Law: Income Tax Act, 1922

Section: 10(2)(xvi)&Sched.I,R.6

(a) Income tax Act (XI of 1922)-----S.10(2)(xvi) & Sched. I, R.6 Assessee, an insurance company Reserve for unexpired risks in fire account not being an actual expenditure but an hypothetical estimate of liabilities; reserve for unexpired risks in marine reserve account not being an actual expenditure but an hypothetical estimate of liabilities and extra reserve for an unexpired risk in miscellaneous account having been incurred beyond the permissible limit of 40% under Insurance Rules are allowable expenditure. Alpha Insurance's case PLD 1981 SC 293 ref. Commissioner of Income tax Central 'A' Karachi v. Messrs Premier Insurance Company Limited 1989 P T D 1028 fol. (b) Income, tax Act (IX of 1922) S.10(2)(xvi) & Sched. I, R.6 Assessee, an insurance company Whether management expenses in excessive and in contravention of the maximum prescribed in that behalf under R. 40, Insurance Rules. 1958 could be deemed to have been incurred wholly and exclusively for the purposes of business under S. 10(2)(xvi) and could be allowed as such. Alpha Insurance's case PLD 1981 SC 293 fol. JUDGMENT SALEEM AKHTAR, J.- The respondent is engaged in general Fire Insurance business. At the instance of the Commissioner of Income tax the following questions have been referred by the Tribunal under section 66(I) of the Income tax Act: (1) Whether, on the facts and in the circumstances of the case the sum of Rs. 25,83,647/18,60,674 being management expenses in excessive and in contravention of the maximum prescribed in this behalf under Rules 40 of the Insurance Rules could be deemed to have been incurred wholly and exclusively for the purpose of business under section 10(2) (xvi) and can be allowed as such. (2) Whether on the facts and in the circumstances of the case the reserve for unexpired risks in Fire account of Rs. 4,77,438/6,37,728 not being an actual expenditure but an hypothetical estimate of liabilities is allowable under section 10 read with Rule 6 of the First Schedule of the Incometax Act. (3) Whether, on the facts and in the…

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