Tribunal Rules in Favor of Insurer on Statutory Deductions

Tribunal Rules in Favor of Insurer on Statutory Deductions and Transfer Pricing Adjustments

Issues

Depreciation & Profit on Sale of Fixed Assets: Whether statutory depreciation under Section 32 applies in place of book depreciation under Section 44 read with Rule 5, and if profit on sale of fixed assets must be reduced accordingly.
Prior Period Disallowances: Whether expenses previously disallowed under Section 40(a)(ia) can be claimed in a subsequent year once requisite tax is deducted and deposited.
AMP Adjustment (Transfer Pricing): Whether marketing/AMP expenses incurred by a full-risk insurer can be subjected to Transfer Pricing adjustment without evidence of an agreement to serve an Associated Enterprise (AE).
Profit on Sale of Investments: Whether profits from the sale of investments of a general insurance business can be adjusted outside Section 44 read with Rule 5 provisions.
Dividend Exemption & Section 14A: Whether dividend exemption under Section 10(34) and Section 14A disallowance relief remain available to general insurance companies assessed under Section 44.
Co-Insurance Fee TDS: Whether Section 194H applies to co-insurance administration fees paid under principal-to-principal risk-sharing arrangements.
Computer Peripherals Expenditure: Whether costs incurred on computer accessories (pen drives, adapters, hard disks) constitute revenue expenditure under Section 37(1).

Facts

Profile & Assessment: The assessee, a general insurance business entity, filed its return of income for Assessment Year 2010-11 under Section 44 read with Rule 5 of the First Schedule.
Depreciation & Disallowances: The assessee substituted statutory depreciation for book depreciation and claimed a deduction of ₹3,63,76,969 under Section 40(a)(ia) for amounts disallowed in earlier years whose TDS was deposited during the current year. The Assessing Officer (AO) disallowed the deduction claim.
Transfer Pricing (AMP): The Transfer Pricing Officer (TPO) treated a portion of the advertisement, marketing, and promotion (AMP) spend as an international transaction and applied a mark-up. The CIT(A) deleted this upon finding the assessee to be a full-risk entity operating on its own behalf without any AE agreement.
Investment Profits & Exemptions: The AO added profit on the sale of investments to the total income outside the Rule 5 computation framework, denied Section 10(34) dividend exemption, and made disallowances under Section 14A.
Co-Insurance & Peripherals: The AO invoked Section 40(a)(ia) for non-deduction of tax under Section 194H on co-insurance fees and disallowed computer peripheral purchases treated as capital expenditure.

Decision

Depreciation & Asset Sale: Statutory depreciation under Section 32 is allowable over book depreciation, and profit on sale of fixed assets must be reduced accordingly in favor of the assessee.
Deduction of Deposited TDS: Disallowed expenses under Section 40(a)(ia) cannot remain permanently embedded in profit once TDS compliance is fulfilled in a subsequent year; the ₹3,63,76,969 deduction is allowed subject to verification.
AMP Adjustment Deletion: In the absence of an agreement, arrangement, or brand-promotion obligation toward an AE, AMP expenditure cannot be treated as an international transaction.
Investment Profit Computation: Profit on sale of investments cannot be brought to tax using adjustments beyond the explicit scope of Section 44 read with Rule 5.
Exemptions Preserved: Exemptions under Section 10(34) remain fully accessible to insurance entities under Section 44, and Section 14A disallowances are inapplicable.
No TDS on Co-Insurance Fees: Co-insurance arrangements operate on a principal-to-principal basis without an agency relationship; hence, Section 194H and Section 40(a)(ia) disallowances do not apply.
Peripherals as Revenue Expense: Expenditure on items like pen drives, laptop adapters, cables, batteries, and hard disks is revenue in nature under Section 37(1).

Key Takeaways

Special Regime Supremacy: Section 44 read with Rule 5 forms a self-contained code for general insurance profits; Assessing Officers cannot make extraneous additions not specified by Rule 5.
No Permanent Disallowance: Deductions disallowed under TDS defaults must be allowed in the year actual tax compliance is fulfilled to prevent double taxation.
Principal-to-Principal Immunity: Risk-sharing arrangements without an agency structure do not constitute brokerage/commission under Section 194H.
Prerequisites for TP Adjustments: Unilateral marketing spends cannot be recharacterized as international transactions without evidence of a concert or agreement with an Associated Enterprise.

IN THE ITAT MUMBAI BENCH ‘H’

Asst. Commissioner of Income-tax

Tata AIG General Insurance Co. Ltd.

Smt. Beena Pillai, Judicial Member
and Jagadish, Accountant Member

IT Appeal Nos. 2451 and 2634 (Mum) of 2017
[Assessment years 2010-11]

SEPTEMBER 8, 2026

Nishant Thakkar and Ms. Jasmin Amalsadwala for the Appellant. Pravin Salunkhe, Sr. DR for the Respondent.

ORDER

Jagadish, Accountant Member.- These cross appeals filed by the Revenue and the assessee are directed against the order dated 13.12.2016 passed by the Commissioner of Income-tax (Appeals)-58, Mumbai [“the learned CIT(A)”], in appeal No. CIT(A)-58/205/2014-15, arising out of the assessment order dated 26.05.2014 passed by the Deputy Commissioner of Income-tax-2(3), Mumbai under section 143(3) read with section 144C(3) of the Incometax Act, 1961 [“the Act”], for the assessment year 2010-11. Since both appeals arise from the same appellate order, they were heard together and are disposed of by this consolidated order.

2. The assessee has raised the following grounds of appeal:

“1. The learned CIT(A) erred in disallowing the deduction of profit on sale of assets amounting to Rs.2,02,000.”

“2. The learned CIT(A) erred in not following the provisions of section 32 of the Act, i.e. in not allowing the claim of depreciation amounting to Rs.10,37,11,785 under section 32 of the Act.”

“3. The learned CIT(A) erred in not allowing the deduction of expenses amounting to Rs.3,63,76,969 as per the proviso to section 40(a)(ia) of the Act, i.e. expenses disallowed in an earlier year on which tax was deducted and deposited during the year under consideration.”

“4. The learned CIT(A) erred in exceeding his jurisdiction in considering that the advertisement and marketing expenses incurred by the appellant constituted an international transaction within the meaning of section 92B of the Act.”

3. The Revenue has raised the following grounds of appeal:

“(i) The learned CIT(A) erred in not following the decision of his predecessor for assessment year 2009-10 wherein the adjustment was upheld.”

“(ii) The learned CIT(A) erred in holding that the advertisement and direct and indirect marketing expenses did not lead to a direct benefit to the associated enterprise’s brand name, though the name AIG formed part of the logo TATA AIG.”

“(iii) The learned CIT(A) erred in allowing exemption of profit on sale of investments amounting to Rs.17,65,97,000.”

“(iv) The learned CIT(A) erred in allowing exemption under section 10(34) in respect of dividend income of Rs.49,56,093 and in holding section 14A inapplicable.”

“(v) The learned CIT(A) erred in holding that co-insurance fees were not commission liable for deduction of tax at source under section 194H.”

“(vi) The learned CIT(A) erred in allowing expenditure on pen drives, laptop adapters, cables, batteries, hard disks, etc. as revenue expenditure.”

4. Briefly stated, the assessee is engaged in the business of general insurance. It filed its return of income on 27.09.2010 declaring total income of Rs.1,81,26,258. The assessment was completed at a total income of Rs.17,47,60,856. While computing the income under section 44 read with Rule 5 of the First Schedule, the Assessing Officer, inter alia, made a transfer-pricing adjustment of Rs.2,18,83,513 in respect of advertisement, marketing and promotion expenditure; brought to tax profit on sale of investments of Rs.17,65,97,000; declined reduction of profit on sale of fixed assets of Rs.2,02,000; declined tax depreciation of Rs.10,37,11,785 while allowing book depreciation; disallowed expenditure of Rs.3,63,76,969 which had been disallowed in the preceding year under section 40(a)(ia); denied exemption in respect of dividend income of Rs.49,56,093 and applied section 14A; disallowed coinsurance administration fees of Rs.34,41,175 under section 40(a)(ia); and treated expenditure on computer peripherals of Rs.22,15,160 as capital in nature, after allowing depreciation thereon.

5. The learned CIT(A) deleted the transfer-pricing adjustment after holding that the assessee was a full-risk entity carrying on its own insurance business and that any benefit to the foreign associated enterprise from use of the joint brand was only incidental. He also allowed the claims relating to profit on sale of investments, dividend income, section 14A, co-insurance fees and computer peripherals by following the Tribunal’s orders in the assessee’s own case for earlier years. He, however, confirmed the disallowance of profit on sale of fixed assets, tax depreciation and the expenditure earlier disallowed under section 40(a)(ia), principally relying upon New India Assurance Co. Ltd. v. Addl. CIT 133 ITD 131 (Mumbai). Both sides are aggrieved.

6. The learned Authorised Representative submitted that grounds 1 to 3 of the assessee’s appeal stand squarely covered in favour of the assessee by the subsequent orders of the coordinate benches in the assessee’s own case, namely, Tata AIG General Insurance Company Ltd. v. Dy. CIT (Mumbai – Trib.)/ITA No.1718/Mum/2020 for assessment year 2015-16, order dated 25.04.2022; Dy. CIT v. Tata AIG General Insurance Co. Ltd. [IT Appeal Nos.1834 and 1835 (Mum) of 2023] for assessment years 2016-17 and 2017-18, order dated 30.10.2024; and Dy. CIT v. Tata AIG General Insurance Company Ltd [2026] 216 ITD 554 (Mumbai – Trib.)/ITA No.5394/Mum/2025, order dated 23.12.2025 for assessment year 2013-14. A detailed chart identifying the relevant paragraphs was placed on record. In respect of the Revenue’s appeal, reliance was placed on Tata AIG General Insurance Co. Ltd. v. Asstt. CIT [IT Appeal No. 2597 (Mum.) of 2009] for assessment year 2003-04, order dated 22.10.2010; ITA No.7748/Mum/2013 for assessment year 2005-06, order dated 04.12.2015; the consolidated order dated 20.11.2015 in TATA AIG General Insurance Co. Ltd. v. ADCIT [IT Appeal Nos. 3535 & 1702 (Mum) of 2011, dated 20-11-2015] and connected appeals for assessment years 2006-07 to 2008-09; Dy. CIT v. Tata AIG General Insurance Co. Ltd. [IT Appeal No.14 (Mum.) of 2021, dated 8-3-2022] for assessment year 2015-16, order dated 08.03.2022; ITA Nos.1834 and 1835/Mum/2023; and ITA No.5394/Mum/2025. Reliance was also placed on Pr. CIT v. Tata AIG General Insurance Co. Ltd. (Bombay), Income Tax Appeal No.528 of 2017, dated 05.08.2019, and the order of the Hon’ble Bombay High Court in Income Tax Appeal No.541 of 2017 concerning co-insurance fees.

7. The learned Departmental Representative relied upon the assessment order and supported the application of section 44 read with Rule 5 of the First Schedule. On the AMP issue, he submitted that the joint TATA AIG logo promoted the brand of the foreign associated enterprise and justified the adjustment. He further relied upon the grounds raised by the Revenue.

8. We have heard the rival submissions and perused the material available on record, including the orders relied upon by the assessee. The issues are adjudicated hereunder.

9. Grounds 1 to 3 of the assessee’s appeal involve, respectively, reduction of profit on sale of fixed assets, allowance of depreciation under section 32 in place of book depreciation, and allowance in the current year of expenditure disallowed in the earlier year under section 40(a)(ia) where tax was deducted and deposited during the current year. In ITA No.1718/Mum/2020, the coordinate bench dealt with the scheme of section 44 and Rule 5 and held, so far as material, as under:

“4.1. We have heard rival submissions and perused the materials available on record. We find that assessee had debited depreciation in its profit and loss account and also claimed depreciation as per the provisions of Section 32 of the Act in the return of income. The Id. AO placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of New India Assurance Company Ltd., v. Additional CIT reported in and disallowed the claim of depreciation as per Section 32 of the Act by holding that no deductions are permissible from the profits as per the profit and loss account while assessing insurance companies as per Rule 5 of the first schedule to the Act read with Section 44 of the Act. We find that the assessee had added back the book depreciation while filing its return of income. Hence by this process, the assessee was neither granted deduction for book depreciation nor granted deduction for income tax depreciation computed u/s.32 of the Income Tax Act. Hence, it had resulted in a situation that no depreciation at all was granted deduction to the assessee. This action was upheld by the Id. CIT(A). This, in our considered opinion, had resulted in gross injustice to the assessee. In any case, the depreciation computed u/s.32 of the Act is to be granted mandatorily to the assessee as per Explanation 5 to Section 32 of the Act. In our considered opinion, the effect of Rule 5, Clause ‘a’ of schedule-1 is that, if the insurance company has claimed a deduction for any expenditure / allowance or as debited in the accounts to the profit and loss account by way of provision or reserve, which is not admissible as per the provisions of Section 30 to 43B of the Income Tax Act, the same shall be liable for disallowance. The natural corollary to this would be that deductions that are otherwise specified u/s.30 to 43B would become allowable under the provisions of the Act and the same would get allowed to insurance company. Hence, logically if book depreciation is not allowed to the assessee, then the depreciation computed as per Section 32 of the Act would become automatically allowable to the assessee. This is irrespective of the fact that income tax depreciation u/s.32 is to be mandatorily allowed to the assessee as per Explanation-5 to Section 32 of the Act. In this regard, the language of the Section and the computation provisions mentioned in Rule 5 of first schedule to the Income Tax Act applicable for insurance companies cannot be given a literal interpretation as it manifestly produces unjust result. Reliance in this regard has been rightly placed by the Id. AR on the decision of the Hon’ble Supreme Court in the case of CIT v. J H Gotla reported in 156 ITR 323 wherein the relevant portion is reproduced hereunder:-

“46. Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the Court might modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational construction. The task of interpretation of a statutory provision is an attempt to discover the intention of the Legislature from the language used. It is necessary to remember that language is at best an imperfect instrument for the expression of human intention. It is well to remember the warning administered by judge, the learned hand that one should not make a fortress out of dictionary but remember that statutes always have some purpose or object to accomplish and sympathetic and imaginative discovery is the surest guide to their meaning.”

4.2. We would like to make it clear that the aforesaid purposive interpretation of the provisions are being considered in the instant case only to avoid unjust and absurd results that would otherwise prevail in the event of assessee not getting even statutory deductions / allowances while computing the taxable income. The production of unjust and absurd results could never be the intention of the legislature and we are not inclined to make the computation provisions of Rule 5 of first schedule to the Income Tax Act unworkable. Hence, in order to prevent that gross injustice, we are inclined to give purposive interpretation of the provisions instead of literal interpretation.

4.3. We also find that the Finance Act 2020 had addressed the very same anomaly by amending the Rule 5 of the first schedule to the Income Tax Act by inserting the proviso after Clause-C of Rule 5 to provide deduction of amounts previously disallowed u/s.43B in the year in which the same is actually paid. The Explanatory Memorandum to the Finance Bill 2020 explaining the provisions relating to direct tax amendments while proposing an amendment in Section 43B to insurance companies had stated as under:-

“Section 44 of the Act provides that computation of profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or a co-operative society shall be computed in accordance with the rules contained in the First Schedule to the Act.

Section 43B of the Act provides for allowance of certain deductions, irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by the assessee, only in the previous year in which such sum is actually paid.

Rule 5 of the said Schedule provides for computation of profits and gains of other insurance business. It states that profits and gains of any business of insurance other than life insurance shall be taken to be the profit before tax and appropriations as disclosed in the profit and loss account prepared in accordance with the provisions of the Insurance Act, 1938 or the rule made thereunder or the provisions of the Insurance Regulatory and Development Authority Act, 1999 or the regulations made thereunder, subject to the condition that any expenditure debited to the profit and loss account which is not admissible under the provisions of sections 30 to 43B shall be added back; any gain or loss on realisation of investment shall be added or deducted, as the case may be, if the same is not credited or debited to the profit and loss account; any provision for diminution in the value of investment debited to the profit and loss account shall be added back. Thus, there is no specific provision, in this rule, in the case of other insurance companies, to allow deduction for any payment of certain expenses specified in section 43B if they are paid in subsequent previous year. There is a possibility that such sum may not be allowed as deduction in the previous year in which the payment is made. This has not been the intention of the legislature.

Therefore, it is proposed to insert a proviso after clause (c) of the said rule 5 to provide that any sum payable by the assessee which is added back under section 43B in accordance with clause (a) of the said rule shall be allowed as deduction in computing the income under the rule in the previous year in which such sum is actually paid.

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.”

4.4. From the logical reading and understanding of the aforesaid Explanatory Memorandum of Finance Bill 2020, it could be safely inferred and concluded that the legislature never wanted to deny any deduction or allowance that was otherwise allowable to the assessee under the very same provisions of Sections 30 to 43B of the Income Tax Act. It also impliedly mentioned that by this process, the double disallowance that would occur shall be avoided. There would be cases where assessee while making certain provision for certain expenses or provision for certain reserves would add it back voluntarily in the return of income even though the same is an item of legitimate expenditure in the P & L account. When the very same expenditure is actually paid by the assessee in different assessment year, the same should be logically and legally liable for deduction / allowance to the assessee in the year in which such payments are made. This alone would address the clear intention of the legislature. Moreover these benefits are otherwise available to all other types of the assessee and there is no logical reason that an Insurance company alone should be deprived of the same. This would be more relevant from the point of discrimination of assessee. Considering the totality of these observations, it could be safely concluded that the amendment brought in Finance Act 2020 addressing this anomaly is merely curative in nature and hence has to be construed as clarificatory having retrospective effect as it was brought in to avoid unintended consequences and to avoid discrimination with other assessees. In this regard, we find that the reliance has been rightly placed by the Id. AR on the decision of the Hon’ble Supreme Court in the case of Allied Motors (P) Ltd., v. CIT reported in 224 ITR 677 wherein it was held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give it a reasonable interpretation, it could be read to be retrospective in operation, particularly to give effect to the section as a whole. This direction, in our considered opinion, would make computation provisions mentioned in Rule 5 of the first schedule of the Income Tax Act workable. In view of the above observations, we direct the Id. AO to grant allowance of depreciation u/s.32 of the Act for the year under consideration. Needless to mention that the Id. AO should rework the depreciation of subsequent years accordingly due to change in the written down value of the block of assets. Accordingly, the ground No.10 raised by the assessee is allowed.

5. The ground Nos. 5 to 9 raised by the assessee are in the same line of ground No.10 wherein certain deductions were claimed by the assessee. The same are detailed hereinbelow:-

(a) Ground No.5 is seeking deduction in respect of profit on sale of fixed assets from the assessee’s total income – Since we have already directed the Id. AO to grant depreciation as per Ground No.10 hereinabove u/s.32 of the Act, then consequently on sale of fixed assets would also have to be as per the provisions of Income Tax Act, hence, this ground No.5 becomes consequential in nature.

(b) Ground No.6 is challenging the action of the Id. CIT(A) not excluding the reversal of expenses credited by the assessee to its profit and loss account which had been disallowed in the previous years.

(c) Ground No.7 is challenging the action of the Id. CIT(A) disallowing the claim of expenses u/s.40(a) (ia) of the Act which was disallowed in the preceding previous year and on which tax had been deducted at source and paid to the credit of the Central Government in the previous year under appeal.

(d) Ground No.8 is challenging the disallowance of deduction of bonus and leave encashment paid during the year under appeal which was disallowed in earlier years u/s.43B of the Act.

(e) Ground No.9 is challenging the disallowance of reversal of provision of doubtful debts which was disallowed by the assessee in earlier years.

5.1. We find that all the aforesaid items from (b) to (e) above are to be granted deduction and excluded from the total income of the assessee in order to avoid double disallowance. The amendment brought in Finance Act, 2020 also impliedly concluded that there should be no double disallowance. In this regard, assessee has given detailed submissions before the Id. CIT(A) that are enclosed in pages 217-222 of the paper book filed before us justifying the claim of deduction. The same reasoning that was given by us in ground No.10 hereinabove would apply to these grounds also. Accordingly, the ground Nos. 6 to 9 raised by the assessee are allowed.”

10. The same view was followed in the assessee’s own case in ITA Nos.1834 and 1835/Mum/2023. The coordinate bench noted that an expenditure disallowed in an earlier year under section 40(a)(ia), section 43B or a similar provision cannot again remain embedded in the balance of profit when the statutory condition is fulfilled in the subsequent year, since that would result in a double and permanent disallowance. It also allowed statutory depreciation under section 32 and the consequential adjustment for profit on sale of fixed assets. The later order in ITA No.5394/Mum/2025 follows the same position for assessment year 201314. No distinguishing feature in facts or law has been brought to our notice. Respectfully following the coordinate bench decisions in the assessee’s own case, we direct the Assessing Officer to allow reduction of Rs.2,02,000, depreciation of Rs.10,37,11,785 under section 32 after withdrawing the corresponding book depreciation allowed in the computation, and deduction of Rs.3,63,76,969, subject to verification that the amount was disallowed in the earlier year and that the requisite tax was deducted and deposited during the year under consideration. Grounds 1 to 3 of the assessee’s appeal are allowed.

11. Ground 4 of the assessee’s appeal and grounds (i) and (ii) of the Revenue’s appeal concern the AMP adjustment. The TPO treated a part of the advertisement and marketing expenditure as an international transaction and proposed a mark-up. The learned CIT(A), after examining the functions, assets and risks, found that the assessee carried on its insurance business in India as a full-risk entity; that the advertisements promoted its insurance products; that there was no agreement or arrangement requiring the assessee to render brand-promotion services to its associated enterprise; and that the associated enterprise neither required to reimburse the expenditure nor pay a mark-up. The learned CIT(A) consequently deleted the entire adjustment.

12. In CIT v. Whirlpool of India Ltd. 381 ITR 154 (Delhi), the Hon’ble Delhi High Court held that the Revenue must first demonstrate, by tangible material, the existence of an international transaction involving AMP expenditure. It further held that the mere fact that the foreign associated enterprise may incidentally benefit from the AMP expenditure incurred by the Indian enterprise does not establish such a transaction and that application of the bright-line test cannot supply the missing jurisdictional fact. The material conclusion of the Court is reproduced below:

“The Revenue has been unable to demonstrate by some tangible material that there is an international transaction involving AMP expenses between the assessee and its associated enterprise. The mere fact that the associated enterprise may incidentally benefit from such expenditure cannot justify an inference of an international transaction, and the bright-line test cannot be used to determine its existence.”

13. The aforesaid principle was also applied in Maruti Suzuki India Ltd. v. CIT 381 ITR 117 (Delhi). In the present case, the TPO inferred an international transaction from the level of AMP expenditure and applied the bright-line method. The Revenue has not brought on record any agreement, arrangement, understanding or action in concert requiring the assessee to incur AMP expenditure for its associated enterprise or to render a brand-promotion service to it. The assessee is a full-risk general insurance company; the expenditure was incurred to promote and sell its own insurance products in India; and any benefit to the AIG name embedded in the joint logo was merely incidental. The decision of the predecessor learned CIT(A) for assessment year 2009-10 cannot govern the present year when the issue has to be decided in accordance with the subsequent binding exposition of law. We therefore uphold the deletion of Rs.2,18,83,513. Grounds (i) and (ii) of the Revenue’s appeal are dismissed. Ground 4 of the assessee’s appeal challenges the finding that an international transaction existed. In view of the above conclusion, this ground is allowed.

14. Ground (iii) of the Revenue’s appeal concerns profit on sale of investments of Rs.17,65,97,000. The issue was decided in favour of the assessee in ITA No.2597/Mum/2009 for assessment year 2003-04, paragraphs 17 to 20; ITA No.7748/Mum/2013 for assessment year 200506, paragraphs 20 to 23; and the consolidated order in ITA Nos.3535 and 1702/Mum/2011 and connected appeals for assessment years 2006-07 to 2008-09. These orders hold that, after omission of clause (b) of Rule 5 with effect from 01.04.1989 and having regard to CBDT Circular No.528 dated 16.12.1988, profit on sale of investments of a general insurance company cannot be brought to tax by making an adjustment not specified in Rule 5. The Hon’ble jurisdictional High Court in Tata AIG General Insurance Co. Ltd. (supra), Income Tax Appeal No.528 of 2017, dated 05.08.2019, admitted certain other questions but did not disturb the Tribunal’s conclusion on this issue. The facts and statutory position for the year under consideration are identical. Respectfully following the aforesaid orders in the assessee’s own case, ground (iii) is dismissed.

15. Ground (iv) relates to exemption of dividend income of Rs.49,56,093 under section 10(34) and disallowance under section 14A. The exemption was allowed in the consolidated order dated 20.11.2015 in the assessee’s own case for assessment years 2006-07 to 2008-09, following General Insurance Corporation of India v. Dy. CIT 342 ITR 27 (Bombay). The same view was followed in ITA Nos.1834 and 1835/Mum/2023, paragraphs 26 to 28, and in ITA No.5394/Mum/2025, paragraphs 24 and 25. The material finding is that exemptions contained in section 10 remain available to a general insurance company notwithstanding computation of its business income under section 44.

16. As regards section 14A, the coordinate bench in the consolidated order for assessment years 2006-07 to 2008-09, paragraphs 13 to 18, held that no adjustment which is not expressly contemplated by Rule 5 can be introduced into the special computation under section 44. This conclusion was followed in ITA No.5394/Mum/2025, paragraphs 20 to 23. The Hon’ble jurisdictional High Court in Income Tax Appeal No.528 of 2017 specifically noticed the Revenue’s proposed question challenging inapplicability of section 14A to income computed under section 44 and did not disturb the Tribunal’s conclusion. No change in material facts or applicable law has been shown. We accordingly uphold the learned CIT(A)’s order granting exemption under section 10(34) and deleting the disallowance under section 14A. Ground (iv) is dismissed.

17. Ground (v) concerns co-insurance administration fees of Rs.34,41,175. The learned CIT(A) followed the consolidated order in ITA Nos.3535 and 1702/Mum/2011 and connected appeals for assessment years 2006-07 to 2008-09, paragraphs 27 to 32, holding that the participating insurers shared premium, claims and risks on a principal-to-principal basis and did not act as agents of the lead insurer; consequently, section 194H and the disallowance under section 40(a)(ia) were not attracted. The relevant finding was:

“The co-insurers were not the agents of the assessee and the transactions between the assessee and the co-insurers were on principal-to-principal basis. considering the totality of facts and circumstances of the case, we are in agreement with the contention of the learned AR that no disallowance is warranted under section 40(a)(ia) in respect of co-insurance fees paid by the assessee.”

18. The Revenue carried the issue further in Income Tax Appeal No.541 of 2017. The Hon’ble jurisdictional High Court did not admit the proposed questions concerning sections 194H and 40(a)(ia). The same issue was again decided in favour of the assessee in ITA No.5394/Mum/2025, paragraphs 5 to 7. Although ITA No.14/Mum/2021 restored the issue for examination of the agreements in the absence of the relevant evidence in that year, in the present case the learned CIT(A) has recorded the nature of the co-insurance arrangement and followed the earlier owncase order on identical facts. The Revenue has not shown any difference in the arrangement or brought contrary material before us. We therefore follow the direct decisions on the identical arrangement and uphold the deletion. Ground (v) is dismissed.

19. Ground (vi) concerns expenditure of Rs.22,15,160 on pen drives, laptop adapters, cables, batteries, hard disks and similar hardware consumables. The issue was decided in favour of the assessee in the consolidated order for assessment years 2006-07 to 2008-09, paragraphs 22 and 23, by following CIT v. Southern Roadways Ltd 288 ITR 15 (Madras) In ITA No.14/Mum/2021, paragraphs 18 to 20, the coordinate bench again held that purchase of hard disks, batteries and similar items was revenue expenditure. More importantly, the Hon’ble Bombay High Court in Tata AIG General Insurance Co. Ltd. (supra), Income Tax Appeal No.528 of 2017, expressly noticed the Revenue’s additional question on purchase of hard disks and other peripherals and held that no substantial question of law arose. The later order in ITA No.5394/Mum/2025, paragraph 8, follows the same position. The Revenue has not established that an independent capital asset came into existence. We therefore uphold the learned CIT(A)’s order. Ground (vi) is dismissed.

20. In the result, the appeal filed by the assessee in ITA No.2634/Mum/2017 is allowed and the appeal filed by the Revenue in ITA No.2451/Mum/2017 is dismissed.