1989 PLP 128 (PTD)

SALEEM AKHTATR, J.--The respondent/assessee carries on life, fire and general insurance business. In the assessment year 1973-74 the respondent claimed Reserve for un-expired risk at rate higher than 40% Limit prescribe under section 27-A of the Insurance Act. The Income-tax Officer did not accept this claim as according to him under law reserve at higher rate than 40% limit as provided under the insurance Act and Rules could not be maintained. The claim of the respondent beyond 40% of the net premium income was, therefore, not accepted and the Income-tax Officer curtailed the claim to 40% limit. The respondent filed an appeal before the Appellate Assistant Commissioner who allowed it and the same was confirmed by the learned Tribunal. The Department then filed an application for referring the following question to the High Court: "Whether on the facts and in the circumstances of the case the sum of Rs. 7,61,316 for the assessment year 1973-74 claimed as extra reserve for un expired risk in fire marine and miscellaneous accounts, were liable to be allowed having been incurred beyond the permissible limit of 40% under the Insurance Act and Rules and, or deductible as Laid out wholly and exclusively for the purposes of business under section 10 (2) (xvu) of the ,income-tax Act." In our view the question seems to have been framed in a most complex manner and ought to have been. as follows: "Whether on the facts and in the circumstances of the case the sum of Rs.7,61,316 for the assessment year 1973-74 claimed as extra reserve for un expired risk in fire, marine and miscellaneous account were liable to be allowed having been incurred beyond the permissible limit of 40% under the Insurance Act and Rules?". We have reframed the question to which both the learned counsel have no objection. Mr. Iqbal Naeem Pasha the learned counsel for the respondent has referred to Commissioner of Income Tax Central, Karachi v. New Jubilee Insurance Co. Ltd. P L D 1982 Kar. 684 where after considering a host of authorities the learned Bench observed as follows:- "From the foregoing we conclude that the Income-tax Officer is bound to accept balance of profits as disclosed by the accounts submitted by an assessee to the Collector of Insurance under section 15 (1) of the Insurance Act, 1938 and accepted by him, except that the Income-tax Officer is entitled to exclude expenditure other than expenditure permissible under the provisions of section 10 of the Act and that the amount set aside as reserves for un expired risks is not "expenditure" within the meaning of rule 6 of the First Schedule and section 10 of the Income-tax Act." The learned counsel for the Department has not advanced any valid argument, which may compel us to take a different view. We respectfully agree with the observation quoted above and reply the question in the affirmative. M.BA./C-64/K Question answered in affirmative.