DCIT/ACIT, CIR-6(2), KOLKATA, Kolkata V. National Insurance Company Ltd., Kolkata

ITA 1876/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5298 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 22-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business income; Depreciation; Earning of tax free income; Bad and doubtful debts; Rule 8D
• Section: 43B; 14A; 115JB

Judgement Text

I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1876/KOL/2017 ASSESSMENT YEAR: 2014-2015 DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX,.. ...........APPELLANT CIRCLE-6(2), KOLKATA, AAYAKAR BHAWAN, 6 TH FLOOR, ROOM NO.6/15, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. NATIONAL INSURANCE COMPANY LIMITED,........... ........................RESPONDENT 3, MIDDLETON STREET, KOLKATA-700 071 [PAN: AAACN 9967 E] APPEARANCES BY: SHRI A.K. NAYAK, CIT, D.R., FOR THE APPELLANT SHRI SANJAY BHATTACHARYA, FCA, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : MARCH 25, 2019 DATE OF PRONOUNCING THE ORDER : MAY 29, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZONE) :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATA DAT ED 03.07.2017 AND THE GROUNDS RAISED BY THE REVENUE THEREIN READ AS U NDER:- '(1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON THE FACTS OF THE CASE A ND IN LAW IN DIRECTING THAT A SUM OF RS.450,02,000/-, BEING DISA LLOWANCE OF WRITTEN OFF DEPRECIATED INVESTMENTS, BE DELETED FOL LOWING THE DECISION OF CIT(APPEALS) AY. 2007-08 AND 2008-09.' 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, AND IN LAW THE LD. CIT(A) HAS ERRED ON THE FACTS OF THE CASE AND IN LAW IN DIRECTING THAT A SUM OF RS.5,78,44,000/-, BEING AMORTIZATION OF PREMIUM PAID ON INVESTMENTS, SHOULD BE ALLOWED.' 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION U /S L4A RULE- 8D(2) OF THE I.T. ACT AND DIRECTED TO RE-COMPUTE TH E I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 2 DISALLOWANCE DEPENDING ON THE JUDICIAL PRONOUNCEMEN T OF HON'BLE ITAT, KOLKATA'. 4. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) HAS ERRED ON THE FACTS OF THE CASE A ND IN LAW IN HOLDING THAT A SUM OF RS.738,37,27,000/- BEING THE RESERVE CREATED FOR UNEXPIRED RISK SHOULD NOT BE CONSIDERED WHILE COMPUTING THE BOOK PROFIT U/S. L15JB OF THE I.T. AC T.' 5. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD CIT(A) HAS ERRED ON THE FACTS OF THE CASE AN D IN LAW IN HOLDING THAT DISALLOWANCE U/S. 14A SHOULD NOT BE AD DED TO THE TOTAL INCOME WHILE COMPUTING BOOK PROFIT OF THE ASS ESSEE.' 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLV E IN GROUND NO. 1 IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION RENDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS 2005- 06, 2007-08 AND 2008- 09 VIDE ITS COMMON ORDER DATED 05.08.2016 PASSED IN ITA NOS. 674, 982 & 983/KOL/2012, WHEREIN A SIMILAR ISSUE WAS DECIDED B Y THE TRIBUNAL VIDE PARAGRAPH NO. 9 OF ITS ORDER AS UNDER:- 9. DISALLOWANCE OF INVESTMENTS WRITTEN OFF THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE WROTE OFF RS.4,22,26,000/- OUT OF INVESTMENTS BY CHARGING THE SAID SUM TO ITS PROF IT & LOSS ACCOUNT. THE LD AO HELD THAT THE ABOVE-MENTIONED WRITE OFF COULD AL LEGEDLY NOT BE ALLOWED AS ADMISSIBLE DEDUCTION AND HE DISALLOWED RS.4,22,26,0 00/-. THE ASSESSEE SUBMITTED THAT THE SUM OF RS.4,22,26,000/- WHICH HA D BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT HAD REPRESENTED THE AMOUNT OF INVESTMENT WRITTEN OFF AND THE SUM WAS NEITHER AN EXPENDITURE NOR AN ALLOW ANCE. SINCE THE AFORESAID SUM HAD NOT BEEN OF THE NATURE OF ANY EXP ENDITURE OR ALLOWANCE, THE SAME COULD NOT BE ADDED BACK AS PER THE PROVISI ONS OF SECTION 44 READ WITH RULE 5 OF THE FIRST SCHEDULE TO THE INCOME-TAX ACT, 1961. THE ASSESSEE ALSO SUBMITS THAT THE LD AO HAD THE POWER TO ADD BA CK ONLY THAT EXPENDITURE OR ALLOWANCE OR A PROVISION WHICH WAS NOT ADMISSIBL E UNDER THE PROVISIONS OF SECTIONS 30 TO 43B. THE APPELLANT HAD BROUGHT TO TH E ATTENTION OF THE LD AO OF THE FACTS AND THE DECISION OF THE HON'BLE SUPREME C OURT REPORTED IN 240 ITR 139 (SC). HOWEVER, WHILE MAKING THE ASSESSMENT THE LD AO HAD NOT CONSIDERED THE ASSESSEES REFERENCE MADE TO THE DEC ISION OF THE HON'BLE SUPREME COURT AS REPORTED IN 240 ITR 139 (SC) AND H E DISALLOWED THE SUM OF RS.4,22,26,000/-. THE ASSESSEE FURTHER SUBMITTED TH AT AS PER THE FACTS AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V. ORIENTAL FIRE & GENERAL INSURANCE CO. LTD. [2007] 291 ITR 371(SC), ANY AMOUNT HAVING BEEN WRITTEN OFF, CANNOT BE CONSIDERED AS AN EXPENDITURE OR ALLOWANCE WHICH COULD BE ADDED BACK AS PER THE PROVISIONS OF SECTION 44 R EAD WITH RULE 5 OF THE FIRST SCHEDULE. I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 3 WITHOUT PREJUDICE TO THE SUBMISSION MADE HEREINABOV E, THE ASSESSEE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 44 READ WITH RULE 5 OF THE FIRST SCHEDULE ALL THE INCOMES OF THE ASSESSEE WERE TO BE CONSIDERED AS ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION '. AS PER THE RELEVANT PROVISIONS OF THE ACT, THERE IS NO PROVISION FOR ASSESSMENT OF ANY INCOME OF THE ASSESSEE UNDER ANY HEAD OTHER THA N UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION '. HEN CE, ALL THE ASSETS OF THE ASSESSEE WERE TO BE CONSIDERED AS ASSETS UTILISED F OR THE ASSESSEES BUSINESS. THOUGH IN THE BALANCE SHEET SOME OF THE ASSETS ARE BEING SHOWN UNDER THE HEAD 'INVESTMENTS ', STILL THOSE ARE ALSO TO BE CON SIDERED AS BUSINESS OR TRADING ASSETS OF THE ASSESSEE. ANY WRITING OFF OF INVESTMENTS WHICH HAVE BEEN CONSIDERED AS BAD, SHOULD BE TREATED AS WRITING OFF OF BAD DEBTS. HENCE, THE ASSESSEE SUBMITTED THAT WRITING OFF OF INVESTMENTS SHOULD HAVE BEEN CONSIDERED BY THE LD AO AS WRITING OFF OF BAD DEBTS WHICH WERE ALLOWABLE U/S. 36(1)(VII). THE LD AO SHOULD HAVE APPRECIATED THAT INCOME FROM THOSE INVESTMENTS HAD ALWAYS BEEN SHOWN UNDER THE HEAD 'B USINESS INCOME' AND, THEREFORE, THE REQUIREMENT OF SECTION 36(2) SHOULD HAVE BEEN CONSIDERED AS HAVING BEEN FULFILLED BY THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED THAT IN RESPECT OF THE ASSESSMENT YEAR 2002-03 (GROUND NO. 1) THE LD CIT(A) VIDE HIS APPELLATE ORDER DATED 24-01-2007 (PARAGRAPH NO. 7) DELETED THE DISALLOWANCE IN RESPECT OF THE BAD DEBTS BEING INVE STMENT WRITTEN OFF. ON THE BASIS OF THE ABOVE FACTS, THE ABOVE-REFERRED TWO DE CISIONS OF THE HON'BLE SUPREME COURT AS WELL AS THE APPELLATE DECISION IN THE ASSESSEE'S OWN ASSESSMENT FOR THE ASSESSMENT YEAR 2002-03, AS REFE RRED TO ABOVE, THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE OF RS. 4,2 2,26,000/- IN RESPECT OF INVESTMENTS WRITTEN OFF, MAY KINDLY BE DELETED. IT WAS ALSO SUBMITTED THAT THE LD CITA HAD DELETED THE DISALLOWANCES ON INVESTMENTS WRITTEN OFF FOR THE ASST YEARS 2000- 01 , 2002-03 AND 2004-05 VIDE ORDERS DATED 30.1.2009, 24.1.2007 AND 15.6.200 9 RESPECTIVELY. THE LD CITA DELETED THE DISALLOWANCE MADE BY THE LD AO. AG GRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 3. THE CIT(A) ERRED ON THE FACTS OF THE CASE AND I N LAW IN HOLDING THAT A SUM OF RS. 4,22,26,000/- BEING THE I NVESTMENTS WRITTEN OFF IS AN ALLOWABLE DEDUCTION. 9.1. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF TH E LD AO. IN RESPONSE TO THIS, THE LD ARVEHEMENTLY RELIED ON THE ORDER OF THE LD C ITA. 9.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LD CITA HAD DELETED THE DISALLOWANCE BY OBSERVING AS UNDER:- 23. I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS O F THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT AND BOTH THE DECISIONS REFERRED TO ABOVE OF HON'BLE SUPREME COURT AND THE COPIES OF THE APPELLATE ORDERS FOR TH E ASSESSMENT YEARS 2000-01, 2002-03 AND 2004-05 OF THE CIT(A)-VI , KOLKATA. THE AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THA T THE TRANSACTIONS IN INVESTMENTS BEING A PART OF BUSINES S OF THE ASSESSEE, THE WRITING OFF OF INVESTMENTS SHOULD BE CONSIDERED AS DEDUCTIBLE FOR THE PURPOSE OF COMPUTING THE BUSINES S INCOME OF ASSESSEE. SINCE THE ASSESSEE HAS BEEN CARRYING ON T HE GENERAL INSURANCE BUSINESS AND CONSEQUENTLY ITS ASSESSMENT IS REQUIRED I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 4 TO BE MADE IN ACCORDANCE WITH THE PROVISIONS OF SEC TION 44 READ WITH THE RULE 5 OF THE FIRST SCHEDULE TO THE INCOME -TAX ACT, 1961, THE ASSESSING OFFICER IS EMPOWERED TO MAKE ADDITIONS/DISALLOWANCES ONLY IN ACCORDANCE WITH THE ABOVE- MENTIONED RULE 5. ANY SUM WHICH HAS BEEN WRITTEN OF F CANNOT BE CONSIDERED AS EITHER 'EXPENSE' OR 'ALLOWANCE' OR 'P ROVISION'. 24. IT IS OBSERVED THAT IN THE ABOVE-REFERRED RULE 5 OF THE FIRST SCHEDULE IT HAS BEEN MENTIONED THAT CERTAIN EXPENDI TURE OR ALLOWANCE OR PROVISION CAN BE ADDED BACK ONLY IF TH E SAME IS NO ADMISSIBLE UNDER SECTIONS 30 TO 438 OF THE ACT AND THERE IS NO SPECIFIC MENTIONING OF ADDING BACK OF ANY AMOUNT WR ITTEN OFF OUT OF INVESTMENTS. FROM THE ABOVE-REFERRED SUPREME COU RT DECISIONS IT IS CLEAR THAT IF THE PARTICULAR ITEM O F DISPUTE (DEBIT ENTRY MADE IN THE PROFIT & LOSS ACCOUNT) FALLS UNDE R THE CATEGORY OF 'EXPENDITURE' OR 'ALLOWANCE' OR 'PROVISION', AND THE SAME IS NOT ADMISSIBLE UNDER THE ACT, ONLY THEN THE CONCERN ED ITEM CAN BE ADDED BACK IN COMPUTING THE INCOME FROM GENERAL INSURANCE BUSINESS. FROM THE ABOVE FACTS IT APPEARS THAT THE DISALLOWANCE OF THE WRITING OFF OF INVESTMENTS, MADE BY THE ASSE SSING OFFICER IS NOT IN ACCORDANCE WITH THE PRESCRIBED SPECIFIC PROC EDURE IN THE APPELLANT'S CASE. 25. RESPECTFULLY FOLLOWING THE ABOVE-REFERRED TWO S UPREME COURT DECISIONS, SUBMISSIONS OF THE APPELLANT AND THE APP ELLATE ORDERS FOR THE ASSESSMENT YEARS 2000-01, 2002-03 AND 2004- 05 OF THE CIT(A)-VI, KOLKATA AND IN THE FACTS AND CIRCUMSTANC ES OF THE CASE AS MENTIONED HEREINABOVE, IT IS HELD THAT BECAUSE O F THE RESTRICTIONS CONTAINED IN SECTION 44 READ WITH RULE 5 OF THE FIRST SCHEDULE, THERE COULD NOT BE ANY DISALLOWANCE OF TH E AMOUNT WRITTEN OFF OUT OF INVESTMENTS AND, ACCORDINGLY, TH E DISALLOWANCE OF RS.4,22,26,000/- IS DELETED. HENCE, GROUND NO.5 IS ALLOWED. WE FIND THAT THE REVENUE WAS NOT ABLE TO CONTROVERT THE DETAILED FINDINGS OF THE LD CITA BEFORE US. HENCE WE FIND NO INFIRMITY I N THE ORDER OF THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 3 RAISED B Y THE REVENUE FOR THE ASST YEARS 2007-08 AND 2008-09 ARE DISMISSED. THE DECISI ON TAKEN IN ASST YEAR 2007-08 WITH REGARD TO THIS GROUND WOULD APPLY WITH EQUAL FORCE TO ASST YEAR 2008-09 AS SIMILAR DISALLOWANCE WAS MADE IN ASST YE AR 2008-09 EXCEPT WITH VARIANCE IN FIGURES. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATI ON AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF A.YS 2005-06, 2007- 08 AND 2008-09, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR THE SAID YEARS AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. GROUND NO. 1 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 5 3. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 2 RE LATING TO THE DELETION BY THE LD. CIT(APPEALS) OF THE DISALLOWANC E OF RS.5,78,44,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AMORTIZ ATION OF PREMIUM PAID ON INVESTMENTS, THE LD. REPRESENTATIVES OF BOT H THE SIDES HAVE AGREED THAT THIS ISSUE IS ALSO SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE ORDER OF THE TRIBUNAL DATED 05.08.2016 (SUPRA), WHEREIN A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL VIDE PARAGRAPH NO . 8 OF ITS ORDER AS UNDER:- 8. DISALLOWANCE OF AMORTISATION OF PREMIUM PAID ON PURCHASE OF INVESTMENTS THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE CLAIMED RS. 6,02,18,000/- TOWARDSAMORTIZATION OF PREMIUM PAID ON INVESTMENTS. WITHOUT ASSIGNING ANY REASON, THE LD AO STATED IN HIS ORDER THAT THE SAID CLAIM OF AMORTIZATION COULD ALLEGEDLY NOT BE ALLOWED AS ADMISSIBLE DEDUCT ION AND ACCORDINGLY DISALLOWED THE SAME. THE ASSESSEE SUBMITTED THAT IT HAS BEEN CARRYING ON THE BUSINESS OF INSURANCE OTHER THAN LIFE INSURANCE AND ACCORDINGLY ITS INCOME TAX ASSESSMENTS WERE REQUIRED TO BE MADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44 READ WITH RULE 5 OF THE FIRST SCHEDULE T O THE INCOME TAX ACT. ACCORDING TO THE AFORESAID PROVISIONS, THE PROFITS AND GAINS OF THE INSURANCE BUSINESS OTHER THAN LIFE INSURANCE SHALL BE TAKEN T O BE THE BALANCE OF PROFITS DISCLOSED BY THE PROFIT & LOSS ACCOUNT COPY OF WHIC H ARE REQUIRED UNDER THE INSURANCE ACT, 1938 TO BE FURNISHED TO THE COMPTROL LER OF INSURANCE SUBJECT TO THE FOLLOWING ADJUSTMENTS :- A) ANY EXPENDITURE OR ALLOWANCE WHICH IS NOT ADMISS IBLE UNDER THE PROVISIONS OF SECTION 30 TO 43B SHALL BE ADDED BACK. B) AMOUNT CARRIED OVER TO A RESERVE FOR ANY UNEXPIR ED RISKS AS PRESCRIBED IN THIS BEHALF SHALL BE ALLOWED AS A DED UCTION. THE ASSESSEE ALSO SUBMITTED THAT THE HONBLE SUPREM E COURT IN THE CASE OF GENERAL INSURANCE CORPORATION OF INDIA VS CIT REPOR TED IN (1999) 240 ITR 139 (SC) HAD HELD THAT THE ASSESSING OFFICER HAD NO GENERAL POWER TO MAKE ANY ADJUSTMENT IN THE ACCOUNTS OF A GENERAL INSURAN CE COMPANY. THE ASSESSEE ALSO SUBMITTED THAT THE HONBLE SUPREME COURT IN TH E CASE OF CIT VS ORIENTAL FIRE & GENERAL INSURANCE CO LTD REPORTED IN (2007) 291 ITR 370 (SC) HAD HELD THAT PROVISIONS MADE TOWARDS INCOME TAX AND BA D AND DOUBTFUL DEBTS, NOT BEING OF THE NATURE OF EXPENDITURE, COULD NOT B E ADDED BACK BY THE ASSESSING OFFICER WHILE COMPUTING THE BUSINESS INCO ME OF AN ASSESSEE CARRYING ON GENERAL INSURANCE BUSINESS COVERED U/S 44 OF THE INCOME TAX ACT. THE ASSESSEE FURTHER SUBMITTED THAT AS PER THE ABOV E REFERRED SECTION 44 OF THE INCOME TAX ACT , ALL CLASSES OF INCOME OF THE A SSESSEE ARE REQUIRED TO BE ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION. HENCE THE ASSESSING OFFICER SHOULD HAVE APPRECIATED THAT ALL EXPENSES AND / OR ADJUSTMENTS MADE IN THE ASSESSEES ACCOUNTS WERE TO BE CONSIDERED AS HAVING DIRECT NEXUS TO THE ASSESSEES BUSINESS OF INSURANC E. THE ASSESSEE FURTHER SUBMITTED THAT SINCE THERE DOES NOT EXIST ANY SPECI FIC PROVISION IN THE ACT FOR DISALLOWANCE OF PREMIUM PAID ON INVESTMENTS, THE LD AO SHOULD NOT HAVE MADE THE DISALLOWANCE OF RS. 6,02,18,000/- AS PER R ULE 5 OF THE 1 ST SCHEDULE TO THE INCOME TAX ACT, 1961. ACCORDINGLY, THE ASSESSEE SUBMITTED THAT THE LD AO I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 6 SHOULD HAVE HELD THAT PREMIUM PAID ON INVESTMENTS B Y THE ASSESSEE COULD NOT BE DISALLOWED AND HIS ACTION IN MAKING THE DISALLOW ANCE SHOULD BE CONSIDERED AS UNJUSTIFIED. IT WAS ALSO SUBMITTED TH AT THE TRANSACTIONS IN INVESTMENTS BEING A PART OF THE BUSINESS OF THE ASS ESSEE, THE AMORTIZATION OF PREMIUM PAID ON INVESTMENTS SHOULD BE CONSIDERED AS DEDUCTIBLE FOR THE PURPOSE OF COMPUTING THE BUSINESS INCOME OF THE ASS ESSEE. IT WAS SUBMITTED FURTHER THAT THIS WAS THE FIRST YEAR IN WHICH SUCH DISALLOWANCE HAS BEEN MADE. THE ASSESSEE BUYS THE GOVERNMENT SECURITIES O N PREMIUM. THE PREMIUM AMOUNT IS AMORTISED AND IS BEING CHARGED TO PROFIT & LOSS ACCOUNT ON PRO RATA BASIS DEPENDING ON THE NUMBER OF YEARS WHEN THE SECURITIES WILL BE PAID BACK. THE PURCHASING OF THE SECURITIES AT P REMIUM IS COMPULSORY AS PER THE GUIDELINES OF THE GOVERNMENT OF INDIA AND T HERE IS NO CHOICE WITH ASSESSEE FOR NOT TO BUY THE SAME. THE ASSESSEE DIST RIBUTES THE PREMIUM PAID OVER A PERIOD OF HOLDING RATHER THAN DEBITING THE S AME IN THE YEAR OF PURCHASE WHICH WILL GIVE A DISTORTED LOOK TO THE PR OFIT & LOSS ACCOUNT AND WILL NOT BE REFLECTING THE TRUE AND FAIR VIEW OF TH E COMPANY AS PER THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT SINCE THE ASSESSEE HA S BEEN CARRYING ON THE GENERAL INSURANCE BUSINESS AND CONSEQUENTLY ITS ASS ESSMENT IS REQUIRED TO BE MADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4 4 READ WITH RULE 5 OF FIRST SCHEDULE TO THE INCOME TAX ACT, 1961, THE LD AO IS EMPOWERED TO MAKE ADDITIONS / DISALLOWANCES ONLY IN ACCORDANCE WITH T HE ABOVE MENTIONED RULE 5. ANY SUM WHICH HAS BEEN AMORTISED CANNOT BE CONSI DERED AS EITHER EXPENSE OR ALLOWANCE OR PROVISION. IT WAS SUB MITTED THAT IN THE ABOVE REFERRED RULE 5 OF THE FIRST SCHEDULE, IT HAS BEEN MENTIONED THAT CERTAIN EXPENDITURE OR ALLOWANCE OR PROVISION CAN BE ADDED BACK ONLY IF THE SAME IS NOT ADMISSIBLE U/S 30 TO 43B OF THE ACT AND THERE I S NO SPECIFIC MENTIONING OF ADDING BACK OF ANY AMOUNT AMORTISED IN RELATION TO PREMIUM PAID ON INVESTMENTS. FROM THE ABOVE REFERRED SUPREME COURT DECISIONS, IT IS CLEAR THAT IF THE PARTICULAR ITEM OF DISPUTE (DEBIT ENTRY MADE IN THE PROFIT AND LOSS ACCOUNT) FALLS UNDER THE CATEGORY OF EXPENDITURE OR ALLOWANCE OR PROVISION AND THE SAME IS NOT ADMISSIBLE UNDER THE ACT, ONLY THEN THE CONCERNED ITEM CAN BE ADDED BACK IN COMPUTING THE INCOME FROM GENE RAL INSURANCE BUSINESS. FROM THE ABOVE FACTS, IT IS CLEAR THAT THE DISALLOW ANCE OF AMORTISED PREMIUM PAID ON INVESTMENTS MADE BY THE LD AO IS NOT IN ACC ORDANCE WITH THE PRESCRIBED SPECIFIC PROCEDURE IN THE ASSESSEES CAS E. THE LD CITA DULY APPRECIATED THE CONTENTIONS OF THE ASSESSEE AND BY FOLLOWING THE RATIO DECIDENDI OF THE TWO SUPREME COURT DECISIONS SUPRA, DELETED THE DISALLOWANCE OF RS. 6,02,18,000/- MADE BY THE LD AO. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 2. THE CIT(A) ERRED ON THE FACTS OF THE CASE AND I N LAW IN HOLDING THAT A SUM OF RS.6,02,18,000/- BEING AMORTIZATION O F PREMIUM PAID ON PURCHASE OF INVESTMENTS IS AN ALLOWABLE DED UCTION WHILE COMPUTING THE INCOME. 8.1. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF TH E LD AO. IN RESPONSE TO THIS, THE LD AR VEHEMENTLY RELIED ON THE ORDER OF THE LD CITA. 8.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE REVENUE WAS NOT ABLE TO CONTROVERT THE DETAILED FINDINGS OF THE LD CITA BEFORE US. WE ALSO FIND THA T THE LD CITA HAD GRANTED RELIEF TO THE ASSESSEE AFTER ELABORATELY DISCUSSING THE FACTS OF THE CASE AND BY I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 7 PLACING RELIANCE ON THE TWO SUPREME COURT JUDGMENTS SUPRA. RESPECTFULLY FOLLOWING THE SAME, WE FIND NO INFIRMITY IN THE ORD ER OF THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE REVENUE FOR THE ASST YEARS 2007-08 AND 2008-09 ARE DISMISSED. THE DECISI ON TAKEN IN ASST YEAR 2007-08 WITH REGARD TO THIS GROUND WOULD APPLY WITH EQUAL FORCE TO ASST YEAR 2008-09 AS SIMILAR DISALLOWANCE WAS MADE IN ASST YE AR 2008-09 EXCEPT WITH VARIANCE IN FIGURES. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATI ON AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF A.YS 2005-06, 2007- 08 AND 2008-09, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR THE SAID YEARS AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. GROUND NO. 2 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 4. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 3 RE LATING TO THE DIRECTION GIVEN BY THE LD. CIT(APPEALS) TO THE ASSE SSING OFFICER TO RE- COMPUTE THE DISALLOWANCE UNDER SECTION 14A READ WIT H RULE 8D AS PER THE JUDICIAL PRONOUNCEMENT OF ITAT, KOLKATA, IT IS OBSE RVED THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD RECEIVED IN COME OF RS.930.09 CRORES, WHICH WAS EXEMPT FROM TAX. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICE R THAT THE AVERAGE INVESTMENT MADE BY THE ASSESSEE DURING THE YEAR UND ER CONSIDERATION IN THE CORRESPONDING INVESTMENT WAS RS.10,709.96 CRORE S. ACCORDING TO THE ASSESSING OFFICER, DISALLOWANCE UNDER SECTION 14A R EAD WITH RULE 8D THUS WAS REQUIRED TO BE MADE TO THE EXTENT OF RS.53,44,9 8,000/- BEING 0.5% OF SUCH AVERAGE INVESTMENT. IN THIS REGARD, IT WAS SUB MITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT EVEN THOUGH DISAL LOWANCE OF RS.16,40,60,000/- WAS MADE IN THE COMPUTATION OF TO TAL INCOME UNDER SECTION 14A, THE ACTUAL EXPENDITURE INCURRED IN REL ATION TO THE EXEMPT INCOME WAS ONLY RS.8,21,40,421/-. IT WAS ALSO SUBMI TTED BY THE ASSESSEE THAT THE AVERAGE INVESTMENT AS WORKED OUT BY THE AS SESSING OFFICER WAS BASED ON RE-VALUED INVESTMENT AS APPEARING IN THE B ALANCE-SHEET AND NOT ON THE ACTUAL INVESTMENT. THESE SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AND HE PR OCEEDED TO MAKE A I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 8 DISALLOWANCE OF RS.37,14,38,000/- (RS.53,54,98,000/ - MINUS RS.16,40,60,000/-) UNDER SECTION 14A READ WITH RULE 8D. THE DISALLOWANCE OF RS.37,14,38,000/- MADE BY THE ASSES SING OFFICER UNDER SECTION 14A READ WITH RULE 8D WHILE COMPUTING THE T OTAL INCOME OF THE ASSESSEE AS PER THE NORMAL PROVISIONS OF THE ACT WA S CHALLENGED IN THE APPEAL FILED BY THE ASSESSEE BEFORE THE LD. CIT(APP EALS) AND BY RELYING, INTER ALIA, ON THE DECISION OF THE TRIBUNAL IN THE CASE OF REI AGRO LIMITED VS.- DCIT [144 ITD 141], THE LD. CIT(APPEALS) DIRE CTED THE ASSESSING OFFICER TO RE-COMPUTE THE DISALLOWANCE BY TAKING IN TO CONSIDERATION THE VALUE OF ONLY THOSE SHARES, WHICH HAD YIELDED DIVID END INCOME TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. SINCE THE DECISION OF THE TRIBUNAL IN THE CASE OF REI AGRO LIMITED (SUPRA) HA S BEEN UPHELD BY THE HONBLE CALCUTTA HIGH COURT AND THREE IS NO OTHER D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OR THE HONBLE SUPREME CO URT CITED BY THE LD. D.R. TAKING A CONTRARY VIEW, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUND NO. 3 OF THE REVENUES APPEAL. 5. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 4, T HE LD. REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE SAME IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL DATED 05.08.2016 (SUPRA), WHEREIN A SIMILAR ISSUE AS INVO LVED IN ASSESSEES OWN CASE FOR A.YS 2005-06, 2007-08 AND 2008-09 WAS DECI DED BY THE TRIBUNAL VIDE PARAGRAPH NO. 11 OF ITS ORDER AS UNDER:- 11. ADDITION TOWARDS RESERVE CREATED FOR UNEXPIRED RISK U/S 115JB OF THE ACT THE BRIEF FACTS OF THIS ISSUE IS THAT WHILE COMPUTI NG THE BOOK PROFIT U/S. 115JB OF THE ACT FOR THE PURPOSE OF MAT, THE LD AO CONSIDERED A SUM OF RS.169,45,00,000/- BEING THE RESERVE FOR UNEXPIRED RISK CREATED AS PER THE R EQUIREMENT OF LAW, AS ALLEGEDLY REQUIRED TO BE ADDED BACK. THE LD AO ADDED BACK THE AFORESAID SUM OF RS.169,45,00,000/- IN COMPUTING THE BOOK PROFIT. TH E ASSESSEE SUBMITTED THAT AS PER THE INSURANCE ACT, 1938, IN CASE OF AN INSURANCE CO MPANY CARRYING ON GENERAL INSURANCE BUSINESS, PREMIUM IS RECOGNISED AS INCOME OVER THE CONTRACT PERIOD OR THE PERIOD OF RISK, WHICHEVER IS APPROPRIATE. PREMIUM R ECEIVED IN ADVANCE WHICH REPRESENTS PREMIUM INCOME NOT RELATING TO THAT PART ICULAR ACCOUNTING PERIOD IN WHICH THE SAID PREMIUM HAS BEEN RECEIVED, IS SEPARA TELY DISCLOSED IN THE FINANCIAL STATEMENTS OF AN INSURANCE COMPANY. THAT PART OF IN COME WHICH IS ATTRIBUTABLE TO THE SUCCEEDING ACCOUNTING PERIOD OR PERIODS IS REDU CED FROM THE TOTAL PREMIUMS RECEIVED DURING AN ACCOUNTING PERIOD BY WAY OF CREA TION OF A RESERVE FOR UNEXPIRED I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 9 RISK IN ACCORDANCE WITH SECTION 64V(L)(II)(B) OF TH E INSURANCE ACT, 1938. THE AFORESAID RESERVE IS TO BE CREATED FOR A MINIMUM AM OUNT AS PRESCRIBED UNDER THE ABOVE MENTIONED SECTION. APPRECIATING THE SPECIAL N ATURE OF THE INSURANCE BUSINESS, THE LAW MAKERS PRESCRIBED SPECIAL PROCEDURE FOR COM PUTATION OF TOTAL INCOME OF AN INSURANCE COMPANY CARRYING ON BUSINESS OF INSURANCE OTHER THAN LIFE INSURANCE WHICH ARE TO BE FOUND IN RULE 5 OF THE FIRST SCHEDU LE TO THE INCOME-TAX ACT, 1961 READ WITH RULE 6E OF THE INCOME-TAX RULES, 1962. THIS PA RTICULAR PROCEDURE HAS TO BE MANDATORILY COMPLIED WITH IN MAKING THE ASSESSMENT FOR INCOME-TAX PURPOSES. EVERY YEAR ADJUSTMENTS ARE MADE TO THE EXISTING RES ERVE FOR UNEXPIRED RISK BY WAY OF CREDITING OR DEBITING BY THE AMOUNT OF DIFFERENC E BETWEEN THE RESERVE CREATED IN THE IMMEDIATE PRECEDING YEAR AND THE RESERVE REQUIR ED TO BE CREDITED DURING THE CURRENT ACCOUNTING YEAR. THIS CANNOT BE CONSIDERED AS ANY ALLEGED 'AMOUNT CARRIED TO ANY RESERVE' DEBITED TO THE PROFIT & LOSS ACCOUN T, BUT IT SHOULD BE APPRECIATED THAT THIS RESERVE REPRESENTS THAT PART OF PREMIUM I NCOME WHICH DOES NOT RELATE TO THE CURRENT ACCOUNTING PERIOD. IT MUST BE APPRECIAT ED THAT AS PER THE MERCANTILE SYSTEM OF ACCOUNTING, IT IS ONLY THAT INCOME/EXPEND ITURE WHICH RELATE TO THE CURRENT ACCOUNTING PERIOD, SHOULD FIND PLACES IN 'THE REVEN UE/PROFIT & LOSS ACCOUNT OF THE YEAR. HENCE IT WAS SUBMITTED THAT IN CASE OF AN INS URANCE COMPANY (CARRYING ON GENERAL INSURANCE BUSINESS), THE CREATION OF 'RESER VE FOR UNEXPIRED RISK' CANNOT BE CONSIDERED TO BE SIMILAR TO THOSE 'RESERVES' WHICH HAVE BEEN REFERRED TO IN CLAUSE (B) OF EXPLANATION (1) TO SECTION 115JB(2). IT MAY ALSO BE APPRECIATED THAT THE 'RESERVE FOR UNEXPIRED RISK' CAN, IN ANY CASE, NOT BE CONSID ERED AS ANY PROVISION MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILI TIES AS REFERRED TO IN CLAUSE(C) OF EXPLANATION (1) TO SECTION 115JB(2). ON THE BASIS OF THE ABOVE FACTS IT MAY KINDLY BE AP PRECIATED THAT THERE HAS NOT BEEN ANY REQUIREMENT TO ADD BACK ANY SUM IN RELATION TO THE 'RESERVE FOR UNEXPIRED RISK' WHILE COMPUTING 'BOOK PROFIT' U/S.115JB(2) FOR THE ASSESSMENT YEAR 2008-09. ACCORDINGLY, THE ASSESSEE SUBMITTED THAT THE 'RESER VE FOR UNEXPIRED RISKS' NOT BEING OF THE NATURE AS SPECIFIED IN CLAUSE (B) OF EXPLANA TION 1 TO SECTION 115JB(2), THE ACTION OF THE LD AO IN MAKING AN ADDITION OF SUCH R ESERVE SHOULD BE HELD AS UNJUSTIFIED. HENCE, THE ASSESSEE SUBMITTED THAT TH E LD AO MAY KINDLY BE DIRECTED TO DELETE THE ADDITION OF RS.169,45,00,000/- MADE BY H IM IN COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. 11.1. THE LD CITA OBSERVED THAT THE PROVISIONS CONT AINED IN RULE 6E OF THE INCOME-TAX RULES, 1962 HAS ALSO BEEN CONSIDERED. SECTION 115JB (2)- EXPLANATION (1)(B) REQUIRES INCREASING 'THE AMOUNTS CARRIED TO ANY RESERVE, BY WHATEVER NAME CALLED, OTHER THAN A RESERVE SPECIFIED U/S 33AC' IF SUCH AMOUNT IS DEB ITED TO THE PROFIT & LOSS ACCOUNT. IT IS HELD THAT THE RESERVE FOR UNEXPIRED RISK HAS NOT BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT AT ANY POINT OF TIME, THEREFORE EXPLANATION 1 TO SUB-SECTION 2 OF SECTION115JB IS NOT APPLICABLE IN THE PECULIAR FACTS OF THE GENE RAL INSURANCE BUSINESS CARRIED OUT BY THE ASSESSEE. IN THE ASSESSEE'S CASE, FIRSTLY THE C ONCERNED RESERVE FOR UNEXPIRED RISK HAS NOT BEEN CREATED THROUGH ANY DEBIT ENTRY MADE I N THE PROFIT & LOSS ACCOUNT. THE RESERVE HAS BEEN CREATED IN ACCORDANCE WITH THE REL EVANT PROVISIONS OF THE INSURANCE ACT, 1938, BY WAY OF DEBITING THE PREMIUM RECEIVED FOR ADJUSTING THE AMOUNT OF PREMIUM THAT MAY BE RELATED TO FUTURE YEAR OR YEARS . IT IS NOTED THAT RULE 5 OF THE FIRST SCHEDULE OF THE INCOME-TAX ACT, 1961, WHICH S PECIFIES THE PROCEDURE TO BE FOLLOWED FOR COMPUTING THE BUSINESS INCOME OF A GEN ERAL INSURANCE BUSINESS, SPECIFICALLY ALLOWS DEDUCTION FOR RESERVE CARRIED O VER FOR UNEXPIRED RISK AND RULE 6E OF THE INCOME-TAX RULES, 1962 PROVIDES THAT SUCH DE DUCTION WILL BE ALLOWED TO THE MAXIMUM EXTENT OF 50% OF THE NET PREMIUM RECEIVED D URING THE RELEVANT YEAR. I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 10 HENCE, THIS CREATION OF RESERVE OUT OF THE PREMIUM RECEIVED DURING THE YEAR, IS A STATUTORY REQUIREMENT AND THE SAME IS DULY RECOGNIS ED BY THE INCOME-TAX ACT/RULES. AS ALREADY MENTIONED HEREINABOVE, THIS PARTICULAR R ESERVE DOES NOT FALL IN THE CATEGORY OF THOSE RESERVES WHICH HAVE BEEN SPECIFIE D IN EXPLANATION 1 (B) TO SECTION 115JB(2). THEREFORE, THIS RESERVE VIZ., THE RESERVE FOR UNEXPIRED RISK IN THE CASE OF A GENERAL INSURANCE BUSINESS, SHOULD NOT BE ADDED BAC K FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT U/S. 115JB(2) FOR MAT PURPOSES. ON T HE BASIS OF THIS OBSERVATION, IT WAS HELD THAT THE LD AOS ACTION IN ADDING BACK A SUM O F RS.169,45,00,000/- BEING RESERVE CREATED FOR UNEXPIRED RISK, WAS NOT IN ACCORDANCE W ITH THE RELEVANT PROVISIONS OF THE INCOME-TAX ACT, 1961 AND ACCORDINGLY DELETED THE AD DITION. 11.2. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 4. THE CIT(A) ERRED ON THE FACTS OF THE CASE AND I N LAW IN HOLDING THE SUM OF RS.1694500000 BEING THE RESERVE CREATED FOR UNEXPIRED RISK SHOULD BE CONSIDERED AS RESERVE FOR COMPUTING THE B OOK PROFIT UNDER SECTION 115JB OF THE INCOME-TAX ACT. 11.3. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF T HE LD AO. IN RESPONSE TO THIS, THE LD AR VEHEMENTLY RELIED ON THE ORDER OF THE LD CITA. 11.4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE LD CITA HAD DEALT THIS ISSUE VERY ELABORATELY AND HAD GIVEN PROPER FINDING THAT THE RESERVE CREATED FOR UNEXPIRED RISK NEED NOT BE ADDED BACK FOR THE PURPO SE OF COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT. THE REVENUE WAS NOT ABLE TO C ONTROVERT THE FINDINGS OF THE LD CITA BEFORE US. HENCE WE FIND NO INFIRMITY IN THE O RDER PASSED BY THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 4 RAISED BY THE REVENUE FOR ASST YEAR 2008-09 IS DISMISSED. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATI ON AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF A.YS 2005-06, 2007- 08 AND 2008-09, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR THE SAID YEARS AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. GROUND NO. 4 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 6. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 5 RE LATING TO THE RELIEF ALLOWED BY THE LD. CIT(APPEALS) ON ACCOUNT OF DISAL LOWANCE UNDER SECTION 14A WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE -COMPANY UNDER SECTION 115JB, IT IS OBSERVED THAT WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB, AN ADDITION OF RS.16,40,60,000/- WAS MADE BY THE ASSESSEE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A. SINCE THE DISALLOWANCE UNDER SECTION 14A AS PER RULE 8D WAS WORKED OUT BY THE ASSESSING OFFICER AT RS.53,54,98,000/- WHILE COMPUTING THE TO TAL INCOME OF THE I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 11 ASSEESSEE AS PER THE NORMAL PROVISIONS OF THE ACT, THE ASSESSING OFFICER ADOPTED THE SAID COMPUTATION AND MADE A FURTHER ADD ITION OF RS.37,14,38,000/- (RS.53,54,98,000/- MINUS RS.16,40 ,60,000/-) WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE UNDER SEC TION 115JB. 7. ON APPEAL, THE LD. CIT(APPEALS) DELETED THE SAID ADDITION MADE BY THE ASSESSING OFFICER BY RELYING, INTER ALIA, ON TH E DECISION OF THIS TRIBUNAL IN THE CASE OF M/S. PHILIPS ELECTRONICS IN DIA LIMITED VS.- DCIT (ITA NO. 1815/KOL/2008 DATED 03.02.2016), WHEREIN I T WAS HELD THAT COMPUTATION OF DISALLOWANCE UNDER RULE 8D COULD BE USED ONLY FOR COMPUTATION OF INCOME UNDER NORMAL PROVISIONS OF TH E ACT AND NOT FOR BOOK PROFITS UNDER SECTION 115JB OF THE ACT. IT WAS FURTHER HELD THAT UNLESS AN ITEM IS DEBITED IN THE PROFIT & LOSS ACCO UNT, THE SAME COULD NOT BE THE SUBJECT MATTER OF ADDITION TO BOOK PROFITS U NDER CLAUSE (F) OF EXPLANATION TO SECTION 115JB OF THE ACT. SINCE THIS VIEW TAKEN BY THE DIVISION BENCH OF THE TRIBUNAL HAS BEEN AFFIRMED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF VINEET..[82 TAXMAN.COM 415] HOLDING THAT ARTIFICIAL DISALLOWANCE UNDER SECTION 14A AS WORKED OUT BY APPLYING RULE 8D CANNOT BE ADDED WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT AND IT IS ONLY THE ACTUAL EXPENDITURE IN CURRED BY THE ASSESSEE IN RELATION TO THE EXEMPT INCOME, WHICH IS DEBITED TO THE PROFIT & LOSS ACCOUNT, CAN BE ADDED. KEEPING IN VIEW THE SAID DEC ISION OF THE SPECIAL BENCH OF THIS TRIBUNAL, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A BY APPLYING RULE 8D WHILE COMPUTI NG THE BOOK PROFIT OF THE ASSESSEE UNDER SECTION 115JB OF THE ACT. GRO UND NO. 5 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 29, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 29 TH DAY OF MAY, 2019 I.T.A. NO. 1876/KOL/2017 (ASSESSMENT YEAR: 2014-2015) M/S. NATION AL INSURANCE COMPANY LIMITED 12 COPIES TO : (1) DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6(2), KOLKATA, AAYAKAR BHAWAN, 6 TH FLOOR, ROOM NO.6/15, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. NATIONAL INSURANCE COMPANY LIMITED, 3, MIDDLETON STREET, KOLKATA-700 071 (3) COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKAT A, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.