DCIT Vs HDFC Ergo General Insurance Company (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, dismissed both the Revenue’s appeal and the assessee’s cross-objection arising from the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2012-13. The Revenue challenged the deletion of additions made under Section 37(1) and Section 14A of the Income-tax Act, 1961, while the assessee questioned the validity of the reassessment proceedings under Section 147.
The assessee had filed its return of income on 28.09.2012, declaring a loss under the regular provisions and book profit. The original assessment under Section 143(3) was completed on 06.02.2016. Subsequently, the case was reopened under Section 147, and reassessment was completed on 05.12.2018. The Commissioner (Appeals) granted relief on the additions made in reassessment but rejected the challenge to the validity of the reassessment, leading to the Revenue’s appeal and the assessee’s cross-objection.
The first issue concerned the disallowance of Rs.11,35,23,239 under Explanation 1 to Section 37(1). During reassessment, the Assessing Officer held that the assessee, a general insurance company, had outsourced certain activities to service aggregators and made payments to motor vehicle dealers through such aggregators, treating these payments as commissions exceeding the limits prescribed under Section 40(1) of the Insurance Act, 1938. The Assessing Officer considered the expenditure to be incurred for an activity prohibited by law and disallowed it under Explanation 1 to Section 37(1). The Commissioner (Appeals) deleted the addition by following a consolidated order of the Tribunal in the assessee’s own cases for earlier assessment years.
