D.K Jain, J.:— These two appeals by the Revenue under section 260A of the Income-tax Act, 1961 (for short “the Act”), are directed against the two orders passed by the Income-tax Appellate Tribunal (for short “the Tribunal”) in I.T.A No. 119.Delhi of 1990 and I.T.A No. 3101.Delhi of 1991, pertaining to the assessment years 1986–87 and 1988–89, respectively.
2. Since a common issue is involved in both the appeals, these are being disposed of by this order.
3. The assessee, a subsidiary of General Insurance Corporation of India is engaged in the business of general insurance. In its returns of income for the relevant assessment years, the assessee did not include the amount of interest outstanding on term and bridge loans, etc., on the plea that the debtors had defaulted in making payments and the recoveries were outstanding for more than one year.
4. While completing the assessments, the Assessing Officer, relying on the decision of the Supreme Court in State Bank Of Travancore v. Commissioner Of Income Tax, Kerala , [1986] 158 ITR 102, held that the said interest was liable to be included in the assessee's total income. He, accordingly, included the amount of interest accrued on such accounts in the total income of the assessee.
5. Aggrieved, the assessee preferred appeal to the Commissioner of Income-tax (Appeals) but without any success. The matter was taken up in further appeal to the Tribunal. The Tribunal, vide the impugned orders, has accepted the stand of the assessee that since the profits and gains of its business have been computed in accordance with the rules contained in the First Schedule to the Act, as stipulated in section 44 of the Act, the Assessing Officer cannot make any adjustments therein. The Tribunal thus allowed the appeals. Hence, the present appeals.
6. We have heard Mr. R.D Jolly/learned senior standing counsel for the Revenue, and Mr. Syali, Jeamed senior counsel for the assessee.
7. It is vehemently submitted by Mr. Jolly that the Tribunal has failed to appreciate the concept of real income as explained by the Supreme Court in State Bank of Travancore's case, [1986] 158 ITR 102. The submission is that once the interest has accrued to the assessee according to the method of accounting adopted by it, the conduct of the assessee in taking the interest to the suspense account would not negate the accrual of income. It is asserted that the notion of real income cannot be brought into play when the income has already accrued to the assessee. It is, thus, submitted that a substantial question of law arises from the orders of the Tribunal.
8. Mr. Syali, on the other hand, would contend that since section 44 of the Act expressly makes the First Schedule to the Act applicable to an assessee carrying on insurance business, the ratio of the aforenoted decision of the Supreme Court did not apply in the present case. It is urged that since the issue stands concluded by the decision of the apex court in General Insurance Corporation of India v. CIT, (1999) 240 ITR 139, no substantial question of law arises from the order of the Tribunal
9. We find substance in the contention of learned counsel for the assessee.
10. Section 44 of the Act is a special provision dealing with the computation ot profits and gains of business of insurance. It being a non obstante provision, has to prevail over other provisions in the Act. It clearly provides that income from insurance business has to be computed in accordance with the rules contained in the First Schedule. It is not the case of the Revenue that the assessee has not computed the profits and gains of its insurance business in accordance with the said rules. The scope of section 44 of the Act came up for consideration before the Supreme Court in General Insurance Corporation of India v. CIT, [1999] 240 ITR 139, and their Lordships observed thus (page 144):
“Section 44 of the Income-tax Act is a special provision governing computation of taxable income earned from business of insurance. It opens with a non obstante clause and thus has an overriding effect over other provisions contained in the Act. It mandates the assessing authorities to compute the taxable income for business of insurance in accordance with the provisions of the First Schedule. A plain reading of rule 5(a) of the First Schedule makes it clear that in order to attract the applicability of the said provision the amount should firstly be an expenditure or allowance. Secondly, it should be one not admissible under the provisions of sections 30 to 43a. If the amount is not an expenditure or allowance, the question of testing its eligibility for adjustment by reference to rule 5(a) of the First Schedule would not arise at all.”
11. In view of the said authoritative pronouncement, and in the aosence or any finding by the Assessing Officer that the taxable income has not been computed in accordance with section 44 of the Act, no fault can be found with the view taken by the Tribunal. No question of law, much less a substantial question of law, survives for our consideration. Consequently, both the appeals are dismissed.