Commissioner of Income Tax vs New India Assurance Co. Ltd.

T.D. Sugla, J.—In this departmental reference relating to the assessee, an insurance company, assessment for the assessment year 1972-73, the Income Tax Appellate Tribunal has referred to this court the following three questions of law u/s 256(1) of the Income Tax Act, 1961 :

"(i) Whether the general reserves and taxation reserves are allowable expenditure ?

(ii) If question No. 1 is answered in the affirmative, whether such expenditure or allowance would categorically be governed by sections 30 to 43A of the Income Tax Act, 1961 ?

(iii) Whether the taxation reserve or general reserve is liable to be added back under rule 5 (a) of the First Schedule to the Income Tax Act, 1961 ?"

Counsel are agreed that similar questions were involved in the case of Commissioner of Income Tax Vs. South India Insurance Co. Ltd., and that, by our court''s judgment dated December 12, 1988, in Income Tax Reference No. 236 of 1976, we have answered the first question thus :

"Neither the taxation reserve nor the general reserve can be considered to be an allowance or an expenditure."

The third question was answered in the negative and in favour of the assessee. In the view our court took about the first question, the second question was stated not to arise.

Accordingly, here again, following our court''s judgment in the case of Commissioner of Income Tax Vs. South India Insurance Co. Ltd., , we hold that neither the taxation reserve nor the general reserve can be considered to be an allowance or an expenditure. In view thereof, the second question need not be answered. The third question is answered in the negative and in favour of the assessee.

No order as to costs.