ITAT Restores Oriental Insurance Co. Ltd’s Depreciation Claim for Reconsideration

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently addressed a dispute involving Oriental Insurance Co. Ltd. and the disallowance of depreciation claimed under Section 32 of the Income Tax Act, 1961. Out of a total claim of ₹35 crore, the Assessing Officer (AO) had disallowed ₹10 crore on account of lack of asset details. The ITAT has now restored the matter for fresh examination.

Background of the Case

• Assessee: Oriental Insurance Co. Ltd., a public sector insurance company engaged in general insurance and related activities.

• Assessment Year: 2006–07

• Return Filed: Declared a total loss of ₹184.74 crore under normal provisions and ₹238.43 crore as book loss under Section 115JB (Minimum Alternate Tax).

• Business Profile: Apart from general insurance, the company also reported income from the purchase and sale of securities.

As a recognized Public Financial Institution under the Companies Act, the company’s insurance business income is required to be computed strictly in line with Section 44 of the Income Tax Act, read with Part B of the First Schedule.

Issue Raised

The company had claimed depreciation of ₹35 crore in its return. During scrutiny, the AO found that:

• Additions to fixed assets of around ₹21.10 crore were reported during the year.

• However, no detailed records of additions or deletions of assets were furnished.

• In earlier years (AY 2001–02 and AY 2004–05), similar claims were partly disallowed for lack of documentation.

Based on these observations, the AO disallowed ₹10.15 crore of the depreciation claim. The CIT(A) later upheld this action.

Tribunal’s Findings

The two-member bench comprising Vikas Awasthy (Judicial Member) and M. Balaganesh (Accountant Member) reviewed the appeal.

• They noted that in previous years, the ITAT had restored similar issues for fresh verification by the AO.

• Following the same approach, the bench decided to send the matter back to the AO for reconsideration.

• The AO has been directed to examine the claim afresh in light of earlier decisions and any additional evidence provided by the assessee.

Why This Matters

This case highlights two key aspects:

1. Documentation is Critical: Even large institutions like insurance companies must maintain proper records of asset additions and deletions to justify depreciation claims.

2. Consistency Across Assessments: When similar issues arise across multiple years, tribunals tend to adopt a uniform approach to maintain fairness.

For taxpayers, especially corporates, this serves as a reminder that depreciation claims under Section 32 must be supported with detailed asset registers and evidence.

Conclusion

The ITAT has not outrightly allowed or disallowed the depreciation claim of Oriental Insurance Co. Ltd. Instead, it has given the assessee another opportunity by restoring the matter to the AO for fresh consideration.

For now, the depreciation dispute of ₹10 crore out of ₹35 crore claimed remains unresolved, but the company has another chance to substantiate its claim with proper evidence.