M/s. TheOriental Insurance Co. Ltd., New Delhi V. ACIT, New Delhi

ITA 4493/DEL/2012

• Counselvise Citation: 449320114 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-12-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 22-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GUNJAN PRASHAD
• Keywords: Business income; Depreciation; Deemed to accrue or arise in india; Retrospective amendment; Notional interest
• Section: 43B; 143(3); 234B; 14A; 115JB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SMT. DIVA SINGH, JM AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 4786 /DEL/201 2 AY 200 5 - 06 D CIT (LTU) VS. M/S ORIENTAL INSURANCE CO. LTD. DELHI A 25/27, ASAF ALI ROAD NEW DELHI PAN: AAACT 0627 R ITA NO. 4493 /DEL/201 2 AY 200 5 - 06 M/S ORIENTAL INSURANCE CO. LTD. VS. DCIT (LTU), DELHI NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. TARANDEEP SINGH, C.A. DEPARTMENT BY : S H. GUNJAN PRASHAD, CIT, D.R. ORDER PER J. SUDHAKAR REDDY, JM THESE ARE CROSS - APPEALS AND ARE DIRECTED AGAINST THE ORDER OF LD.CIT(APPEALS ) - LTU, NEW DELHI DT. 02.07.2012 PERTAINING TO THE ASSESSMENT YEAR 200 5 - 06 . 1 . 1 . THE GROUNDS OF APPEAL OF THE REVENUE READ AS FOLLOWS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS.3,39,60,000/ - MADE BY THE AO ON ACCOUN T OF INVESTMENT WRITTEN OFF. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING ADDITION OF RS.63,72,76,000/ - MADE BY THE AO ON ACCOUNT OF NOTIONAL INTEREST INCOME. ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS. 29,62,415/ - M ADE BY THE AO U/S 14A OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING DISA LLOWANCE OF RS. 8,31,169/ - M ADE BY THE AO ON ACCOUNT OF GUEST HOUSE EXPENSES. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 1 . 2 . THE GROUNDS OF APPEAL OF THE ASSESSEE READ AS FOLL OWS. 1. THAT ON THE FACTS AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ADDITION TO TOTAL INCOME OF RS.4,57,60,43,000/ - ON ACCOUNT OF PROFIT ON SALE/REDEMPTION OF INVESTMENTS. 2. THAT ON THE FACTS AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE DISAL LOWANCE MADE BY AO ON ACCOUNT OF PROVISION MADE FOR ORPHAN CLAIMS OF RS.7,07,78,528/ - . 3. THAT ON THE FACTS AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.7,47,40,000/ - MADE BY AO ON ACCOUNT OF DIMINUTION IN THE VALUE OF INVESTMENTS. 4. THAT ON THE FACTS AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.3,03,24,184/ - OUT OF DEPRECIATION CLAIMED BY THE APPELLANT. 5. THAT ON FACTS AND IN LAW THE AO WHILE COMPUTING THE BOOK PROFITS FOR THE PURPOSE OF S.115JB AT RS.9,05,14,34,065/ - ERRED IN MAKING FOLLOWING ADDITIONS/DISALLOWANCES: (A) PROFIT ON SALE OF INVESTMENTS RS. 4,57,60,43,000/ - (B) INVESTMENT WRITTEN OFF RS. 3,39,60,000/ - (C ) INTEREST INCOME NOT PROVIDED RS. 63,72,76,000/ - (D) ORPHAN CLAIM DISALLO WANCE RS. 7,07,78,528/ - (E) DIMINUTION IN THE VALUE OF INVESTMENT RS. 7,47,40,000/ - (F) DEPRECIATION DISALLOWED RS. 3,03,24,184/ - (G) MANAGEMENT EXPENSES RELATING TO TAX FREE INVESTMENT RS. 29,62,415/ - (H) GUEST HOUSE EXPENSES RS. 8,31,169/ - TO TAL: RS. 5,42,69,15,296/ - . 6. THAT ON THE FACTS AND IN LAW, THE AO ERRED IN LEVYING INTEREST U/S 234B AND 234D OF THE ACT. 7. THAT ON THE FACTS AND IN LAW, THE ORDER OF ASSESSMENT U/S 143(3) PASSED BY THE AO IS BAD IN LAW AND VOID AB INITIO. 8. THAT ON FACTS AND IN LAW THE ORDER PASSED BY CIT(A) TO THE EXTENT IT UPHOLDS THE ASSESSMENT ORDER IN PART IS BAD IN LAW AND VOID AB INITIO. 2. WE HAVE HEARD SHRI TARANDEEP SINGH, THE LD.COUNSEL FOR THE ASSESSEE AND SHRI GUNJAN PRASAD, THE LD.DR ON BEHALF OF THE REVENUE. ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 3 2.1. ADMITTEDLY THE ISSUES THAT AROSE IN BOTH THESE APPEALS ARE NO MORE RES INTEGRA , AS THEY HAVE BEEN ADJUDICATED BY THE DELHI B BENCH OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR THE AY 2000 - 2001 AND 2001 - 2002 IN THE CASE REPORTED IN 40 - SOT(1 9 ) ( DELHI ( ( URO ) (2010) AND THE DECISION OF THE TRIBUNAL FOR THE AYS 1982 - 83 TO 1986 - 87 AND 1995 - 96, 1997 - 98 IN THE CASE REPORTED IN 92 T TJ 300 (DELHI) IN D CIT VS. ORIENTAL GENERAL INSURANCE CO. (DELHI C BENCH OF THE TRIBUNAL) A ND THE ORDER OF THE DELHI E BENCH OF THE TRIBUNAL IN ITA NO. 2282/DEL/2007 IN M/S ORIENTAL INSURANCE CO.LTD. VS. ACIT FOR THE AY 2003 - 04 ORDER DT. 16.10.2009 REPORTED IN 50 SOT 80 (DEL) AND THE DECISION OF THE TRIBUNAL REPORTED IN ( 2012 ) 18 TAXMANN.COM 147 ( DELHI ) IN THE ASSESSEE S OWN CASE FOR THE AY 2004 - 05. 3. WE NOW DISPOSE OF F THE CASE GROUND WISE. 4. WE FIRST TAKE UP THE ASSESSEE S APPEAL IN ITA 4493/ DEL/ 2012. 4.1. GROUND NO.1 IS AGAINST ADDITION ON ACCOUNT PROFIT ON SALE/REDEMPTION OF INVESTMENTS. 4.2. THIS ISSUE HAS BEEN ADJUDICATED AT PARA 6 IN THE ASSESSEE S OWN CASE FOR THE AY 2004 - 05 , WHEREIN THE DELHI E BENCH OF THE TRIBUNAL HAS HELD AS FOLLOWS. 6. THIS BRINGS US TO THE MERITS OF THE ADDITION. WE HAVE ALREADY REPRODUCED THE PROVISION CONTAINED IN RULE 5 OF SCHEDULE - I IN PARAGRAPH NO.5.4 (SUPRA). THE LANGUAGE OF THE STATUTE IS CLEAR THAT NO ADJUSTMENT IS REQUIRED TO BE MADE TO THE ACC OUNTS FURNISHED TO THE CONTROLLER OF INSURANCE IN RESPECT OF PROFIT ON SALE OF INVESTMENTS . THAT VIEW WAS SUPPORTED BY TWO DECISIONS OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN ORIENTAL GENERAL INSURANCE CO.LTD. CASE (SUPRA) AND ORIENTAL INSURANCE CO. LTD. VS. ACIT (2010) 40 SOT 19 (DELHI) (URO). ON THE OTHER HAND, THE LD.COUNSEL HAS RELIED ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF BAJAJ ALLIANZ GENERAL INSURANCE CO.LTD. VS. ACIT (ITA 1447/PUNE/2007, DT. 31.8.2009). IN THIS CASE IT HAS BEEN HELD THAT AFTER DELETION OF RULE 5(B) OF THE FIRST SCHEDULE, NO CLAUSE WAS INTRODUCED ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 4 TO PRESCRIBE THE METHOD OF TAXATION OF SUCH INCOME. THEREFORE, THE REVENUE HAS NO RIGHT TO TAX SUCH INCOME IN THE ABSENCE OF ANY ENABLING PROVISION. THIS DECIS ION WAS FOLLOWED IN THE CASE OF GENERAL INSURANCE CORPN. OF INDIA LTD. VS. ACIT (2010) 35 SOT 161 (MUM) FOR AY 2002 - 03 TO 2004 - 05 DT. 22.10.2009, A COPY OF WHICH HAS BEEN PLACED BEFORE US. THE DECISION WAS ALSO FOLLOWED IN THE CASE OF DCIT VS. ROYAL SUNDA RAM ALLIANCE INSURANCE CO.LTD. BY THE D BENCH OF CHENNAI TRIBUNAL (ITA NOS. 847 TO 849/MAD/2008, DT. 5.3.2010), FOR AY 2002 - 03 TO 2004 - 05 A COPY OF WHICH HAS BEEN PLACED ON RECORD. HAVING CONSIDERED THESE DECISIONS, WE ARE OF THE VIEW THAT THE DECISION O F THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF IS A BINDING PRECEDENT, WHICH HAS TO BE FOLLOWED. THE DECISION IN THE CASE OF BAJAJ ALLIANZ GENERAL INSURANCE CO. PROCEEDS ON AN ASSUMPTION, WHICH GOES AGAINST THE ARGUMENT OF THE LD.COUNSEL IN THIS CASE T HAT THE ASSESSEE IS CARRYING ON ONLY ONE BUSINESS OF GENERAL INSURANCE, AND INVESTMENT AND SALE THEREOF IS PART AND PARCEL OF THIS VERY BUSINESS. IT HAS BE E N DEMONSTRATED ELABORATELY WHILE DEALING WITH THE INSURANCE ACT, WHICH PERMITS THE ASSESSEE COMPANY TO MAKE INVESTMENTS. THESE INVESTMENTS ARE IN THE NATURE OF STOCK IN TRADE AS THE VALUE THEREOF IS ADJUSTED IN THE BOOKS AT THE END OF EACH YEAR WITH A VIEW TO FIND OUT APPRECIATION OR DEPRECIATION THEREIN. SUCH DEPRECIATION HAS BEEN CLAIMED AS DEDUCTIO N IN THE BOOKS OF ACCOUNT OF THIS YEAR, WHICH HAS ALSO BEEN ALLOWED. THEREFORE, WE ARE OF THE VIEW THAT IN THE LIGHT OF THESE SUBMISSIONS, WE ARE BOUND TO FOLLOW THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE. 4.3. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DISMISS THIS GROUND OF THE ASSESSEE. 5. GROUND NO.2 IS ON THE DISALLOWANCE MADE ON ACCOUNT OF PROVISION MADE FOR ORPHAN CLAIMS. THIS ISSUE IS ADJUDICATED BY THE DELHI B BENCH OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE, IN ITS ORDER F OR THE AY 2000 - 2001 WHEREIN AT PARAS 35 TO 38 IT IS HELD AS FOLLOWS. 35. THE ONLY SURVIVING DISPUTE FOR AY 2001 - 02 RELATES TO THE DISALLOWANCE OF RS.4,12,00,000/ - ON ACCOUNT OF ESTIMATED LIABILITY FOR ORPHAN CLAIMS. 36. THE ASSESSEE MADE PROVISION IN RESPECT OF UNIDENTIFIED MOTOR THIRD PARTY CLAIM (ORPHAN CLAIM). THE ASSESSEE EXPLAINED THAT AS PER CLAUSE 5.1 OF ACCOUNTING POLICY OF THE ASSESSEE COMPANY IN RESPECT OF MOTOR THIRD PARTY CLAIM WHERE COURT SUMMONS HAVE B EEN SERVED ON THE COMPANY WITHOUT ADEQUATE POLICY PARTICULARS TO ESTABLISH THE LIABILITY OF THE COMPANY, PROVISION IS MADE TO THE EXTENT OF ONE THIRD OF THE VALUE OF THE TOTAL ESTIMATED LIABILITY OF SUCH UNIDENTIFIED CLAIMS DETERMINED ON THE BASIS OF EXIST ING GUIDE LINES AND ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 5 PRACTICES. THE AO HELD THE SAID PROVISION AS CONTINGENT IN NATURE. IN APPEAL, THE CIT(A) CONFIRMED THE FINDING OF THE AO AND THE AO (SIC - ASSESSEE) IS AGGRIEVED. 37. THE LD.COUNSEL FOR THE ASSESSEE WAS FAIR ENOUGH TO POINT OUT THAT I DENTICAL ISSUE AROSE IN ASSESSEE S OWN CASE FOR AYS 1997 - 98 AND 1998 - 99 AND THE TRIBUNAL HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE. THE LD.DR IN THE LIGHT OF THIS STRONGLY JUSTIFIED THE DISALLOWANCE. 38. WE HAVE GONE THROUGH THE RECORDS AND CONSIDERED RIVAL CONTENTIONS, FOLLOWING OUR OWN ORDER FOR AY 1997 - 98 AND 1998 - 99 THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE. WE HOLD THAT THE CLAIM OF ASSESSEE IS CLEARLY CONTINGENT IN NATURE AND CANNOT BE ALLOWED AS DEDUCTION. THE ORDER OF THE CIT(A) ON THIS ISSUE FOR AY 2000 - 2001 IS CONFIRMED. 5.1. RESPECTFULLY FOLLOWING THE SAME WE DISMISS THIS GROUND OF THE ASSESSEE. 6. GROUND NO.3 IS ON THE ISSUE OF DISALLOWANCE MADE BY THE AO ON ACCOUNT OF DIMINUTION IN THE VALUE OF INVESTMENTS. 6.1. THIS ISSUE HAD BEEN ADJUDICATED BY THE DELHI E BENCH OF THE TRIBUNAL FOR THE AY 2003 - 04, VIDE ORDER DT. 16.10.2009 WHEREIN AT PAGE 21 PARAS 22 TO 32 IT HAS HELD AS FOLLOWS. 22. AS PER GROUND NOS. 6 AND 7, THE ASSESSEE HAS CHALLENGED THE DECISION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.7,42,06,000 / - ON ACCOUNT OF PROVISION MADE BY THE ASSESEE FOR DIMINUTION IN THE VALUE OF INVESTMENTS. IT CONTENDED THAT THE PROVISION WAS MADE ON THE BASIS OF GUIDELINES ISSUED BY THE INSURANCE REGULA TORY AND DEVELOPMENT AUTHORITY, (IRDA) TO THE BOOK PROFITS OF THE ASSESEE U/S 115 JB OF THE 1. T .ACT. 23. THE ID. COUNSEL, DURING THE COURSE OF HEARING BEFORE US, REITERATED THAT THE ASSESEE IS IN THE BUSINESS OF GENERAL INSURANCE AND THE INCOME OF THE I NSURANCE COMPANIES IS REQUIRED TO BE COMPUTED AS PER THE PROVISIONS OF S.44 IN ACCORDANCE WITH THE RULES CONTAINED IN THE FIRST SCHEDULE OF THE ACT. HE INVITED REFERENCE TO RULE 5, PART B OF THE FIRST SCHEDULE, WHICH PROVIDED FOR 'COMPUTATION AND GAINS OF OTHER INSURANCE BUSINESS'. HE CONTENDED THAT THE INCOME OF THE ASSESSEE WAS TO BE TAKEN AS PER ITS BOOK PROFIT SUBJECT TO THE ADJUSTMENTS PROVIDED IN CLAUSE (A) OF THE RULE 5 OF SCHEDULE I OF THE LT. ACT. ACCORDING TO HIM SINCE THE DIMINUTION IN THE VALUE OF INVESTMENTS IS NOT ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 6 COVERED IN CLAUSE (A) OF RULE 5 OF SCH . I, THE AMOUNT CANNOT BE ADDED BACK IN COMPUTING THE PROFITS AND GAINS OF THE BUSINESS OF THE ASSESEE. THE ID. COUNSEL - IN SUPPORT OF HIS SUBMISSIONS RELIED ON THE FOLLOWING DECISIONS. I. GENERAL INSURANCE CORPORATION VS CIT (1999) 240 ITR 139(S.C.) II. CIT VS ORIENTAL FIRE AND GENERAL INS.(2007) 291 ITR 370(S.C.) III. CIT VS HCL COMNET SYSTEMS & SERVICES LTD. (2008) 174 TAXMAN 118 (S. C ) 24. THE ID.COUNSEL OF THE ASSESEE, FAIRLY CONCEDED THAT RULE 5(A) OF SCH.1 WAS AMENDED BY THE FINANCE (NO.2) ACT, 1998, W.E.F. 1.4.1989. HE HOWEVER, MAINTAINED THAT THE GENERAL PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN ITS CASE FOR A.Y. 1974 - 75 , 75 - 76 AND 78 - 79 (SUPRA) WERE STILL APPLICABLE AND THE PROVISION MADE BY THE ASSESSEE COULD NOT BE ADDED BACK IN COMPUTING THE PROFITS AND GAINS OF ITS BUSINESS BECAUSE THE DIMINUTION IN VALUE OF INVESTMENTS DEBITED TO THE PROFIT AND LOSS ALE WAS NEITHE R AN EXPENDITURE, NOR AN ALLOWANCE, NOR A PROVISION FOR ANY TAX, DIVIDEND, RESERVE NOR ANY OTHER PROVISION AS PRESCRIBED, WHICH WAS NOT ADMISSIBLE UNDER THE PROVISIONS OF S .30 TO 43B OF THE IT ACT. 25. THE ID. COUNSEL FOR THE ASSESEE INVITED OUR ATTE NTION TO RELEVANT PAGES OF ITS ANNUAL ACCOUNTS FOR F.YS. 2002 - 2003, 2003 - 04, AND CONTENDED THAT NOT ONLY SIMILAR PROVISION WAS MADE IN EARL IER YEAR BUT WHEN THE VALUE OF ASSETS APPRECIATED THE AMOUNT WAS ALSO CREDITED TO ITS PROFIT AND LOSS A / C IN THE SUB SEQUENT YEAR. 26. THE L D.D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESEE HAD IN FACT REVALUED ITS INVESTMENTS AND DEBITED NOTIONAL LOSS TO THE PROFIT AND LOSS ACCOUNT WHICH COULD BE ALLOWED AS A DEDUCTION IN COMPUTING THE BUSINESS INCOME OF THE ASSESEE. 27. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES, MATERIAL PLACED ON RECORD AND RIVAL SUBMISSIONS. THE AO MADE THE ADDITION FOR THE REASON THAT 'THE ASSESSEE COMPANY HAD CREATED A PROVISION OF RS.19,28,OL,OOO / - AS AGAINST IMMEDIATE PRECEDING YEAR OFRS.11,85,95,OOO / - SINCE THE ASSESSEE CO M PANY HAS ALREADY BOOKED THE LOSSES ON THE SHARE TRANSACTION THE PROVISION THAT WAS CREATED IN THE PREVIOUS YEAR ON ACCOUNT OF DIMINUTION IN THE VALUE OF INVEST MENT SHOULD HAVE BEEN OFFERED AS INCOME WHICH THE ASSESEE COMPANY WHILE PRETENDING TO DO SO HAS NOT ACTUALLY DONE. 28. IN THE LIGHT OF THE ABOVE FACTS IT IS CRYSTAL CLEAR THAT THE ASSESEE HAS MADE FURTHER PROVISION IN THE DIMINUTION OF INVESTMENTS AND THE SAME IS DISALLOWED BEING AN UNASCERTAINED LIABILITY AND ADDED BACK TO INCOME OF THE ASSESEE COMPANY. 29. THE ID.CIT(A) WAS OF THE CONSIDERED VIEW THAT THE ABOVE STATED CLAIM OF THE ASSESSEE FOR AN UNASCERTAINED LIABILITY WAS RIGHTLY DISALLOWED BY THE AO . SHE, THEREFORE, CONFIRMED THE DISALLOWANCE OF RS.7,42,06,000 / - ON ACCOUNT OF PROVISION IN THE DIMINUTION OF INVESTMENT. SHE ALSO HELD THAT THE PROVISION FOR ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 7 DIMINUTION IN THE VALUE OF INVESTMENTS CLAIMED AT RS.7,42,06,000 / - WAS NOT ASCERTAINED LIABILI TY AND, THEREFORE, THE AO HAD RIGHTLY MADE THE ADDITION U / S 115JB OF THE ACT. SHE ACCORDINGLY CONFIRMED THE ORDER OF THE AO ON THIS ISSUE. 30. ON A CAREFUL CONSIDERATION OF THE ISSUE, WE ARE OF THE CONSIDERED OPINION THAT THE PROVISION MADE BY THE ASSE SEE FOR NOTIONAL LOSSES ON REVALUATION OF INVESTMENT IS IN FACT A RESERVE IRRESPECTIVE OF THE NOMENCLATURE GIVEN BY THE, ASSESEE. WE ARE ALSO OF THE CONSIDERED OPINION THAT THE SUBSTANCE OF THE CLAIM IS TO BE CONSIDERED AND NOT THE NOMENCLATURE. THE PRO VISION IN QUESTION MADE BY THE ASSESEE IN SUBSTANCE IS A RESERVE FOR MEETING FUTURE LOSSES, IF ANY, ON ACCOUNT OF DIMINUTION IN THE VALUE OF ITS INVESTMENTS AND IS COVERED WITHIN THE SCOPE OF AMENDED PROVISIONS OF RULE 5(A) OF THE FIRST SCHEDULE OF THE LT . ACT. WITH DUE RESPECT THE DECISIONS CITED BY THE ID. COUNSEL ARE OF NO HELP TO THE ASSESEE IN VIEW OF THE RETROSPECTIVE AMENDMENT OF RULE 5(A) OF THE FIRST SCHEDULE OF THE LT. ACT. IT IS ALSO OBSERVED THAT THE ID. CIT(A) HAS ALSO HELD THAT THE PROVISI ON IN QUESTION BEING AN UNASCERTAINED LIABILITY WAS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE DEEMED INCOME OF THE ASSESSEE COMPANY U/S. 115 JB OF THE IT ACT. IN OUR CONSIDERED OPINION, THE ASSESSEE HAS NOT SOLD THE INVESTMENTS IN QUESTION DURING THE RELEVANT ACCOUNTING PERIOD AND NOT WITHSTANDING THE GUIDELINES GIVEN BY THE IRDA TO REFLECT THE TRUE POSITION OF ASSETS AND LIABILITIES IN THE RELEVANT BALANCE SHEET OF THE ASSESSEE, THE NOTIONAL LOSSES CLAIMED ONLY ON THE BASIS OF PREVAILING MARKET PRICE COULD NOT BE ALLOWED AGAINST THE ACTUAL BUSINESS PROFITS OF THE RELEVANT ACCOUNTING PERIOD. IT IS ALSO OBSERVED THAT THE SPECIAL PROVISIONS FOR PAYMENT OF TAX U/S. L15JB ARE APPLICABLE NOT - WITH - STANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THE I NCOME TAX ACT, INCLUDING SEC. 44 R.W. SCHEDULE I OF THE 1. T. ACT FOR COMPUTING THE INCOME FROM 'INSURANCE BUSINESS'. AS PER THE PROVISIONS OF SEC. 115JB(2), THE ASSESSEE COMPANY IS REQUIRED TO PREPARE ITS PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE PRO VISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT. IT IS CLEAR FROM THE PERUSAL OF THE RELEVANT PROVISIONS THAT THE CLAIM OF LOSS POT ACTUALLY INCURRED ON THE INVESTMENTS WHICH HAVE NEITHER BEEN SOLD NOR TRANSFERRED OTHERWISE IS ONLY A PROVIS ION FOR UNASCERTAINED LIABILITY AND CANNOT BE ALLOWED TO BE REDUCED FROM THE INCOME OF THE ASSESSEE. 31. IT IS FURTHER OBSERVED THAT CLAUSE 79 OF FINANCE (N02) BILL, 2009 SEEKS TO AMEND RULE 5 OF THE FIRST SCHEDULE OF THE INCOME TAX ACT W.E.F. 1.04.2011 BY INSERTING CLAUSE (B) WHICH PROVIDES THAT ADJUSTMENT SHALL BE MADE BY WAY OF DEDUCTION IN RESPECT OF ANY AMOUNT EITHER WRITTEN OFF OR PROVIDED IN THE ACCOUNTS TO MEET DIMINUTION IN OR LOSS ON REALIZATION OF INVESTMENTS IN ACCORDANCE WITH THE REGULATIONS PRESCRIBED BY INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY. 32. THUS, IT IS VERY CLEAR THAT THE DEDUCTION FOR THE AMOUNT PROVI DED BY THE ASSESSEE IN ITS RELEVANT ACCOUNTS TO MEET DIMINUTION IN OR LOSS ON REALIZATION ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 8 OF INVESTMENTS CANNOT BE ALLOWED FOR THE PERIOD PRIOR TO 01.04.2011 AS PER THE EXISTING PROVISIONS OF THE ACT. THE CLAIM OF THE ASSESSEE HAS, THUS, BEEN RIGHTLY REJECTED BY THE AO. THE ADDITION HAS, THEREFORE, RIGHTLY BEEN MADE BY THE A O AND THE DECISION OF THE LD. CIT ( A) ON THIS ISSUE REQUIRES NO INTERFERENCE ON OUR PART. THIS GROUND OF APPEAL IS REJECTED. 6.2. CONSISTENT WITH THE VIEW TAKEN THEREIN WE DISMISS THIS GROUND OF THE ASSESSEE. 7. GROUND NO.5 IS REGARDING COMPUTATION OF BOOK PROFITS. TH E ASSESSEE HAS FILED AN ADDITIONAL GROUND ON THIS ISSUE WHICH READS AS FOLLOWS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN COMPUTING THE INCOME OF THE APPELLANT U/S 115 JB OF THE ACT. 1.1. O N THE FACTS AND IN LAW THE AO OUGHT TO HAVE APPRECIATED THAT PROVISIONS OF S.115 JB OF THE ACT ARE NOT APPLICABLE TO THE APPELLANT AS THE APPELLANT PREPARES ITS ACCOUNT AS PER THE IRDA PRINCIPLES ON FINANCIAL STATEMENTS AND AUDITOR S REPORT OF INSURANCE COMPANIES REGULATION 2002 AND NOT AS PER THE PROVISIONS OF PART 2 AND PART 3 OF SCHEDULE XI TO THE COMPANIES ACT, 1956. 7.1 . AFTER HEARING THE RIVAL CONTENTIONS WE ADMIT THESE ADDITIONAL GROUNDS FOR THE REASON THAT ALL THE FACTS ARE ON RECORD AND THE GROUND IS A LEGAL GROU ND BY FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF NTPC LTD. VS. CIT REPORTED IN 229 ITR 383. WE FURTHER FIND THAT THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE MUMBAI I BENCH O F THE TRIBUNAL IN THE CASE OF ICICI LAMBARD GENERAL INSURANCE CO.LTD. RANGE 10(1) MUMBAI 54 SOT 3 538 MUMBAI WHEREIN IT IS HELD THAT THE PROVISIONS OF S.115 JB OF THE ACT ARE NOT APPLICABLE IN CASE OF INSURANCE COMPANIES , AS THEY ARE NOT REQUIRED TO PREPA RE THE ACCOUNTS AS PER PART 2 AND 3 OF SCHEDULE VI TO THE COMPANIES ACT. RESPECTFULLY FOLLOWING THE SAME WE ALLOW THIS GROUND OF THE ASSESSEE AND DELETE THE COMPUTATION MADE U/S 115 JB OF THE ACT. 7.2 . IN THE RESULT, THE ADDITIONAL GROUNDS ARE ALLOWED . ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 9 8. GROUND NO.5 IS NOT ADJUDICAT ED AS IT IS INFRUCTUOUS. 9. GROUND NO.6 IS AGAINST LEVY OF INTEREST U/S 234B AND 234D OF THE INCOME TAX ACT. THE LEVY OF INTEREST IS CONSEQUENTIAL IN NATURE AND THESE GROUNDS ARE DISMISSED AS SUCH. 10 . GROUND NOS. 7 AND 8 ARE GENERAL IN NATURE. 11 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. 12. WE NOW TAKE UP THE REVENUE S APPEAL IN ITA 4786/DEL/2012. 13. GROUND NO.1 IS AGAINST DELETION OF DISALLOWANCE MADE ON ACCOUNT OF INVESTMENT WRITTEN OFF. 13.1 . THE ISSUE HAS BEEN CONSIDERED BY TH IS BENCH IN THIS ORDER FOR THE AY 2000 - 2001 AND 2001 - 02 WHEREIN AT PARA S 4 TO 8 IT IS HELD AS FOLLOWS. 4. N EXT COMMON GROUND IN BOTH THESE APPEALS RELATES TO DISALLOWANCE OF IN VESTMENT WRITTEN OFF. THE CIT( A) FOLLOWING HIS PREDECESSOR S ORDERS IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 1989 - 90 TO 1999 - 2000 SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 5. THE LEARNED COUNSEL FOR THE ASSESSEE FILED COPIES OF THE ORDERS DATED 29 - 9 - 2004 OF THE TRIBUNAL INVOLVING ASSESSMENT YEARS 1990 - 91 TO 1995 - 96. THE REVENUE SOUGHT APPROVAL OF THE C O D TO FILE APPEAL AGAINST THIS ORDER, WHICH THE C O D HAS NOT PERMITTED. OUR ATTENTION WAS DRAWN TO P.56 OF THE PAPER BOOK. THE LEARNED COUNSEL FURTHER RELIED UPON THE ORDER DATED 6 - 6 - 2008 OF THE TRIBUNAL IN ASSESSMENT YEAR 1998 - 99 WHEREIN THE TRIBUNAL FOLLOWING ITS EARLIER ORDER HAS AGAIN DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY SUPPORTED THE IMPUGNED ORDERS. 7. WE HAVE GONE THROUGH THE RECORDS AND FIND THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THE OPERATIVE PART OF THE TRIBUNAL'S ORDER DATED 29 - 9 - 2004 REPORTED AS DY. CIT V. ORIENTAL GENERAL INSURANCE CO. LTD. [2005] 143 TAXMAN 15(DELHI) (MA G.), WHICH DEALS WITH THIS ISSUE IN PARA 19 IS REPRODUCED AS BELOW: '19. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THIS APPEAL, WE ARE CONCERNED WITH THE ASSESSMENT YEAR 199 - 91 I.E., AFTER THE OMISSION OF SUB - RULE (B).OF RULE 5 OF FIRST SCH EDULE TO INCOME - TAX ACT, 1961 WITH EFFECT FROM 1ST APRIL, 1989. THE LE MED C I T(A) HAS BASED HIS DECISION ON CBDT CIRCULAR BY ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 10 WAY OF EXPLANATORY NOTES ON THE CHANGES BROUGHT ABOUT BY THE RELEVANT FINANC E ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTE D OUT THAT THE DISCUSSION IN PARA 45 OF THE CIRCULAR IN RELATION TO OMISSION OF SUB - RULE (B) COULD AT BEST BE ELUCIDATION OF THE INTENTION OF THE LAW MAKERS. THE FACT OF THE MATTER WAS THAT SUCH EFFECT WAS NOT FORTHCOMING FROM OMISSION OF CLAUSE (B). ON C ONSIDERATION, WE FIND OURSELVES IN SUBSTANTIAL AGREEMENT WITH THIS ARGUMENT. THE INTENTION OF THE LEGISLATURE WAS TO EXEMPT PROFIT ON SALE OF INVESTMENTS AND TO DISALLOW DEDUCTION OF LOSS ON SALE OF INVESTMENTS, THE FACT REMAINS THAT SUCH INTENTION HAS NOT BEEN TRANSLATED INTO STATUTE. OMISSION OF SUB - RULE (B) OF RULE 5 DOES NOT BRING ABOUT THIS CHANGE IN THE STATUTE. IN THESE CIRCUMSTANCES, WE ARE LEFT WITH THE ONLY QUESTION AS TO WHETHER THE WRITE OFF/WRITE DOWN OF INVESTMENTS MADE IN THE BOOKS OF ACCOUNT S OF THE ASSESSEE FOR THE ASSESSMENT YEAR BEFORE US CAN BE CONSIDERED TO BE 'EXPENDITURE' OR 'ALLOWANCE'. IF IT REPRESENTS EITHER OF THE TWO, PROVISIONS OF SECTIONS 30 TO 43B OF THE ACT WOULD COME INTO OPERATION AND THE AMOUNT CLAIMED BY THE ASSESSEE CANNO T BE ALLOWED AS DEDUCTION FOR WANT OF CORRESPONDING PROVISIONS IN INCOME - TAX ACT, 1961. IF, ON THE CONTRARY, THE AMOUNT CLAIMED BY THE ASSESSEE BY WAY OF WRITE OFF/WRITE DOWN OF INVESTMENTS IS NEITHER AN 'EXPENDITURE' NOR AN 'ALLOWANCE', THE ASSESSING OFFI CER, IS NOT CLOTHED WITH ANY JURISDICTION TO INTERFERE IN THE PROFIT AND LOSS ACCOUNT AS DRAWN BY THE ASSESSEE IN .THIS BEHALF. ON CONSIDERATION OF THE MATTER, WE FIND THAT THE ENTRIES MADE IN THE ASSESSEE'S BOOKS OF ACCOUNT IN THIS BEHALF ARE STRICTLY IN ACCORDANCE WITH THE GUIDELINES ISSUED BY GENERAL INSURANCE CORPORATION. THESE GUIDELINES PERMIT THE ASSESSEE TO BOOK A LOSS WHICH HAS FOR ALL PRACTICAL PURPOSES, BEEN SUFFERED ON ACCOUNT OF DEPRECIATION IN VALUE OF INVESTMENTS BEYOND ANY REASONABLE HOPE OF RECOVERY. IN SUCH CIRCUMSTANCES, THE GUIDE L INES PERMITTED THE INSURANCE COMPANY TO BOOK THE LOSS IN THE ACCOUNTS RATHER THAN WAITING FOR ACTUAL REALIZATION OF LOSS ON SALE OF INVESTMENT. THUS, THE AMOUNTS CLAIMED BY THE ASSESSEE ARE TO BE UNDERSTOOD AS A LOSS ON INVESTMENTS SUFFERED BY THE ASSESSEE. SUCH 'LOSS' CAN NEITHER BE - CONSIDERED AN 'EXPENDITURE' NOR AN 'ALLOWANCE'. WE FIND SUPPORT IN THIS VIEW FROM THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GENERAL INSURANCE CORPORATION OF INDIA V S , CIT [1999] 156 CTR (SC) 425: [1999] 240 ITR 139(SC). IN THAT JUDGMENT HON'BLE SUPREME COURT HELD THAT 'SPENDING' IN THE SENSE OF' 'PAYING OUT OR AWAY' OF MONEY IS THE PRIMARY MEANING OF 'EXPENDITURE'. 'EXPENDITURE' IS WHAT IS PAID OUT OR AWAY AND IS SOMETHING WHICH IS GONE IRRETRIEVABLY. IN THAT CASE, HON'BLE SUPREME COURT HELD THAT CERTAIN AMOUNTS SET APART WHICH IS TREATED TO BE AN EXPENDITURE FOR THE PURPOSE OF INSURANCE ACT, 1938 CANNOT BE TREATED SO FOR THE PURPOSE OF RULE 5(A) OF THE FIRST SCHEDULE FOR T HE REASON THAT THE AMOUNT SET APART DID NOT FALL TO BE CONSIDERED AS AN EXPENDITURE IN THE ORDINARY MEANING OF THE EXPRESSION. AS WE HOLD THE VIEW THAT WRITE OFF OF INVESTMENTS CLAIMED BY THE ASSESSEE REPRESENTS, 'LOSS' AND NOT 'EXPENDITURE' NOR' ALLOWANCE ' WE HOLD THAT THE ASSESSING OFFICER ERRED IN ADDING BACK THE SAME IN THE COMPUTATION OF ASSESSEE'S INCOME CHARGEABLE TO TAX AND SIMILARLY THE CIT(A) ERRED IN CONFIRMING THE SAME. AS TO THE JUDGMENT RELIED UPON BY THE LEARNED C I T - DEPARTMENTAL REPRESENTATIV E IN INDORE MALWA U NITED MILLS LTD. V. CIT [1962] 45 ITR 210 (SC), WE FIND THE SAME TO BE OUT OF CONTEXT. IN VIEW OF THE DISCUSSION IN THE FOREGOING PARAS WE DIRECT DELETION OF THE ADDITION MADE ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 11 BY THE ASSESSING OFFICER IN RESPECT OF AMOUNTS WRITTEN OFF BY THE ASSESSEE ON PUNT OF DEPRECIATION IN THE VALUE OF INVESTMENTS.' 8. IN THE LIGHT OF THE ABOVE PRECEDENT, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE C I T(A) IS DELETED. 13.2. THE FIRST APPELLATE AUTHORITY HAS APPLIED THE D ECISION OF THE TRIBUNAL AND GRANTED RELIEF. CONSISTENT WITH THE VIEW TAKEN IN THE CASE REPORTED IN 130 TTJ 388 (DELHI), WE UPHOLD THE FINDING OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF THE REVENUE. 14. GROUND NO.2 IS ON THE ISSUE OF DELETION OF AN ADDITION MADE ON ACCOUNT OF NOTIONAL INTEREST INCOME. THIS ISSUE IS COVERED IN THE ASSESSEE S OWN CASE VIDE THE DECISION OF THE JURISDICTIONAL HIGH COURT REPORTED IN 125 TAXMANN.COM 1094 DELHI, WHEREIN THE ORDER OF THE TRIBUNAL ON THIS ISSUE REPORTED IN 13 0 TTJ 3 8 8 (DELHI) WAS UPHELD. RESPECTFULLY FOLLOWING THE SAME WE DISMISS THIS GROUND OF REVENUE. 15. GROUND NO.3 IS ON THE ISSUE OF DELETION OF DISALLOWANCE MADE BY THE AO U/S 14A. THIS ISSUE IS ALSO COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR THE AY 2000 - 2001, 2001 - 2002 WHEREIN AT PARAS 18 TO 24 THE TRIBUNAL HAS HELD AS FOLLOWS. 18. THE NEXT COMMON DISPUTE RELATES TO THE ORDER OF THE CIT(A) IN SUSTAINING THE ACTION OF ASSESSING OFFICER IN MAKING (SIC) ALLOWING ONLY 50 PER CENT OF THE MANAGEMENT EXPENSES BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. THE ADDITION IS MADE BY THE ASSESSING OFFICER ON THE PLEA THAT THE PROVISION OF SECTION 14A WAS INSERTED BY FINANCE ACT, 200 I WITH EFFECT FROM 1 - 4 - 1962. IT IS STATED THAT THE INVESTMENTS MADE BY THE ASSESSEE ARE BOTH TAXABLE AS WELL AS. TAX - FREE. AN ESTIMATED DISALLOWANCE OF 50 PER CENT OUT OF THE MANAGEMENT - EXPENSES INCURRED AND AS CLAIMED IN THE PROFIT AND LOSS ACCOUNT IS TREATED AS IS EXPENSES INCURRED IN CONNECTION WITH THE LOOKING AFTER TAX - FREE INVESTMENT. 19. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE INCOME OF THE ASSESSEE IS TO BE COMPUTED UNDER SECTION 44 READ WITH RULE 5 OF SCHEDULE I OF THE INCOME - TA X ACT. SECTION 44 IS A NON OBSTANTE CLAUSE AND APPLIES NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED WITHIN THE PROVISIONS OF THE INCOME - TAX ACT RELATING TO COMPUTATION OF INCOME CHARGEABLE UNDER DIFFERENT HEADS, OTHER THAN THE INCOME TO BE COMPUTED U NDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. FOR COMPUTATION OF PROFITS AND ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 12 GAINS OF BUSINESS OR PROFESSION THE MANDATE TO THE ASSESSING OFFICER IS TO COMPUTE THE SAID INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 28 TO 438 OF THE AC T. IN THE CASE OF THE COMPUTATION OF PROFITS AND GAIN OF ANY BUSINESS OF INSURANCE, THE SAME SHALL BE DONE IN ACCORDANCE WITH THE RULES PRESCRIBED IN FIRST SCHEDULE OF THE ACT, MEANING THEREBY SECTIONS 28 TO 438 SHALL NOT APPLY. NO OTHER PROVISION PERTAINI NG TO COMPUTATION OF INCOME WILL BECOME RELEVANT. ACCORDING TO THE LEARNED COUNSEL, TWO PRESUMPTIONS THAT FOLLOW ON A COMBINED READING OF SECTIONS 14, 14A AND 44 AND RULE 5 OF THE FIRST SCHEDULE ARE : (A)THAT NO HEAD - WISE BIFURCATION IS CALLED FOR. THE I NCOME, INTER ALIA, OF THE BUSINESS OF INSURANCE IS ESSENTIALLY TO BE AT THE AMOUNT OF THE BALANCE OF PROFITS DISCLOSED BY THE 'ANNUAL ACCOUNTS AS FURNISHED TO THE CONTROLLER OF INSURANCE UNDER THE INSURANCE ACT, 1938. THE SAID BALANCE OF PROFITS IS SUBJECT ONLY TO ADJUSTMENTS THEREUNDER. THE ADJUSTMENTS DO NOT REFER TO DISALLOWANCE UNDER S. 14A OF THE ACT. (B)PROFITS AND GAINS OF BUSINESS AS REFERRED TO IN (C) ABOVE HAVE ONLY TO BE COMPUTED IN ACCORDANCE WITH RULE 5 OF THE FIRST SCHEDULE. 20. SECTION 44 C REATES A SPECIFIC EXCEPTION TO THE APPLICABILITY OF SECTIONS 28 TO 438. THEREFORE, THE PURPOSE, OBJECT AND PURVIEW OF SECTION L4A HAS NO APPLICABILITY TO THE PROFITS AND GAINS OF AN INSURANCE BUSINESS. 21. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY JUSTIFIED THE ACTION OF THE ASSESSING OFFICER AND THAT OF THE CIT(A) IN THE LIGHT OF THE CLEAR PROVISIONS OF SECTION 44A OF THE ACT. 22. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORDS. THE PROVISIONS OF SECTION 44 READ AS UNDER: '4 4. INSURANCE BUSINESS. - NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE PROVISIONS OF THIS ACT RELATING TO THE COMPUTATION OF INCOME CHARGEABLE UNDER THE HEAD 'INTEREST ON SECURITIES', 'INCOME FROM HOUSE PROPERTY', 'CAPITAL GAINS' OR INCOME FROM O THER SOURCES', OR IN SECTION 199 OR IN SECTIONS 28 TO 438, THE PROFITS AND GAINS OF ANY BUSINESS OF INSURANCE, INCLUDING ANY SUCH BUSINESS CARRIED ON BY A MUTUAL INSURANCE COMPANY OR BY A CO - OPERATIVE SOCIETY, SHALL BE COMPUTED IN ACCORDANCE WITH THE RULES CONTAINED IN THE FIRST SCHEDULE.' 23. THE ABOVE PROVISION MAKES IT VERY CLEAR THAT SECTION 44, APPLIES NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED WITHIN THE PROVISIONS OF THE INCOME - TAX ACT RELATING TO COMPUTATION OF INCOME CHARGEABLE UNDER DIFFE RENT HEADS. WE AGREE WITH THE LEARNED COUNSEL THAT THERE IS NO REQUIREMENT OF HEAD - WISE BIFURCATION CALLED FOR WHILE COMPUTING THE INCOME UNDER SECTION 44 OF THE ACT IN THE CASE OF AN INSURANCE COMPANY. THE INCOME OF THE BUSINESS OF INSURANCE IS ESSENTIALL Y TO BE AT THE AMOUNT OF THE BALANCE OF PROFITS DISCLOSED BY THE ANNUAL ACCOUNTS AS FURNISHED TO THE CONTROLLER OF INSURANCE. THE ACTUAL COMPUTATION OF PROFITS AND GAINS OF INSURANCE BUSINESS WILL HAVE TO BE COMPUTED IN ACCORDANCE WITH RULE 5 OF THE FIRST SCHEDULE. IN ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 13 THE LIGHT OF THESE SPECIAL PROVISIONS COUPLED WITH NON OBSTANTE CLAUSE THE ASSESSING OFFICER IS NOT PERMITTED TO TRAVEL BEYOND THESE PROVISIONS. 24. SECTION 14A CONTEMPLATES AN EXCEPTION FOR DEDUCTIONS AS ALLOWABLE UNDER THE ACT ARE THOSE CON TAINED UNDER SECTIONS 28 TO 438 OF THE ACT. SECTION 44 CREATES SPECIAL APPLICATION OF THESE PROVISIONS IN THE CASES OF INSURANCE COMPANIES. WE THEREFORE, AGREE WITH THE ASSESSEE AND DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WHICH IS BASED ON TH E APPLICATION OF SECTION L4A OF THE ACT AS ACCORDING TO US, IT IS NOT PERMISSIBLE TO THE AO TO TRAVEL BEYOND S.44 AND FIRST SCHEDULE OF I.T.ACT. 15.1. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DISMISS THIS GROUND OF REVENUE. 16. GROUND NO.4 IS AGAINST DELETION OF DISALLOWANCE WITH REGARD TO GUEST HOUSE EXPENSES. THIS ISSUE ALSO IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR THE AY 2000 - 2001, 2001 - 2002 WHEREIN AT PARAS 9 TO 12 THE TRIBUNAL HAS HELD AS FOLLOWS. 9. THE NEXT COMMON DISPUTE IN BOTH THE APPEALS RELATES TO THE ACTION OF THE C!T(A) FOR DISALLOWING 50 PER CENT OF THE GUEST HOUSE EXPENSES . THE ASSESSEE COMPANY MAINTAINS 16 GUEST HOUSES AND TRANSIT HOUSES OUT OF WHICH SEVERAL GUEST HOUSES ARE OWNED BY THE ASSE SSEE COMPANY . THE ASSESSEE DID NOT GIVE DETAILS OF EXPENDITURE ON REPAIRS AND MAINTENANCE OF OWN GUEST HOUSES AND RENTED GUEST HOUSE . THE ASSESSING OFFICER DISALLOWED 50 PER CENT OF THESE EXPENSE . THE ASSESSEE HAS ALSO NOT FURNISHED LEASE AGREEMENT SO AS ASCERTAIN THE LIABILITY TO MAINTAIN THE GUEST HOUSES . IT IS IN THIS BACKGROUND THAT THE ASSESSING OFFICER WAS HELD TO BE JUSTIFIED, IN DISALLOWING 50 PER CENT OF THE EXPENSES INCURRED ON MAINTENANCE OF GUEST HOUSES . THE LEARNED C I T(A) MADE AN OBSERVATION T HAT HIS ORDER FOR THE YEAR FOLLOWS HIS OWN IDENTICAL ORDER FOR ASSESSMENT YEAR 1999 - 2000. 10. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT IN ASSESSMENT YEAR 1999 - 2000, THE TRIBUNAL VIDE ORDER DATED 25 - 7 - 2008 IN ITA NO . 4565 / DELHI/2002 HAS ACCEPTED THE ASSESSEE'S CONTENTIONS, A COPY OF THE SAID ORDER OF THE TRIBUNAL IS PL A CED AT PP, 78 TO 82 OF THE PAPER BOOK . 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY JUSTIFIED THE ORDER OF THE CIT(A), IN THE LIGHT OF HIS DISCUSSION I N THE IMPUGNED ORDER. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH T HE RECORDS. THE TRIBUNAL IN ASSESSMENT YEAR 1999 - 2000 HAS HELD THAT EXPENDITURE INCURRED FOR MAINTENANCE OF THE COMPANY'S OWN GUEST HOUSES IS COVERED UNDER SECT ION 30( A )( II) OF THE ACT. THEREIN THE TRIBUNAL ACCEPTED THE ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 14 PLEA OF THE ASSESSEE THAT IN RESPECT OF THE GUEST HOUSES OWNED BY THE ASSESSEE, REPAIR EXPENSES WILL HAVE TO BE ALLOWED AS DEDUCTION UNDER SECTION 30(0)(II ) OF THE ACT. ONCE THE EXPENDITURE IS A LLOWABLE UNDER SECTION 30(0)(II ), IF THE EXPENDITURE OF INCURRED ON REPAIR AND MAINTENANCE OF GUEST HOUSE TAKEN ON LEASE SHOULD ALSO BE ALLOWED . IN THE LIGHT OF THE AFORESAID ORDER OF THE TRIBUNAL, WE DECIDE THE MATTER, FOR THE AYS IN QUESTION, IN FAVOUR OF THE ASSESSEE. 16.1 . CONSISTENT WITH THE VIEW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THIS GROUND OF THE REVENUE. 17. GROUND NO.5 IS GENERAL IN NATURE. 18. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART AND THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2014. SD/ - SD/ - ( DIVA SINGH ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 21 ST NOVEMBER, 2014 *MANGA ITA 4786/DEL/2012 ITA 4493/DEL/12 AY 2005 - 06 THE ORIENTAL INSURANCE CO.LTD., NEW DELHI 15 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR