Judgement

VENKATARAMA AIYAR, J. - This appeal raises a question of importance as to whether amounts shown by an insurance company as reserves for unexpired risks on pending policies are liable to be deducted under R.2 of Sch. II to the Excess Profits Tax Act (XV of 1940), hereinafter referred to as the Act.

2. The respondent is a Company carrying on life, fire, marine and general insurance business, and the present dispute relates to the assessment of excess profits tax on its income from business other than life insurance for the chargeable accounting periods ending 31st December 1940, and 31st December 1941. To appreciate the contentions raised, it is necessary to state that the policies of insurance with which these proceedings are concerned, are, unlike life insurance policies, issued in general for short periods or ad hoc in relation to a specified voyage or event.

To take the most important of them, fire insurance policies, they are issued normally for one year, and the whole of the premium due thereon is received when the policies are actually issued. In any given year, while the premiums due on the policies would have been received in full, the risks covered by them would have