.07.2024 & ITA No.1585/Chny/2019 dated 19.07.2024 passed in the cases of the assessee has been diluted by the Co-ordinate bench in the case of DCIT Vs M/s Royal Sundaram General Insurance Company Limited [ITA Nos.493, 494, 495 & 496/Chny/2018 for AYs 2011-12, 2012-13, 2013-14 & 2014-15 vide order dated 08.01.2025 following the judgments of the Hon’ble Delhi High Court, Hon’ble Bombay High Court and other benches of Tribunal viz; Delhi, Kolkata and Mumbai. 6. Per contra, the ld. Senior Standing Counsel Ms. Pushpa, Advocate for revenue vehemently argued that the order of the Co-ordinate bench in the assessee’s own case to be strictly followed for the sake of judicial consistency. 7. We have heard the rival submissions and perused the records of the appeals file, assessment order, impugned order, case law compilation and recent order of the Co-ordinate bench in the case of DCIT Vs M/s Royal Sundaram General Insurance Company Limited [ITA Nos.493, 494, 495 & 496/Chny/2018 for AYs 2011-12, 2012-13, 2013-14 & 2014-15 dated 08.01.2025. Our deliberations on the issues are as under: Assessee’s Appeal Disallowance of provision towards IBNR/IBNER claims: We find from chart referred supra, this ground has been decided against assessee by the Co-ordinate bench of the Tribunal in assessee’s own cases in - 8 - ITA Nos.1221 & 1222 /Chny/2023 1085 /Chny /2017 dated 19.07.2024 and ITA No.1585 /Chny /2019 dated 19.07.2024 which held as under: ‘’10. The next common issue that came up for our consideration in the appeals of the assessee for the assessment years 2014-15, 2015-16, 2016- 17, 2017-18, 2018-19 & 2019-20 is disallowance of provision for IBNR and IBNER. 11. The learned counsel for the assessee submitted that during the relevant assessment years, the assessee has made provision for claims incurred, but were not reported (IBNR) and claims incurred, which were not enough reported (IBENR) and such provision has been made for all unsettled claims on the basis of claim lodged by insured persons. According to the learned counsel, date of damage/loss was considered for recognizing the claim in a particular year. In certain circumstances, damages / loss were not reported in the balance sheet of the insurance company and such claims are known as claims incurred, but not reported. Sometimes, damage/loss incurred may be reported, however, it was not enough reported and therefore, the assessee has made provision as per IRDAI guidelines. The liability of the assessee company is determined based on the actual loss / damage. Therefore, such provision is in accordance with guidelines and norms issued by IDRAI and thus, is deductible u/s.37(1) of the Income Tax Act, 1961. 12. On the other hand, the Ld.Sr. Standing Counsel for the Revenue submitted that the assessee has created provision in anticipation of settlement of claims that were not ascertained. What is reported to the assessee is damage/ loss caused to the insured persons. According to the Sr. Standing Counsel, the assessee is yet to assess loss and determine amount to be compensated. Therefore, it is unascertained liability and same cannot be allowed as deduction. The Sr. Standing Counsel further submitted that this issue is covered by the decision of the ITAT., Chennai in assessee’s own case for earlier assessment years, where the Tribunal has held that provision made for IBNR and IBNER is not deductible, because merely incident happened during the year which is basis for making claim, that cannot be a reason for allowing compensation payable by the assessee in the subsequent financial years. 13. After hearing both the parties and going through the material on 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:- - 9 - ITA Nos.1221 & 1222 /Chny/2023 “43. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee made provision in respect of claims incurred but not reported and in respect of claims incurred but not enough reported. The compensation for making insurance claim arises on the date of loss or damage occurred to the insured property. But, the actual liability to make the payment arises on the date on which the loss or damage was assessed and the amount was determined. In this case, the accident or loss was reported to the assessee but the actual loss or compensation was not determined during the assessment year 2009-10. Therefore, as rightly submitted by the according to the Ld. Sr. Standing Counsel for the Revenue, the liability to make the payment accrues to the assessee only in the year in which the loss or damage was ascertained and compensation payable to insured person is determined. Admittedly, the compensation payable to insured person was not determined during the assessment year 2009-10. Therefore, this Tribunal is of the considered opinion that merely because the incident happened during the year which is the basis for making claim, that cannot be a reason for allowing the compensation payable by the assessee for the assessment year 2009-10. In other words, the compensation payable by the assessee has to be allowed in the year in which the amount of compensation was determined. Since the amount was not determined during the year under consideration, this Tribunal is of the considered opinion that the same cannot be allowed for assessment year 2009-10. Hence, the CIT(Appeals) is not correct in allowing the claim of the assessee. Accordingly, the order of the CIT(Appeals) is set aside and that of the Assessing Officer is restored.” 14. In this view of the matter and consistent with view taken by the co- ordinate Bench, we are of the considered view that the assessee is not entitled for deduction towards provision created for IBNR & IBNER and thus, we uphold the findings of the learned CIT(A) on this issue for the assessment years 2014-15, 2015-16, 2016-17, 2018-19 & 2019-20 and reject grounds taken by the assessee. Further, the assessee has also pleaded that with respect to AY 2017-18, the amount disallowable with respect to provisions for IBNR and IBNER claims cannot exceed Rs.1250.89 crores being the amount debited to the revenue accounts of the assesse. The assesse submitted that the additional amount of Rs.1582.58 crores being the amount not debited to the profit & loss account be deleted. We are in conformity with the views of the assessee that amount of monies, as provisions, not debited to the profit & loss account cannot be a part of the disallowance. Accordingly, the AO is directed to recalculate the disallowance with respect to provisions - 10 - ITA Nos.1221 & 1222 /Chny/2023 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’’. However, we also find that order of the Co-ordinate bench of the Tribunal in ITA No.1585/Chny/2019 dated 19.07.2024 in the case of the assessee has recently been diluted by the Co-ordinate bench in the case of DCIT Vs M/s Royal Sundaram General Insurance Company Limited [ITA Nos.493, 494, 495 & 496/Chny/2018 for AYs 2011-12, 2012-13, 2013-14 & 2014-15 vide order dated 08.01.2025 following the judgments of the Hon’ble Delhi High Court in the case of Care Health Insurance Limited (164 taxmann.com 53), Hon’ble Bombay High Court in the case of General Insurance Corporation of India (111 taxmann.com 412 / 422 ITR 248 Bom), Co-ordinate Bench of Tribunal, Mumbai in the case of M/s TATA AIG General Insurance Company Ltd. ITA No.14/Mum/2021 dated 08.03.2022 and other benches of Tribunal viz; Delhi and Kolkata. The Co-ordinate bench in the case of DCIT Vs M/s Royal Sundaram General Insurance Company Limited held as under: ‘’13.0 The next issue raised by the revenue vide ITA Nos. 493, 494, 495 & 496 /Chny/2018, AYs: 2011-12, 2012-13, 2013-14, 2014-15 is regarding disallowance of provisions for claims incurred but not reported (IBNR) and incurred but not enough reported (IBNER). Brief factual matrix of the controversy at hand is that in the assessee’s line of business claims arise qua insurance policies sold by it to its customers. With a view to factor in its liabilities arising on account of claims, the assessee creates provisions qua claims incurred but which have not been reported and claims incurred but which have not been enough reported. The only difference between the two being quantity of claims made. The assessee had been claiming by way of provisions the impugned claims. It is an undisputed fact on records that the - 11 - ITA Nos.1221 & 1222 /Chny/2023 impugned provisions are required to be created by the assessee in compliance to the directions of the parent body of insurance sector being insurance regulatory development authority (IRDA). It is also an undisputed facts on record that the respective claims for IBNR and IBNER in respect of the assessee are calculated by an actuarial valuer appointed by the IRDA. It is the case of the revenue that the impugned claims are unascertained contingent liabilities and hence cannot be allowed as deduction u/s 37(1). The same have been added by the Ld. AO in the case of the assessee. The Ld. First Appellate Authority held that the impugned liabilities is an ascertained liability and directed the Ld.AO to delete the addition. 13.1 We heard rival submissions in the light of the material available on records. The Ld. Revenue’s counsel vehemently protested against the impugned action of the Ld.First Appellate Authority and argued that IBNR and IBNER claims are unascertained contingent liabilities and hence cannot be allowed as deduction u/s 37(1). The Ld. Counsel for the revenue heavily relied upon the decision of the Hon’ble Coordiante Bench of this tribunal in the case of United India insurance company limited vide ITA No.1085 / Chny / 2017 dated 19.07.2024 and invited our reference to the following parts of the decision and accordingly requested for restoring the order of the Ld. Assessing Officer:- “……10. The next common issue that came up for our consideration in the appeals of the assessee for the assessment years 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 & 2019-20 is disallowance of provision for IBNR and IBNER. 11. The learned counsel for the assessee submitted that during the relevant assessment years, the assessee has made provision for claims incurred, but were not reported (IBNR) and claims incurred, which were not enough reported (IBENR) and such provision has been made for all unsettled claims on the basis of claim lodged by insured persons. According to the learned counsel, date of damage/loss was considered for recognizing the claim in a particular year. In certain circumstances, damages / loss were not reported in the balance sheet of the insurance company and such claims are known as claims incurred, but not reported. Sometimes, damage/loss incurred may be reported, however, it was not enough reported and therefore, the assessee has made provision as per IRDAI guidelines. The liability of the assessee company is determined based on the actual loss / damage. Therefore, such provision is in accordance with guidelines and norms issued by IDRAI and thus, is deductible u/s.37(1) of the Income Tax Act, 1961. 12. On the other hand, the Ld. Sr. Standing Counsel for the Revenue submitted that the assessee has created provision in anticipation of settlement of claims that were not ascertained. What is reported to the assessee is damage/ loss caused to the insured persons. According to the Sr. Standing Counsel, the - 12 - ITA Nos.1221 & 1222 /Chny/2023 assessee is yet to assess loss and determine amount to be compensated. Therefore, it is unascertained liability and same cannot be allowed as deduction. The Sr. Standing Counsel further submitted that this issue is covered by the decision of the ITAT., Chennai in assessee’s own case for earlier assessment years, where the Tribunal has held that provision made for IBNR and IBNER is not deductible, because merely incident happened during the year which is basis for making claim, that cannot be a reason for allowing compensation payable by the assessee in the subsequent financial years. 13. After hearing both the parties and going through material records, we find that an identical issue has been considered by the Tribunal in assessee’s own case in 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 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 - 13 - ITA Nos.1221 & 1222 /Chny/2023 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.” 4. In this view of the matter and consistent with view taken by the co-ordinate Bench, we are of the considered view that the assessee is not entitled for deduction towards provision created for IBNR & IBNER and thus, we uphold the findings of the learned CIT(A) on this issue for the assessment years 2014- 15, 2015-16, 2016-17, 2018-19 & 2019-20 and reject grounds taken by the assessee. Further, the assessee has also pleaded that with respect to AY 2017-18, the amount disallowable with respect to provisions for IBNR and IBNER claims cannot exceed Rs.1250.89 crores being the amount debited to the revenue accounts of the assesse. The assesse submitted that the additional amount of Rs.1582.58 crores being the amount not debited to the profit & loss account be deleted. We are in conformity with the views of the assessee that amount of monies, as provisions, not debited to the profit & loss account cannot be a part of the disallowance. Accordingly, the AO is directed to recalculate the disallowance with respect to provisions for IBNR and IBNER claims and restrict it to the extent of the amounts debited to profit & loss account as per law during the assessment year 2017-18. Accordingly, the grounds of appeal raised by the assessee on this issue for AYs 2014-15 to 2016-17 and 2018-19 & 2019-20 are dismissed and that of the AY 2017-18 is treated as allowed for statistical purposes…..”. 13.2 The Ld. Counsel for the assessee vehemently opposed the arguments of Ld.DR of the Revenue and submitted that the matter now stands decided in assessee’s favour by the decisions of Hon’ble Delhi High Court, Bombay High Court as well as - 14 - ITA Nos.1221 & 1222 /Chny/2023 Coordinate Benches of Delhi, Kolkata and Mumbai Tribunals. The Appellant assessee has placed on records through its paper book, copies of the decisions of above Hon’ble Courts. The Ld. Counsel for the revenue submitted that there are favorable decisions of Hon’ble High Court in favour of revenue on the impugned subject. The revenue was asked to provide copies of the impugned orders for consideration, but the same were not placed on records. The Ld. Counsel for the assessee countered that even if there are any such favorable decisions of Hon’ble High Court in favour of revenue on the impugned subject, the same would not be helpful for the revenue given the ratio laid down by the Hon’ble Apex Court in the case of Vegetable Products. 13.3 Hon’ble Coordinate Bench of ITAT, Mumbai in the case of M/s.TATA AIG general insurance company limited ITA no.14 / mum/ 2021 dated 08.03.2022 has ruled as under:- “…..06. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer and merely referred to the order of the learned Assessing Officer and learned CIT (A) stating relevant paragraph of the issues involved. It was submitted that the issues are decided in favour of the assessee by the co-ordinate Bench in assessee’s own case; however, the above Page | 5 ITA No.14/Mum/2021 Tata AIG General Insurance Co. Ltd.; AY 15-16 disallowance should not have been deleted by the learned Commissioner of Income-Tax (Appeals) for the reason given in assessment order y the ld AO. He extensively referred assessment order on all these [3] issues. 07. 08. 09. The Authorised Representative submitted that the appeal of the Revenue deserves to be dismissed in view of the issues already decided in favour of the assessee by the co-ordinate Bench in assessee’s own case for earlier years as well as in case of other insurance companies involving - 15 - ITA Nos.1221 & 1222 /Chny/2023 similar issues. He placed on record the decision of ITAT in assessee’s own case in ITA No. 3535 and 1702/Mum/2011 and ITA No. 1584 and 3596/Mum/2011 preferred by both the parties for Assessment Year 2006-07 and also appeal for Assessment Year 2008-09 dated 20/11/2015. He also submitted a case law compilation to support that issues are covered in this appeal. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also considered the order of the coordinate bench in assessee’s own case as well other decision of coordinate benches involving similar issues. First ground of appeal is related to the provisions for claim Incurred but Not Reported (IBNR) and claim Page | 6 ITA No.14/Mum/2021 Tata AIG General Insurance Co. Ltd.; AY 15-16 Incurred But Not Enough Reported (IBNER) amounting to ₹148,43,01,915/- held to be liable under section 37(1) of the Act by the learned Commissioner of income-tax (Appeals). 010. 011. Fact shows that the assessee has debited the above sum to the profit and loss account and claimed as allowable. The Assessing Officer questioned the same and assessee submitted that the above claims are incurred on account of the contractual obligations between the insurance company and the insurer. Assessee, insurance company, has an obligation to settle claims incurred. Such settlement of claim involve time so cannot be finally settled during the financial year. Above provision are created as per the guidelines prescribed by the IRDA, the method of provisioning a scientific calculation, it is ascertained liability under section 37(1) of the Act. Therefore, it is an allowable expense. The learned Assessing Officer held that it is a provisions created by the assessee in anticipation of claims and it is not ascertained liability so it cannot be allowed. He further noted it is not known that how much liability is good enough to pay out above claims and therefore, it is purely a contingent liability and cannot be allowed as deduction. The Assessing Officer further held that the above claim is not supported by the actual valuation and hence, he disallowed ₹148,43, 01,915/-. The ld CIT (A) after considering the decision of the honourable Supreme Court in case of Rotork controls India private limited versus Commissioner of income tax 314 ITR 62 considered that if there is a present obligation with respect to the provision, and it arises out of events involving outflow of resources and can be based on reliable estimation of such obligation then the liability incurred by the assessee company is allowable. He further held that the methodology to determine the liability is also certified by actuary in accordance with guidelines and norms issued by the Institute of actuaries of India and insurance regulatory and development authority of India. He further held that such provisioning relates to present obligation and involves outflow of resources. He further considered the provisioning made by the assessee in different years and actual utilization of such provision with respect to those financial years and then he found that the provision was made less than the actual amount incurred in settling those claims. He further held that the coordinate bench in case of DCIT vs. National Insurance co. Ltd. (2016) 72 taxmann.com 116 (Kolkata p Trib.) which has been affirmed by Hon'ble Calcutta High Court in ITA - 16 - ITA Nos.1221 & 1222 /Chny/2023 No.76 of 2019. Therefore he held that such provisioning is allowable Page | 8 ITA No.14/Mum/2021 Tata AIG General Insurance Co. Ltd.; AY 15-16 u/s 37 (1) of the act and the addition made by the learned AO was deleted. 012. We have carefully considered the rival contentions and perused the orders of the lower authorities. The facts show that during the year the assessee has made a provision of ₹148,43,01,950/- towards claims Incurred But Not Reported (IBNR) and claims Incurred But Not Enough Reported (IBNER). The above deduction was claimed under section 36(1) of the Act. The basis of the claim was that the provision has been made for all the unsettled claims on the basis of the claims alleged by insured persons. Certain times the loss incurred are not reported in the balance sheet of the insurance company and therefore, such claims are classified as claims incurred but not reported. Certain times such claims are reported, however they were not adequately reported. These are called claims incurred but not enough reported. The assessee made the provisions on the basis of the guidelines provided by insurance regulator and development authority of India. The claims made and provided for, are certified by the Actuary in accordance with the guidelines and norms issued by the Institute of Actuaries of India (IAI) and Insurance Regulatory and Development Authority (IRDA). As according to the assessee, the claims have been approved by Page | 9 ITA No.14/Mum/2021 Tata AIG General Insurance Co. Ltd.; AY 15-16 Actuary, therefore, the assessee has incurred loss / expenses during the year, and hence, it is allowable under section 37(1) of the Income-tax Act. The Assessing Officer considered the same as unascertained liability because ultimately the settlement of claim happens then, only according to him such claims are settled. We find that the assessee is a General Insurance Company and is covered by the guidelines issued by IRDA. The Insurance Companies are required to settle the claims of insured on the occurrence of the loss, which is covered under insurance. Such claims are required to be accounted despite the fact that such claims would not have finally settled but are pending at various stages of processing. The settlement of such claims may happen in subsequent period. Such claims are accounted by the assessee by making a provision as the liability to pay to the insurer agreed during the year. The learned Assessing Officer held that it is an anticipation of settlement of claim and therefore it cannot be said to be a definite liability. We find that identical issue arose in the case of DCIT vs. Export Credit Guarantee Corporation of India Ltd. in ITA No.7657/Mum/2014, wherein the co-ordinate Bench vide order dated 11.10.2017 vide para No.3.3 has allowed the identical claims. The learned CIT(A) while deciding the issue has relied upon the decision Page | 10 ITA No.14/Mum/2021 Tata AIG General Insurance Co. Ltd.; AY 15-16 co-ordinate Bench in DCIT vs. National Insurance Company Limited (supra) has held that the provisions made available the above claim are based on scientific calculation with a proper and rational and therefore, it could only be termed as ascertain liability. Though the above decision was rendered with respect to the computation of book profit under section 115JB of the Act, however, the - 17 - ITA Nos.1221 & 1222 /Chny/2023 learned CIT (A) applied it and allowed the claim of assessee for deduction under section 37(1) of the Act for the reason that the claim of the assessee is ascertained claim, supported by Actuarial valuation and also made on a scientific basis. To reach at this calculation, the learned CIT (A) obtained information for 6 different assessment years and found that the actual claim settled is always higher than the provisions made by the assessee. This it shows that the provisions made are not excessive. Further, it was stated before us that this claim is allowed to the assessee from year to year. In view of this, we find that assessee has incurred an expenditure, which is incurred during the year with respect to the provisions made for the IBNER and IBNR claims, on scientific basis and also certified by the valuer with respect to the methodology adopted in making such provisions. Thus, it satisfies the entire ingredient for its allowance u/s 37 (1) of the act. Thus, there is no Page | 11 ITA No.14/Mum/2021 Tata AIG General Insurance Co. Ltd.; AY 15-16 infirmity in the order of the learned CIT (A) in allowing the claim of ₹148,43,01,915/- under section 37(1) of the Act. Accordingly, the ground no.1 of the appeal is dismissed….” It is noted that the Hon’ble Coordinate Bench has considered the ratio laid down by Hon’ble Coordinate Bench of Kolkata Tribunal as well as the decision of Hon’ble Kolkata High Court. 13.4 Further we have noted that Hon’ble Delhi High Court order in the case of Care Health Insurance Limited (164 taxmann.com 53) observed as under:- “……6. Insofar as the question of IBNR is conpagcerned, the Tribunal has essentially followed the view taken by its Kolkata Bench in Deputy Commissioner of Income Tax vs. National Insurance Co. Ltd. 7. Dealing with this aspect, the Tribunal has held:- \"13. The AO made disallowance for provision for IBNR claims as contingent liability. Ld. CIT (A) deleted the addition by relying upon the decision of Kolkata ITAT Bench in the case of DCIT vs. National Insurance Co. Ltd.. The concluding part of the order of Id. CIT (A) read as under :- \"5.2 I have carefully considered the facts of the case, submissions of the appellant and the impugned order of the AO. The fundamental submissions of the appellant is that the provision for claims incurred but not reported is in accordance with the IRDA Regulations and the - 18 - ITA Nos.1221 & 1222 /Chny/2023 appellant being an insurance company is bound by such regulation. Further, the recent ruling of the Kolkata ITAT Bench in the case of Deputy Commissioner of Income tax vs National Insurance Co. Ltd. (2016) 72 taxmann.com 116 (supra) is squarely applicable to the facts of the case as reproduced hereunder: \"3.6 We have heard the rival submissions and gone through facts and circumstances of the case. We find that the Ld CIT(A) had given a categorical finding that the provision made for liabilities incurred but not reported (IBNR) made by the assesse as per the regulations framed by Insurance Regulatory Development Authority (IRDA) based on a scientific calculation with a proper rationale could only be termed as ascertained liability. Hence, the same need not be added back by treating the same was unascertained liability whi1e computing the book profits u/s115JB of the Act. The revenue was not able to controvert the findings given by the Ld CITA before us. Hence, we find no infirmity in the order of the Ld. CITA in this regard and accordingly dismiss the Ground No. l raised by the revenue.\" Thus, as said provision has been created by it to meet ascertained liabilities, the Company is entitled to claim a deduction of the same IT APPEAL NOS. 674, 982 & 983 (KOL.) OF 2012 while computing its income under the head 'profits & gains from business and profession'. Therefore, respectfully following the decision of the Hon'ble ITAT in the case of National Insurance above, I do not find any merit in the addition made by the AO in this case. Hence, this ground of appeal is allowed.\" 14. We have heard both the parties and perused the records. In the light of the assessee's submissions herein above, we find that ld. CIT (A) has taken correct decision, which does not need any interference on our part. The case law from Kolkata Bench of ITAT duly holds that these are ascertained liabilities. Hence, we uphold the order of ld. CIT (A). \" 7. The computation of profits of general insurance business is undisputedly regulated by the provisions made in the First Schedule of the Act and which requires an entity engaged in the business of insurance to compute its profits and gains from business as per its profit and loss account prepared in accordance with the Insurance Act, 1938, the rules framed under the said enactment or the Insurance Regulatory and Development Authority Act, 1999 and the rules and regulations framed by the IRDA. We find that the provisioning for IBNR is based upon the Insurance Regulatory and Development Authority of India (Assets, Liabilities and Solvency Margin of General Insurance Business) Regulations, 20168. 8. The determination of amount of liabilities of a general insurer is regulated by Regulation 5 and which requires a general insurer to prepare a statement of liabilities in accordance with Schedule II of those Regulations. The subject of claims reserve is regulated by Clause 3 of Schedule II of the Regulation which reads as follows:- - 19 - ITA Nos.1221 & 1222 /Chny/2023 \" 3. CLAIMS RESERVE (1) The Claims Reserve shall be determined as the aggregate amount Regulations of Outstanding Claims Reserve and Incurred but Not Reported Claims Reserve (IBNR) as described below for the following lines of business: xxxx xxxx xxxx (2) Outstanding Claims Reserve The outstanding claims reserve shall be determined in the following manner: (a) Where the amount of outstanding claims of the insurers is known, the amount is to be provided in full; (b) Where the amount of outstanding claims can be reasonably estimated according to the insurer, insurer shall follow the 'case by case method' after taking into account the explicit allowance for changes in the settlement pattern or average claim amounts, expenses and inflation; (c) For lines of business, where the Appointed Actuary is of the view that the statistical method is most appropriate for the estimation of Outstanding claims, the Appointed Actuary may use the appropriate statistical method of claims reserving instead of following case by case method. In such cases, the claims outstanding reserve shall be certified by Appointed Actuary. Where the Appointed Actuary identifies material changes in the claims handling practices, their impact on the outstanding claims reserve pattern shall be taken into account and reported. (3) Incurred But Not Reported (IBNR) Claims Reserve (a) The incurred but not reported (IBNR) claims reserve shall be determined using actuarial principles and methods detailed in clause 4 below (b) The IBNR shall be estimated using appropriate actuarial principles and shall be certified by the Appointed Actuary. (c) The Appointed Actuary shall estimate IBNR on both net of reinsurance and gross of reinsurance basis. (d) The Appointed Actuary shall estimate the provision for IBNR for each year of occurrence and the figures shall be aggregated to arrive at the total amount to be provided. (e) If estimate of IBNR provision for any year of occurrence is negative, the Appointed Actuary shall reexamine the underlying assumptions. Even after re-examination, if the mathematics produces negative value, the Appointed Actuary shall ignore the IBNR provision for that year of occurrence. (f) The estimation process shall not discount the estimated future development of paid claims to the current date.\" 9. While dealing with IBNR claims reserve, Clause 3(3) of Schedule II provides that IBNR would be estimated by usage of appropriate actuarial principles. IBNR itself is to be estimated on the basis of a study undertaken by an appointed actuary. Clause 4 then prescribes the various actuarial - 20 - ITA Nos.1221 & 1222 /Chny/2023 methods that may be used for the estimation of IBNR reserves. The said Clause reads as follows:- \"4. ACTUARIAL METHODS (1) The following Standard Actuarial Methods may be used for the estimation of IBNR reserves: (a) Basic Chain Ladder Method (both on incurred and paid claims) (b) Bornhuetter Ferguson Method (both on incurred and paid claims) (c) Frequency - Severity Method (2) The Appointed Actuary shall use more than one method to arrive at an estimate that s/he believes is adequate to meet the future liabilities. (3) Appointed Actuary may use methods other than standard actuarial methods of IBNR estimation. (4) In his/her annual report submission to the Regulator, Appointed Actuary should provide an explanation of the rationale underlying the selection of a particular method over the other available methods along with the advantages and disadvantages of doing so. (5) Where the results of different methods or assumptions differ significantly, an Appointed Actuary must comment on the likely reasons for the differences and explain the basis for the choice of results. \" 10. As is evident from the aforesaid, IBNR reserves are created by general insurers based on an actuarial exercise which is undertaken in accordance with one of the stipulated methods noticed in Clause 4. It is thus an empirical estimation for claims on the basis of an identified predictive methodology which in the opinion of the general insurer have already been incurred but may not have been reported at the time when a provision is made. We were informed by Mr. Vohra that the aforesaid procedure has been historically followed in the general insurance business. It was in the aforesaid backdrop that Mr. Vohra had sought to draw a parallel between IBNR and warranties that may be issued by entities and the various judgments rendered with respect to the latter. 11. Having heard learned counsels for respective sides at some length, we find merit in the stand as struck by the respondents for reasons which are set out hereunder. One of the seminal decisions rendered by the Supreme Court in the context of warranties and whether provisions made in respect thereof would amount to contingent liabilities is the one rendered in Rotork Controls India Private Limited. vs. Commissioner of Income Tax, Chennai 9. In the aforesaid matter, the Supreme Court was concerned with whether a standard warranty which had been provided by the assessee in respect of claims likely to arise could be construed to be a contingent liability and thus not allowable as a deduction under Section 37. 12. While expounding upon the concept of a provision being made in the books of account, the Supreme Court pertinently observed as follows:- \"22. What is a provision? This is the question which needs to be answered. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognised 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 - 21 - ITA Nos.1221 & 1222 /Chny/2023 can be made of the amount of the obligation. If these conditions are not met, no provision can be recognised. 23. Liability is defined as a present obligation arising from past events, the settlement of which is expected to result in an outflow (2009) 13 SCC 283 from the enterprise of resources embodying economic benefits. A past event that leads to a present obligation is called as an obligating event. The obligating event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing independently of the future conduct of the business of the enterprise that is recognised as provision. For a liability to qualify for recognition there must be not only present obligation but also the probability of an outflow of resources to settle that obligation. Where there are a number of obligations (e.g. product warranties or similar contracts) the probability that an outflow will be required in settlement, is determined by considering the said obligations as a whole. 24. In this connection, it may be noted that in the case of a manufacture and sale of one single item the provision for warranty could constitute a contingent liability not entitled to deduction under Section 37 of the said Act. However, when there is manufacture and sale of an army of items running into thousands of units of sophisticated goods, the past event of defects being detected in some of such items leads to a present obligation which results in an enterprise having no alternative to settling that obligation. 25. In the present case, the appellant has been manufacturing and selling valve actuators. They are in the business from Assessment Year 1983-1984 onwards. Valve actuators are sophisticated goods. Over the years the appellant has been manufacturing valve actuators in large numbers. The statistical data indicates that every year some of these manufactured actuators are found to be defective. The statistical data over the years also indicates that being sophisticated item no customer is prepared to buy valve actuator without a warranty. Therefore, warranty became integral part of the sale price of the valve actuator(s). In other words, warranty stood attached to the sale price of the product. These aspects are important. As stated above, obligations arising from past events have to be recognised as provisions. These past events are known as obligating events. 26. In the present case, therefore, warranty provision needs to be recognised because the appellant is an enterprise having a present obligation as a result of past events resulting in an outflow of resources. Lastly, a reliable estimate can be made of the amount of the obligation. In short, all three conditions for recognition of a provision are satisfied in this case. \" 13. As is evident from the principles enunciated above, the Supreme Court explained the concept of provisioning for liabilities as being based upon a present obligation which may come to be owed by an enterprise as a result of a past event and the probability of an outflow of resources that may be required to settle that obligation. One of the crucial aspects which was highlighted in this regard was of the enterprise being entitled to make a reliable estimate and whether such an estimation could be made of the amount that may be ultimately owed on account of the obligation. Apart from obligations flowing from past events, the Supreme Court also - 22 - ITA Nos.1221 & 1222 /Chny/2023 recognized the concept of historical trends and those justifying the making of an appropriate provision. Historical trend was acknowledged to be a study of defects detected over a period of time and the data collated in respect thereof. The concept of historical trends was explained as under:- \"35. In the present case, the High Court has principally gone by the judgment of the Supreme Court in Shree Sajjan Mills [(1985) 4 SCC 590 : 1986 SCC (Tax) 82 : (1985) 156 ITR 585] . That was the case of gratuity. For Assessment Year 1974-1975 the assessee Company sought to deduct a sum of Rs 18,37,727 towards the amount of gratuity payable to its employees and worked out actuarially. No provision was made for Rs 18,37,727. The claim for deduction was made on the ground that the liability stood ascertained by actuarial valuation and, therefore, was deductible under Section 37 of the 1961 Act. The Income Tax Officer allowed the deduction only in respect of the amounts actually paid by the assessee and the rest was disallowed on the ground of non- compliance with the provisions of Section 40-A(7) of the 1961 Act. This view of ITO was affirmed by CIT(A). 36. The Tribunal in Shree Sajjan Mills [(1985) 4 SCC 590 : 1986 SCC (Tax) 82 : (1985) 156 ITR 585] held that for the earlier assessment year relating to 1973-1974, actuarially ascertained liability for gratuity arising under the Payment of Gratuity Act, 1972 was an allowable deduction. However, for the assessment year in question, the Tribunal held that the increased liability claimed by the assessee for deduction was allowable on general principles of accounting. This view was taken by the Tribunal on the basis that the actuarially determined liability was not provided for in the assessee's books of account. 37. In appeal by the Department, the High Court held that the assessee therein was not entitled to deduction without complying with the provisions of Section 40-A(7) of the 1961 Act. This view of the High Court was affirmed by this Court in Shree Sajjan Mills [(1985) 4 SCC 590 : 1986 SCC (Tax) 82 : (1985) 156 ITR 585] . It was held that Section 40-A(7) which stood inserted by the Finance Act, 1975 w.e.f. 1- 4-1973 has been given an overriding effect over Section 28 as well as Section 37 of the 1961 Act. Consequently, the deduction allowable on general principles was ruled out as Section 40- A(1) made it clear that Section 40-A had effect notwithstanding anything contained in Sections 30 to 39 of the 1961 Act. In other words, as regards deduction in respect of gratuity, the assessee was required to comply with the provisions of Section 40-A(7) after the Finance Act, 1975. 38. It is interesting to note that prior to 1-4-1973 actual payment or provision for payment was eligible for deduction either under Section 28 or under Section 37 of the 1961 Act. This has been reiterated in Shree Sajjan Mills [(1985) 4 SCC 590 : 1986 SCC (Tax) 82 : (1985) 156 ITR 585] . The position got altered only after 1-4-1973. Before that date, provision made in the profit and loss account for the estimated present value of the contingent liability properly ascertained and discounted on an accrued basis could be deducted either under Section 28 or Section 37 of the 1961 Act. This has been explained in Shree Sajjan Mills [(1985) 4 SCC 590 : 1986 SCC (Tax) 82 : (1985) 156 ITR 585] at p. 599. - 23 - ITA Nos.1221 & 1222 /Chny/2023 39. Section 40-A(7) deals only with the case of gratuity. Even in the case of gratuity but for insertion of Section 40-A(7), provision made in the profit and loss account on the basis of present value of the contingent liability properly ascertained and discounted on an accrued basis was entitled to deduction either under Section 28 or under Section 37 of the said Act. This aspect, therefore, indicates that the present value of the contingent liability like the warranty expense, if properly ascertained and discounted on accrued basis, could be an item of deduction under Section 37 of the said Act. This aspect is not noticed in the impugned judgment. 40. We may add a caveat. As stated above, the principle of estimation of the contingent liability is not the normal rule. As stated above, it would depend on the nature of business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting being adopted by the assessee. It will also depend upon the historical trend. It would also depend upon the number of articles produced. As stated above, if it is a case of single item being produced then the principle of estimation of contingent liability on pro rata basis may not apply. 41. However, in the present case, it is not so. In the present case, we have the situation of large number of items being produced. They are sophisticated goods. They are supported by the historical trend, namely, defects being detected in some of the items. The data also indicates that the warranty cost(s) is embedded in the sale price. The data also indicates that the warranty is attached to the sale price. In the circumstances, we hold that the principle laid down by this Court in Metal Box Co. ofIndia [AIR 1969 SC 612 : (1969) 73 ITR 53] will apply. 42. In Metal Box Co. of India case [AIR 1969 SC 612 : (1969) 73 ITR 53] this Court held that contingent liabilities discounted and valued as out of necessity could be taken into account as trading expenses if these were capable of being valued. It was further held that an estimated liability even under a gratuity scheme even if it was a contingent liability if properly ascertainable and if its present value stood fairly discounted, was deductible from the gross profits while preparing the profit and loss account. In view of this decision it became permissible for an assessee to provide, in his profit and loss account, for the estimated liability under a gratuity scheme by ascertaining its present value on accrued basis and claiming it as an ascertained liability to be deducted in the computation of profit and gains of the previous year either under Section 28 or under Section 37 of the 1961 Act. However, the above principle would not apply after insertion of Section 40-A(7) w.e.f. 1-4-1973. It may be stated that the principles of commercial accounting, mentioned above, formed the basis of the judgment of this Court in Metal Box Co. of India [AIR 1969 SC 612 : (1969) 73 ITR 53] and those principles are affirmed by the judgment of the Supreme Court in Shree Sajjan Mills [(1985) 4 SCC 590 : 1986 SCC (Tax) 82 : (1985) 156 ITR 585] up to 1-4-1973. \" 14. What follows from the above is the right of an enterprise to make provisions for a liability which could be measured by and as the Supreme Court described a \"substantial degree of estimation\". It was thus held that as long as a liability is properly ascertainable on the basis of empirical data or a known methodology, the same cannot possibly be held to be a contingent liability. - 24 - ITA Nos.1221 & 1222 /Chny/2023 15. The Supreme Court ultimately in Rotork Controls held as follows:- \"47. At this stage, we once again reiterate that a liability is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources and in respect of which a reliable estimate is possible of the amount of obligation. As stated above, Indian Molasses Co. [AIR 1959 SC 1049 : (1959) 37 ITR 66] is different from the present case. As stated above, in the present case we are concerned with an army of items of sophisticated (specialised) goods manufactured and sold by the assessee whereas Indian Molasses Co. [AIR 1959 SC 1049 : (1959) 37 ITR 66] was restricted to an individual retiree. On the other hand, Metal Box Co. of India [AIR 1969 SC 612 : (1969) 73 ITR 53] pertained to an army of employees who were due to retire in future. 48. In Metal Box Co. of India case [AIR 1969 SC 612 : (1969) 73 ITR 53] the company had estimated its liability under two gratuity schemes and the amount of liability was deducted from the gross receipts in the profit and loss account. The company had worked out its estimated liability on actuarial valuation. It had made provision for such liability spread over to a number of years. In such a case it was held by this Court that the provision made by the assessee Company for meeting the liability incurred by it under the gratuity scheme would be entitled to deduction out of the gross receipts for the accounting year during which the provision is made for theliability. 49. The same principle is laid down in the judgment of this Court in Bharat Earth Movers [(2000) 6 SCC 645 : (2000) 245 ITR 428] . In that case the assesse Company had formulated leave encashment scheme. It was held, following the judgment in Metal Box Co. of India [AIR 1969 SC 612 : (1969) 73 ITR 53] , that the provision made by the assessee for meeting the liability incurred under leave encashment scheme proportionate with the entitlement earned by the employees, was entitled to deduction out of gross receipts for the accounting year during which the provision is made for that liability. 50. The principle which emerges from these decisions is that if the historical trend indicates that large number of sophisticated goods were being manufactured in the past and in the past if the facts established show that defects existed in some of the items manufactured and sold then the provision made for warranty in respect of the army of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 of the 1961 Act. It would all depend on the data systematically maintained by the assessee. 51. It may be noted that in all the impugned judgments before us the assessee(s) has succeeded except in Civil Appeals Nos. 3506-10 of 2009 -- arising out of SLPs (C) Nos. 14178-82 of 2007 -- Rotork Controls India (P)Ltd. v. CIT, in which the Madras High Court has overruled the decision of the Tribunal allowing deduction under Section 37 of the 1961 Act. However, the High Court has failed to notice the \"reversal\" which constituted part of the data systematically maintained by the assessee over last decade. \" 16. A lucid explanation of the concept of contingent liabilities is then found in The Commissioner of Income Tax vs. Whirpool of India Ltd. 10 In the facts of that case, this Court found that the assesse there had been consistently making provisions on the basis of actuarial valuation in respect - 25 - ITA Nos.1221 & 1222 /Chny/2023 of machines sold and warranty claims lodged. Both the AO as well as the CIT(A) in that case had taken the view that claims pertaining to unexpired periods of warranty could be considered only when actual claims may arise and that the assessee would not be justified in estimating a warranty liability. 17. While dealing with this aspect, the Court observed:- \"14. We may take note of a decision of this Court in CIT Vs. Vinitec Corporation (P) Ltd. 278 ITR 337 which is referred by the Tribunal also. In that case the assessee had claimed deduction under Section 37 of the Act, inter alia, on the provision made by it in the year against future claims by customers under the warranty clause which was part of the sale. The AO disallowed the claim on the ground that it was a contingent liability. The Tribunal, however, accepted the assessee€s claim holding that the liability was definite and certain quantification was done on estimate basis after taking into consideration the data for past years of the percentage of warranty expenses. The High Court affirmed the decision of the Tribunal holding that the warranty clause was a part of the sale document and imposed a liability upon the assessee to discharge its obligation under that clause for the period of warranty. It was a liability, which Neutral Citation: 2011 DHC:394-DB was capable of being construed in definite terms, which had arisen in the accounting year, although its actual quantification and discharge might be deferred to a future date. Once the assessee is maintaining his accounts on the mercantile system, a liability accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. In forming the aforesaid view, the Court applied the test laid down in Bharat Earth Movers, Vs. CIT, 245 ITR 428 and analyzed the said judgment and another judgment of Privy Council in the following terms:- \"In our opinion, the judgment of the Supreme Court in Bharat Earth Movers (supra) has a direct bearing on the issue in controversy before us. Dealing with the preposition whether the assessed would be allowed to deduction in the accounting year, although the liability may have to be quantified and discharged at a future date, the liability is to be treated in the present time and would or would not be a contingent liability, the Court held as under :- \"So is the view taken in Calcutta Co.Ltd. v. CIT [1959]37 ITR1 (SC) wherein this Court has held that the liability on the assessed having been imported, the liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date. There may be some difficulty in the estimation thereof but that would not convert the accrued liability into a conditional one; it was always open to the tax authorities concerned to arrive at a proper estimate of the liability having regard to all the circumstances of the case. Applying the above said settled principles to the facts of the case at hand we are satisfied that the provision made by the appellant-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is - 26 - ITA Nos.1221 & 1222 /Chny/2023 entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. The High Court was not right in taking the view to the contrary. The appeal is allowed. The judgment under appeal is set aside. The question referred by the Tribunal to the High Court is answered in the affirmative, i.e. in favor of the assessed and against the Revenue.\" It will be useful for us to make a reference to the judgment of the Privy Council in the case of Commissioner of Inland Revenue (supra) where the Privy Council dealing with a taxpayer who was selling new motor vehicles to the dealers to indemnify them against warranty claims which, in turn, resulted in providing of warranty clause for 12 months from the date of delivery to the purchaser by the dealer, held as under :- \"Held, dismissing the appeal, that, although the taxpayer's liability under the warranty for each vehicle sold was contingent on a defect appearing and being notified to the dealer within the warranty period so that no liability was incurred by the taxpayer until those conditions were satisfied, regard could be had to its estimation of warranty claims based on statistical information, which showed that as a matter of existing fact not future contingency 63 per cent. of all vehicles sold by the taxpayer contained defects likely to be manifested within the warranty period and require work under warranty; that since theoretical contingencies could be disregarded, the taxpayer was in the year of sale under an accrued legal obligation to make payments under those warranties and even though it might not be required to do so until the following year, it was definitively committed in the year of sale to that expenditure; and that, accordingly, in computing the profits or gains derived by the taxpayer from its business in the year in which the vehicles were sold, the taxpayer was entitled under section 104 to deduct from its total income the provision which it had made for the costs of its anticipated liabilities under outstanding warranties in respect of vehicles sold in that year.\" The ratio decidendi of the above cases is squarely applicable to the facts of the present case. It is not disputed that the warranty clause is part of the sale document and imposes a liability upon the assessed to discharge its obligations under that clause for the period of warranty. It is a liability which is capable of being construed in definite terms which has arisen in the accounting year. May be its actual quantification and discharge is deferred to a future date. Once an assessed is maintaining his accounts on the mercantile system, a liability is accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy\" 18. After noticing the judgment in Rotork Controls, the Court held:- \"17. The Court then proceeded to determine as to what would be the most appropriate method for making a provision for 'product warranty', based on historical trend and held that:- (a) It should be based on historical trend and for determining a proper historical trend, the company should have proper accounting system for capturing of sales, warranty provisions made and the actual expenses incurred subsequently. - 27 - ITA Nos.1221 & 1222 /Chny/2023 (b) A detailed assessment of the warranty provisioning policy is required particularly if the experience suggests that warranty provisions are generally reversed if they remained unutilized based on past experience. (c) The warranty provision for the product should be based on estimate at year end of future warranty expense. This becomes clear from the following discussion in the said judgment:- \"For determining an appropriate historical trend, it is important that the company has a proper accounting system for capturing relationship between the nature of the sales, the warranty provisions made and the actual expenses incurred against it subsequently. Thus, the decision on the warranty provision should be based on past experience of the company. A detailed assessment of the warranty provisioning policy is required particularly if the experience suggests that warranty provisions are generally reversed if they remained unutilized at the end of the period prescribed in the warranty. Therefore, the company should scrutinize the historical trend of warranty provisions made and the actual expenses incurred against it. On this basis a sensible estimate should be made. The warranty provision for the products should be based on the estimate at year end of future warranty expenses. Such estimates need reassessment every year.\" 18. Apart from other things, the Court highlighted that provision for warranty on turnover of the company based on past experience fulfills accrual concept as well the matching concept. The Court not only laid stress on the past experience based on historical trend of warranty provisions, it was also emphasized that this provided estimates under the assessment every year. 19. We may also point out at this stage itself that the Supreme Court distinguished the judgments in Sajjan Mills (supra) as well as Indian Molasses Co. (supra). We would also like to refer to the judgment of the Supreme Court in CIT Vs.Woodward Governor India P. Ltd. 312 ITR 254 wherein it was held that the accounting method followed by the assessee continuously for a given period of time has to be presumed to be correct till the AO comes to the conclusion for the reasons to be given that the estimate does not reflect to be true and correct profits.” 19. Upon due consideration of the principles enunciated in the aforenoted decisions, we come to the firm conclusion that it would be wholly incorrect to understand IBNR provisioning to be a contingent liability. We, in this regard, bear in consideration the precepts of reasonable estimation, the capability of a liability being quantified based upon historical trends and the known actuarial methods for estimation which are liable to be adopted in accordance with the IRDA Regulations. We consequently find no error in the view ultimately taken by the Tribunal….” 13.5 We have also noted that the latest decision on the subject has been delivered by Hon’ble Bombay High Court in the Writ petition No.2271 of 2019 as at 422 ITR 248 in the case of General Insurance Corporation of India holding as under:- - 28 - ITA Nos.1221 & 1222 /Chny/2023 “…..11. So far as Issue No.1 above is concerned, the Petitioner submits that same stands concluded in its favour by virtue of the decision dated 11 October 2017 of the Mumbai Bench of the Tribunal in Dy. CIT V. ECGC (IT Appeal No. 7657 (Mum.) of 2014] and the Kolkata Bench of the Tribunal in the case of Dy. CIT v. National Insurance Co. Ltd. [2016] 72 taxmann.com 116 in favour of the Petitioner. However, the impugned order still directed a deposit of 10% of disputed demand on this Court in view of the decision of Chennai Bench of the Tribunal in the case of United India Insurance Co. Ltd. v. Jt. CIT [2018] 97 taxmann.com 466. We note that the Chennai Bench decision of the Tribunal has ignored the co-ordinate bench decision of Mumbai and Kolkata benches of the Tribunal. Therefore, prima facie per incurium. In any case the CBDT Circular No. 530 dated 6 March 1989 states that stay of demand be granted where there are conflicting decisions of the High Court. This principle can be extended to the conflicting decisions of the different benches of the Tribunal. Thus, in the above facts the complete stay of the demand on the above head i.e. Item No.1 of the above chart was warranted in the Petitioner's favour….” 13.6 The above judicial ratios were not available on records while adjudicating the appeal in the case of United India Insurance supra as at ITA 1085 / Chny /2017 dated 19.07.2024. The matter of allowance of IBNR and IBNER as an ascertained liability or as an unascertained liability has been considered. It is noted that in the case of appellant assessee the same meets the criteria laid down by the Hon’ble Coordinate Benches of Kolkata, Delhi and Mumbai as well as the Hon’ble Delhi and Mumbai High Courts. The impugned liability principally arising in view of guidelines formulated by IRDA and calculated by a IRDA approved actuarial valuer fulfills the ratio laid down by Hon’ble Apex Court mandating the that as long as a liability is properly ascertainable on the basis of empirical data or a known methodology, the same cannot possibly be held to be a contingent liability. The Hon’ble Supreme Court thus held that it is the right of an enterprise to make provisions for a liability which could be measured by a \"substantial degree of estimation\" and consequently that its allowance as an valid expenditure would be permissible. We have noted that facts of the case as existing in the present appeal are identical to those as in the cases adjudicated by the Hon’ble Coordinate Benches of Kolkata, Delhi and Mumbai Tribunals. No distinguishment of facts could be pointed out by the appellant revenue. Accordingly, respectfully following the ratio decided in the judicial decisions discussed herein above, we hold that IBNR and IBNER are ascertained liability and therefore allowable as a deduction. Accordingly we hold that the order of the Ld. First Appellate Authority does not requires any interference at this stage. The order of the Ld.CIT(A) is confirmed and the grounds of appeal raised by the revenue are dismissed’’. We also observe that the Co-ordinate Bench in its order at para 13.6 held as under: - 29 - ITA Nos.1221 & 1222 /Chny/2023 “The above judicial ratios were not available on records while adjudicating the appeal in the case of United India Insurance as at ITA 1085/Chny/2017 dated 19.07.2024.” Hence, respectfully following the Co-ordinate bench order in the case of DCIT Vs M/s Royal Sundaram General Insurance Company Limited (referred supra), we also decide this ground in favour of the assessee. Accordingly, this ground of assessee is allowed. Amortization of premium paid on securities: At the outset, the ld. Counsel for the assessee fairly conceded that this issue has been decided by the Tribunal in assessee’s own case up to AY 2019-20 and assessee’s appeal is pending adjudication before the High Court. The Co- ordinate Bench in assessee’s own case held as under: ‘’8. The second common ground raised by the assessee is with regard to disallowance towards amortization of premium 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 theassessment 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). - 30 - ITA Nos.1221 & 1222 /Chny/2023 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.” 9. After hearing both the sides, we find that the Tribunal has 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 years2013-14, 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 & 2019-20 is dismissed.’’ Hence, respectfully following the Co-ordinate bench order in assessee’s own case up to AY 2019-20, we decide this ground in the favour of the revenue. Accordingly, this ground of assessee is dismissed. Revenue’s Appeal Disallowance u/s 40(a)(i) on reinsurance premium paid to foreign insurers: We find from chart referred supra, this ground has been decided in favour of assessee by the Co-ordinate bench of the Tribunal in assessee’s own case in ITA No.1085/Chny/2017 for AY 2013-14 dated 19.07.2024 which held as under: 5. The first and foremost common issue raised by the assesse in its appeals for our consideration relevant to assessment years 2013-14to 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 - 31 - ITA Nos.1221 & 1222 /Chny/2023 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 assessesown 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 Revenuealso 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. 6. We find that an identical issue has been dealt with by the 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 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 - 32 - ITA Nos.1221 & 1222 /Chny/2023 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 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 - 33 - ITA Nos.1221 & 1222 /Chny/2023 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………………………………………………………………………………… …………………………………………………………………………………………… 19. In this view of the matter and considering facts and circumstances of the case and also by following various case laws discussed hereinabove, we are of the considered view that reinsurance premium ceded to non-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 - 34 - ITA Nos.1221 & 1222 /Chny/2023 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.” 7. In view of the above, respectfully following the said 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 Actfor the assessment years2013-14 to 2016-17. Thus, the ground raised by the assessee on this issue 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’’. Hence, respectfully following the Co-ordinate bench order in assessee’s own case up to AY 2019-20, we decide this ground in the favour of the assessee. Accordingly, this ground of revenue is dismissed. Disallowance u/s 40(a)(i) in respect of commission paid to non- resident agents: We find from chart referred supra, this ground has been decided in favour of assessee by the co-ordinate bench of the Tribunal in assessee’s own case in ITA No.1085/Chny/2017 for AY 2013-14 dated 19.07.2024 which held as under: ‘’20. The next common issue that came up for our consideration from the Revenue appeals for the assessment years 2014-15 to 2019-20 is in regard to disallowance of commission paid to non-residents - 35 - ITA Nos.1221 & 1222 /Chny/2023 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 assesseedebited 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 expensespaid to foreign agents for non-deduction of TDS under section 195 of the Acton account of the fact that 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 inassessee’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 assesseeis not liable to deduct tax at source, qua, payments made to overseas 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 - 36 - ITA Nos.1221 & 1222 /Chny/2023 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’’. Hence, respectfully following the Co-ordinate bench order in assessee’s own case up to AY 2019-20, we decide this ground in the favour of the assessee. Accordingly, this ground of revenue is dismissed. Survey fees paid: We find from chart referred supra, this ground has been decided in favour of assessee by the co-ordinate bench of the Tribunal in assessee’s own case in ITA No.1085/Chny/2017 for AY 2013-14 dated 19.07.2024 which held as under: ‘’21. The next issue that came up for our consideration from the 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. 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 - 37 - ITA Nos.1221 & 1222 /Chny/2023 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’’. Hence, respectfully following the Co-ordinate bench order in assessee’s own case up to AY 2019-20, we decide this ground in the favour of the assessee. Accordingly, this ground of revenue is dismissed. 8. In result, the appeal of the assessee is partly allowed and revenue is dismissed. Order pronounced in the open court on 31st day of January, 2025 Sd/- Sd/- एस.आर. रघुनाथा (S.R. RAGHUNATHA) लेखा सदèय/ ACCOUNTANT MEMBER (मनु क ुमार ͬगǐर) (MANU KUMAR GIRI) ÛयाǓयक सदèय / JUDICIAL MEMBER चे᳖ई/Chennai, ᳰदनांक/Dated, the 31 January, 2025 KV आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ /CIT, Chennai. 4. िवभागीय ᮧितिनिध/DR 5.गाडᭅ फाईल/GF. "