Provisions For Unsettled Outstanding & IBNR Claims Allowable U/s 37 Being Ascertained Liabilities: Delhi High Court

The Delhi High Court upheld ITAT's decision allowing provisions for unsettled outstanding and 'Incurred But Not Reported' (IBNR) claims for a health insurance company as deductible under Section 37 of the Income Tax Act. \r

The court held that these provisions are not contingent liabilities but ascertained liabilities, based on historical data and actuarial methods per IRDA regulations. The Bench, including Justices Yashwant Varma and Purushaindra Kumar Kaurav, emphasized that a liability, properly ascertainable using empirical data or known methodology, is valid under Section 37. \r

The court dismissed Revenue's appeal, affirming that IBNR provisions are deductible as they meet the criteria for reasonable estimation.