ITAT directs Re-adjudication on Addition of Insurance Claim of Rs. 2.75 Crores Taxed under Business Head [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has directed re-adjudication on the addition of Insurance claim of  Rs. 2.75 taxed under the business head.

The assessee, Piramal Enterprises criticised the Commissioner of Income Tax (Appeals) [CIT (A)] for affirming the Assessing Officer's decision to treat the insurance claim amount as income, thereby adding it to the appellant's total taxable income.

Piramal Enterprises had filed a claim of Rs. 12.22 crore with the insurance company following a fire at its corporate office, from which it received an interim claim of Rs. 2.75 crores on an ad hoc basis. Additionally, the company suffered a loss of approximately Rs. 7.95 crores due to the fire accident.

The CIT (A) deemed the amount received by the assessee as a windfall and consequently classified it as a revenue receipt taxable under the business or profession head.

However, Mr. Priyank Gala, representing the assessee, argued that since the company ultimately incurred a loss, the received amount should not be taxed as revenue. Despite being called upon to provide evidence of the loss incurred due to the accidental fire, the assessee failed to do so. Moreover, all four insurance policies purchased by the assessee were for plant and machinery. The tribunal, composed of S. Rifafur Raman (Accountant Member) and Kuldip Singh (Judicial Member), directed the matter to be remitted back to the Assessing Officer. The AO was tasked with reevaluating the case within six months from the receipt of the order, specifically focusing on determining the actual loss suffered due to the accidental fire. As a result, the appeal was decided in favour of the assessee

To Read the full text of the Order CLICK HERE

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