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CA Final · Direct Tax Laws & International Taxation · Miscellaneous Provisions

Tarang Marine Insurance Co. carries on marine insurance business including Export Credit Insurance. In the tax year it received premium of Rs 60 crore (marine cargo Rs 50 crore and export credit Rs 10 crore) and paid reinsurance premium of Rs 15 crore in total. It carried Rs 48 crore to the reserve for unexpired risks. What is the amount disallowed under Rule 330?

Rs 3 crore is disallowed. Export Credit Insurance counts as marine insurance, so the limit is 100 per cent of net premium income of Rs 45 crore. Since Rs 48 crore was carried to the reserve, the excess of Rs 3 crore is not allowed.

  1. ANil
  2. BRs 3 croreCorrect
  3. CRs 18 crore
  4. DRs 33 crore

Explanation

Marine insurance includes Export Credit Insurance, so the whole Rs 60 crore is marine business. Net premium = 60 - 15 = Rs 45 crore. The limit is 100% = Rs 45 crore. The amount carried is Rs 48 crore, so the disallowance is 48 - 45 = Rs 3 crore. Nil would result from applying the limit to gross premium of Rs 60 crore.

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