IBNR Provisioning is Not Contingent Liability & deductible U/s 37: Delhi HC

PCIT Vs Care Health Insurance Limited (Delhi High Court)

In the case of PCIT vs. Care Health Insurance Limited, the Delhi High Court addressed significant questions concerning the tax treatment of provisions made by an insurance company for unsettled claims and Incurred But Not Reported (IBNR) claims. The dispute arose from the Income Tax Appellate Tribunal’s (ITAT) decision to delete the disallowance of these provisions, which had been claimed as deductions by Care Health Insurance Limited under Section 37 of the Income Tax Act, 1961.

Background and Issues

The Principal Commissioner of Income Tax challenged the ITAT’s decision on several grounds:

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