Law: Income Tax Act, 1922

Section: 10(2A)&Sched

(a) Income-tax Act (XI of 1922)-- ---S.10--Amount claimed on account of provision for taxation or taxation reserve is admissible expenditure under S.10. Commissioner of Income-tax v. New Jubilee Insurance Co .Ltd I T C No. 326 of 1974 fol. (b) Income-tax Act (XI of 1922)---S.10(2-A) & Sched.I, R. 6--Insurance company--Expenditure--Computation-¬Income-tax officer has to assess on the basis of the balance disclosed by the annual accounts required to be prepared under the Insurance Act, 1938-¬Provision of S.10 can be applied only for the purpose of excluding expenditure other than which may be allowed under S.10 for computing the profits and gains of the business--Application of S.10 is for limited purpose and provision of S.10(2-A) cannot be applied under this garb. C.LT. v. Alpha Insurance Co. Ltd., Karachi P L D 1981 SC 293 ref. JUDGMENT SALEEM AKHTAR, L.-The respondent is a company engaged in fire and general insurance business. For the assessment years 1972-73 and 1973-74 the Income Tax officer observed credit balances of Rs.59,185 and Rs.82,754 outstanding for more than three years. He treated them as assessees' income for the respective years under Section 10 (2A) of the Income Tax Act. The assessee challenged the taxability of credit standing unpaid for more than three years. In appeal the Tribunal held that in view of the provisions of Section 10 (7), Section 10 (2A) could not be attracted to the case of Insurance Companies. In respect of years 1972-73 and 1973-74 the respondents claimed management expenses in excess of Rule 40 of the Insurance Rules and weed disallowed by the Income-tax Officer. However, in appeal the Tribunal directed that the same should be allowed. For the years 1972-73, 1973-74 and 1974-75 the respondent had made a number of provisions for taxation in its accounts. These provisions were disallowed being inadmissible expenditure under Section 10 of the Income-tax Act. The learned Tribunal, however, allowed the same. On Commissioner's application the following questions have been referred: (1) Whether, on the facts and in the circumstances of the case, the Income- Tax Appellate Tribunal was right in ordering deletion of the add…

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