GENERAL INSURANCE CORPN.OF INDIA vs C.I.T., BOMBAY — C.A. No. 3283/1998

Case Summary: General Insurance Corporation of India v. CIT, Bombay (1999) The Supreme Court held that a reserve set apart by General Insurance Corporation of India for redemption of preference shares (Rs. 3,00,30,700) cannot be added back as taxable income under Rule 5(a) of the First Schedule to the Income-tax Act. While Rule 2(2)(a) of the General Insurance Business (Nationalisation) Rules permits such reserves to be treated as expenditure in the profit-and-loss account for regulatory purposes, this accounting treatment does not transform the reserve into "expenditure" within the tax meaning, as expenditure requires actual disbursement or payment. The Court allowed the appeal, finding no conflict exists between the two rules when properly harmonized—each serves distinct purposes under different statutes. This case analysis is maintained by casestatus.in based on publicly available court records.