Only 10 Cr Disallowed out of Rs. 35cr Depreciation Allowance Claimed by Oriental Insurance Co. Ltd u/s 32 : ITAT restores for Reconsideration [Read Order]

The assessee challenged the order passed by the Commissioner of Income Tax (Appeals)-22, New Delhi (CIT(A)), against the order of assessment passed under section 143(3) of the Income Tax Act, 1961 (“the Act‟) dated 03.12.2007 by the Assessing Officer, ACIT, Circle-16 (1), New Delhi (“. AO‟).

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The return of income for assessment year 2006-07 was filed by the assessee on 30.11.2006 declaring total loss of ₹184,74,38,210/- under normal provisions of the Act and the book loss of ₹238,43,07,539/- under section 115JB of the Act. During the relevant previous year, the assessee derived income from the business of general insurance, purchase and sale of securities. The assessee is also authorized to conduct non life insurance business.

The assessee is also recognized as a Public Financial Institution as prescribed under section 4A of the Companies Act, 1956 within the meaning of Section 45 I (c)(ii) of Reserve Bank of India Act, 1934. The assessee being an insurance company, its income arising out of Insurance business is to be computed mandatory in terms of specific statutory provisions contained under section 44 of the Act read with provisions contained in Part B of First Schedule to the Act.

The assessee had shown a sum of ₹615,70,93,758/- as profit on sale of investment for the year ended 31.03.2006 and credited the same to the profit and loss and revenue accounts for the year ended on 31.03.2006. The AO show caused the assessee as to why this sum be not treated as its business income other than from general insurance business on which the provision contained under section 44 of the Act were applicable.

The AO also observed that for assessment year 2004-05, the profit on sale of investment in the assessee's own case was held to be taxable by the AO, which stood confirmed by the CIT(A). Similar treatment was sought to be given by the AO in the year under consideration also and accordingly the sum of ₹615,70,93,758/- was added to the total income after denying the claim of exemption under section 10(38) of the Act.

The assessee are challenging the action of CITA upholding the disallowance of ₹10,15,15,933/- out of total depreciation allowance of ₹35,00,54,939/- claimed by the assessee under section 32 of the Act. The AO observed in the computation of income filed along with the return of income, the assessee company has claimed depreciation of ₹35,00,54,939/-. The AO observed that during the year under consideration, additions to fixed assets were shown at ₹21,10,79,000/-.

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The AO observed that no details of addition or deletion of assets made during the year have been furnished by the assessee. The AO noted that in the earlier assessment year 2004-05, approximately 29% of the depreciation claimed was disallowed for want of supporting evidence for addition and deletion of fixed assets. Similar disallowance was confirmed by the CIT(A) for Assessment Year 2001-02 vide order 30.09.2003.

Respectfully following the order of this tribunal for Assessment Year 2007-08 in the assessee's own case, the two member bench of Vikas Awasthy, Judicial Member and M. Balaganesh, Accountant Member restored the Ground No. 2 and 2.1 raised by the assessee to the file of AO for consideration in the light of decision taken in earlier years.

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