Court affirmed that provisions related to IBNR and IBNER must adhere to actuarial principles under regulatory frameworks, emphasizing specialized tax treatment for insurance companies as stipulated in the Income Tax Act.

JUDGMENT :

ANITA SUMANTH, J.

1. TC(A) Nos.755 of 2018 and 49, 51 and 52 of 2023 have been filed by Cholamandalam MS General Insurance Co. Ltd and TC(A) No.855 of 2018 has been filed by Royal Sundaram General Insurance Co. Ltd under Section 260A of the INCOME TAX ACT 1961 (Act). The appeals relate to assessment years (AYs) 2009-10 (TC(A) 755 of 2018), 2010-11 (TC(A) No.855 of 2018), 2010-11 (TC(A) No.51 of 2023), 2013-14 (TC(A) No.52 of 2023) and 2014-15 (TC(A) No.49 of 2023).

2. The substantial questions of law admitted for consideration in T.C.(A) Nos.755 and 855 of 2018 are as follows:

'Reinsurance Premium:

1. Whether the Tribunal has the jurisdiction to adjudicate upon validity and legality of payments of reinsurance premium made by the appellant to non-resident reinsurers under the Insurance Act, 1938 ?

2. Whether the Tribunal has the jurisdiction to adjudicate upon the grounds, which were never raised by the appellant and the respondent in its grounds of appeal ?

3. When this issue did not arise out of appeal before the Tribunal, whether the Tribunal was correct in holding that the payments of reinsurance premium made by the appellant to non-resident reinsurers are in violation of the provisions of the Insurance Act, 1938 ?

4. Whether the Tribunal has the jurisdiction to adjudicate upon validity and legality of the IRDA (General Insurance- Reinsurance) Regulations, 2000, which permit general insurance companies in India to place reinsurance premium outside India and to hold that these Regulations are not inconsistent with the provisions of the Insurance Act, 1938?

5. Whether the Tribunal was correct in questioning the intention of the Parliament by holding that it cannot be the intention of the Parliament to authorize Indian insurer to have insurance outside the country ignoring the provisions of the Insurance Act, when, on other hand, the Regulations being the IRDA (General Insurance-Reinsurance) Regulations, 2000, which were tabled before the Parliament, permit Indian insurer to place reinsurance outside India ?

6. When the Tribunal was correct in holding that the other insurer in Section 101A(7) of the Insurance Act would only mean the insurer as defined under Section 2(9) of the Insurance Act ?

7. When the finding of the Tribunal that the learned Senior Counsel for the assessee very fairly submitted before the Tribunal that after 2014, the assessee started deducting tax on the reinsurance premium paid to the non-resident reinsurance company is erroneous and perverse ?

8. Whether the Tribunal was correct in holding that the payments of reinsurance premium made by the appellant to non-resident reinsurers is to be disallowed under Section 37 read with Explanation 1 of the Act on the ground that the same is prohibited under the Insurance Act, 1938?

9. Whether the Tribunal was correct in not adjudicating on any of the grounds raised by the appellant and the respondent in respect of non applicability of provisions of Section 195 being withholding of taxes on reinsurance premium paid to foreign insurers?

10. Whether the Tribunal was correct in holding that the payments of reinsurance premium made by the appellant to non-resident reinsurers is to be disallowed under Section 40(a)(i) of the Act, when the Tribunal has not decided the taxabil