Law:

Section:

RULE 2 OF THE SECOND SCHEDULE TO THE COMPANIES (PROFITS) SURTAX ACT, 1964 - CAPITAL - COMPUTATION OF - WHETHER RESERVES FOR UNEXPIRED RISKS, CREATED BY ASSESSES, DOING GENERAL INSURANCE BUSINESS, TO MEET UNEXPECTED CLAIMS COULD QUALIFY AS 'FUND' AND WAS LIABLE TO BE INCLUDED IN CAPITAL COMPUTATION - HELD, yes Facts The assessee, doing general insurance business, had a reserve of a certain amount for unexpired risks. The ITO refused to include the said amount while computing the capital base in accordance with the provisions of the Second Schedule to the Companies (Profits) Surtax Act, 1964. On appeal, the Tribunal, however, held that the reserves for unexpired risks clearly represented sums of money available to the assessee for payment or discharge of unexpected claims that might arise in respect of the policies issued and which extended beyond the accounting year under consideration and that, accordingly, the said amount could be regarded as a 'fund' within the meaning of rule 2(ii) of the Second Schedule and was liable to be included in the capital computation. On reference : Held A Circular No. I-P (XV-5) issued by the CBDT dated 23-1-1968 has direct relevance to the question under consideration. As is well settled, the ITO and the other authorities were bound to act in accordance with the said circular. Accordingly, the Tribunal was justified and the impugned amount could be regarded as a 'fund' within the meaning of rule 2(ii) of the Second Schedule and was liable to be included in the capital computation. IT REFERENCE NO. 45 OF 1975. G.S. Jetly and Miss G. Shah for the Applicant. JUDGMENT Desai, J. - The assessee is Universal Fire & General Insurance Co. Ltd., Bombay. Today, after nationalisation of general insurance business, it is one of the subsidiary units of United India Insurance Co. Ltd. The Assistant General Manager of the United India Insurance Co. Ltd. has addressed a letter dated 25-9-1984 to the Central Government Advocate, stating that the assessee is not interested in appearing in the reference or engaging an advocate for assisting the Court. 2. We have heard Mr. Jetly for the Commissioner. He has frankly stated that the answer to be…

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