Law: Income Tax Act, 1922

Section: 66(1),10(7),8,9,10,12,18,First Schedule

Law: Insurance Act, (IV of 1938)

Section: 3A,3(1)

Income-tax Act, 1922 -- Section 10(7) read with First Schedule to the Income-tax Act -- Insurance Act, 1938 -- Sections 3(1), 3(4), 3(5B) -- Insurance business -- Assessee carrying on insurance business without renewal of registration under 3(1) of the insurance Act, 1938 -- Whether lawful -- Held no -- Whether can be said to be carrying on insurance business -- Held no -- Profits of the business, whether to be computed under Section 10 and not under the rules mentioned in the First Schedule to the Income-tax Act -- Held yes -- JUDGMENT The Judgment of the Court was delivered by I. MAHMUD, J.--- This is a reference under section 66(1) of the Income-tax Act, 1922, by the Income-tax Appellate Tribunal l(Karachi Bench), Karachi, on the application of the Commissioner of Income-tax (Central), Karachi, in R.A. No. 362 of 1966-67. 2. The respondent is non-resident insurance company incorporated in Sydney(Australia) and carried on business of general insurance in Pakistan until the assessment year 1955-56. It appears that, thereafter, it did not obtain renewal of its certificate of registration (licence) as required under section 3-A of the Insurance Act, 1938, but it has been functioning in Pakistan only for the purpose of setting and realising outstanding claims. In the account year ending 31-12-61, relating to the charge year 1962-63, the respondent-assessee returned an income comprising of inter alia, income from interest on securities amounting to Rs. 11,747 and salvage money of Rs.3,485. Against these two items of income, the respondent claimed management expenses of Rs. 2,014 which the Income-tax Officer disallowed on the ground that the respondent, not having renewed its registration, had ceased to carry on insurance business and, as such, the management expenses were inadmissible. The respondent preferred an appeal to the Appellate Assistant Commissioner of Income-tax who took the view that although respondent did not underwrite new insurance business, yet old claims were being settled and realised and, to that connection an office was maintained and management expenses incurred. Therefore, although respondent may not be assessable under the First Schedule to…

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