Law: Income Tax Act, 1922

Section: 10,10(2)(7)

Law: Insurance Act, (IV of 1938)

Section: 15(1),21,22

Income-tax Act (XI of 1922)---S. 10 (2) (7) read with Insurance Act (IV of 1938), Ss. 15 (1), 21 & 22 and Central Board of Revenu Circular published in Income-tax Manual, Part II, 1958 Edn. page 264-Insurance--Revenue for unex­pired risks-Board of Revenue Circular allowing 40% as fair and proper reserve for unexpired risks-Devoid of legal force-Annual accounts of Insurance Companies being annually sent to and checked by Controller of Insurance, balance of profits as disclosed by accounts submitted to Controller and accepted by him---Binding oil Income-tax Officer, subject however to disallowing expenditure not permissible under S. 10 (2)-Amount claimed by assessee insurance Company and Insurance held, cannot be questioned by income-tax Officer in absence of any statutory provision governing allowance of an amount as reserve for unexpired risks. JUDGMENT I. MAHMOOD, J. -This is a reference under section 66 (1) of the Income­tax Act, 1922 whereby the Income-tax Appellate Tribunal, Karachi, on the application of the applicant assessee, has referred the following question of law to the High Court for decision relating to the charge year 1962-63:- "Whether in the facts and circumstances of this case, the Tribunal was justified in holding that the reserve for unexpired risk in Fire, Marine, and Miscellaneous Accounts could be reduced to 40% from 50 % of the premium income as provided for in the account submitted to the Controller of Insurance?" 2. The applicant-assessee, Eastern Federal Union Insurance Company Limited, a Pakistan company, carrying on business of insurance submitted a return of income in respect, inter alia, of its non-life business relating to the charge year 1962-63 claiming reserve for unexpired risks at 50 % of the premium income of the year in respect of its Fire, Marine and Miscellaneous Accounts. The Income-tax Officer reduced the claim from 50 % to 40 for the reason that in the earlier years it had claimed the reserve for unex­pired riskat40"andthe assessee had failed to show that the excess percen­tage claimed, was necessitated on account of any hazardous nature of policy or greater risk involved under them. In the result, the I. T. O.…

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