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Order of Madras HC: Provisions of section 115JB are applicable to Insurance companies retrospectively


The Madras High Court held that provisions of section 115JB are applicable on Insurance companies w.e.f April 1, 2003.

Facts of the case:-

The revenue pointed out the error in the order passed by the Tribunal while deciding the issue with regard to ‘addition of reserve for unexpired risk’ while computing book profit under Section 115JB of the Act. the assessee’s appeal as well as in the revenue’s appeal, the issue arises only up to the year 2012-2013 and this is owing to the fact that there was an amendment to the Section 115 JB by substitution of Sub- Section 2 by Finance Act, 2012 with effect from April 1, 2013.

Interpretation of law:-

As per the amendment culled in the Act, the issue has to be decided by the Tribunal, however, due to inadvertence, the Tribunal has observed in the Order that Section 115JB is not applicable to the insurance companies and therefore, held that there is no infirmity in the order passed by the CIT (Appeals).

The issue raised in this case was whether, on the facts and circumstances of the case and in law, the Tribunal was justified and correct in holding that the provisions of Section 115JB of the Act, which enables the companies to compute book profit may not be applicable to insurance companies.


The Coram consisting of Justice T.S. Sivagnanam and Justice V. Bhawani Subbaroyan clarified that since the provision has been made applicable to the Insurance companies as well with effect from April 1, 2003, the Tribunal has to decide the issue on merits for the assessment year 2013-2014 and decide as to whether the assessing officer was right in computing dis-allowance reserved for unexpired risk provision towards IBNR / IBNER claim and dis-allowance under Section 14(A) read with Rule 18 and the Tribunal to take a decision on merits and in accordance with the law.

Therefore, the court held that the matter has to be remanded to the Tribunal for fresh consideration, accordingly, the observations made by the Tribunal in the impugned order are set aside, insofar as it relates to the assessment year 2013- 2014 and the matter is remanded to the Tribunal to decide the issue with regard to the computation under book profit and whether the assessing officer was right in his computation.

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