The main legal point established in the judgment is the interpretation and application of Section 44 of the Income Tax Act, 1961 read with Rule 5 of the First Schedule to the said Act in the assessment of an insurance company.

Badar Durrez Ahmed, J.

1. In these references, several common questions have been referred to this Court. The assessee’s references are ITR 113/1998 and ITR 114/1998 pertaining to the assessment years 1980-81 and 1981-82, respectively. The department’s references are ITR 115/1998, ITR 116/1998 and ITR 117/1998, which pertain to the assessment years 1980- 81 and 1981-82. In ITR 113/1998, which is the assessee’s reference, the following questions have been referred to this Court for consideration:-

(I) Whether on the facts and circumstances of the case and a true interpretation of Section 44 of the Income Tax Act, 1961 read with Rule 5 of the First Schedule to the said Act, the Tribunal was right in confirming the addition of Rs. 85,55,077/- representing tax deducted at source to the balance of profits disclosed by the annual accounts of the appellant insurance company?

(II) Whether on the facts and circumstances of the case and a true interpretation of Section 44 of the Income Tax Act, 1961 read with Rule 5 of the First Schedule to the said Act, the Tribunal was right in confirming the addition of provision for taxation to Rs. 9,30,00,000/- to the balance of profits disclosed by the annual accounts of the appellant insurance company?

(III) Whether on the facts and circumstances of the case and a true interpretation of Section 44 of the Income Tax Act, 1961 read with Rule 5 of the First Schedule to the said Act, the Tribunal was right in rejecting the applicant insurance company claim for allowing weighted deduction under Section 35B of the Act at Rs. 82,19,658/- in respect of total expenditure of Rs. 1,04,93,445/-?

2. ITR 114/1998, which is also a reference of the assessee, raises the same three questions, though the amounts mentioned therein are different. The amounts in ITR 114/1998 are - Rs. 2,02,98,457/- and Rs. 9,50,00,000/- in question Nos. I and II, respectively. Insofar as question No. III is concerned, the amounts are - Rs. 1,07,76,524/- and Rs. 3,23,29,571/-.

3. Thus, it is seen that the questions in the two references on behalf of the assessee are identical except for the differences in the amounts.

4. Insofar as the department’s reference is concerned, only two questions arise for consideration. In ITR 115/1998, the following question has been referred to us:-

(IV) Whether on the facts and circumstances of the case, the ITAT is right in law in holding that assessee’s claim for deduction of Rs. 1,08,66,420/- and Rs. 49,341/- being reserves for export market development allowance and bad/doubtful debt is allowable under the Income Tax Act, 1961?

5. In ITR 116/1998, the following question has been referred to us:-

(V) Whether on the facts and circumstances of the case, the ITAT is right in law in holding the disallowance of Rs. 57,047/- made under Section 37 (4) of the Income Tax Act on account of expenditure on lease rent, taxes and repairs and maintenance of a guest house, on the ground that this expenditure was allowable under certain other provisions of the Income Tax Act?

6. Insofar as ITR 117/1998 is concerned, the question in this reference is identical to question No. IV above except that the amounts are Rs. 1,16,14,440/- and Rs. 3,94,916/-. ITR 115/1998 pertains to the assessment year 1980-81, ITR 116/1998 pertains to the assessment year 1981-82 and so does ITR 117/1998. Thus, although there are several questions referred in each of the references mentioned above, only five questions need to be answered by this Court.

7. Insofar as question Nos. (I) and (II) are concerned, they are covered against the revenue by virtue of the Supreme Court decision in the assessee’s own case in CIT v. Oriental Fire and General Insurance Co. Ltd: 291 ITR 370 (SC). Question Nos. (I) and (II) are, therefore, answered in favour of the assessee and against the revenue.

8. Insofar as question No. (III) is concerned, that is covered against the assessee and in favour of the revenue by virtue of the Supreme Court decision in the case of