The DCIT, Circle-4,, Baroda V. Prakash Chemicals Pvt.Ltd., Baroda

ITA 172/AHD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50813 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 24-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: MK PATELAR
• Section: 10(10D)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , .'.#$%, '& ' ' BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ./ I.T.A. NO.172/AHD/2011 ( ) * ) * ) * ) * / / / / ASSESSMENT YEAR : 2007-08) DY.CIT CIRCLE-4 BARODA ) ) ) ) / VS. M/S.PRAKASH CHEMICAL PVT.LTD. INDUCHAHA HOUSE OPP.CHHANI OCTROI NAKA BARODA + '& ./,- ./ PAN/GIR NO. : AABCP 1987 H ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ' / APPELLANT BY : SHRI A.K. PATEL, D.R. /0+. 2 1 ' / RESPONDENT BY : SHRI M.K. PATEL, A.R. )3 2 & / / / / DATE OF HEARING : 30/09/2011 4$* 2 & / DATE OF PRONOUNCEMENT : 14.10.11 '5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-III, BARODA DATED 20/09/2010 PASSED FOR A.Y. 2007-08 AND THE ONLY GROUND READS A S FOLLOWS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN ALLOWING KEYMAN INSURANCE P REMIUM AMOUNTING TO ` 10,50,000/-, OVERLOOKING THE FACT THAT THE EXPENDITURE WAS DISALLOWABLE U/S.37(1) OF THE INCOM E TAX ACT, 1961, AS THE ASSESSEE COULD NOT ESTABLISH THAT THE PAYMENT WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSES SEES BUSINESS. ITA NO.172/AHD/ 2011 DY.CIT V. M/S.PRAKASH CHEMICAL P.LTD. ASST.YEAR - 2007-08 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE ASSESSMENT ORDER PASSED U/S.143(3)OF THE ACT DATED 11/12/2009 WERE THAT THE ASSESSEE-COMPANY IS IN THE BUSINESS OF IMPORT AND DISTRIBUTION OF CHEMI CALS. THE ASSESSEE IS ALSO CARRYING TRANSPORTATION BUSINESS. IT WAS NOT ED BY THE AO THAT A SUM OF RS.10,50,000/- WAS DEBITED TO P&L ACCOUNT UNDER THE HEAD KEYMAN INSURANCE PREMIUM . THE DETAILS OF THE SAME WAS SUBMITTED AS FOLLOWS:- SR.NO. NAME NATURE OF WORK EXPERIENCE AND QUALIFICATION PREMIUM PAID 1. CHIRAG P.SHAH MARKETING OF PRODUCTS, BANKING AND FINANCE 13 YEARS BBA RS.3,50,000 2. ATUL C.SHAH MARKETING OF PRODUCTS, ERP & ACCOUNTS 23 YEARS B.COM. RS.3,50,000 3. HITESH C.SHAH MARKETING OF PRODUCTS [ADMN.& H.R.] 29 YEARS B.COM. RS.3,50,000 TOTAL RS.10,50,000 3. THE ASSESSING OFFICER WAS NOT CONVINCED AND HEL D THAT THE ASSESSEE HAS NOT PLACED ON RECORD THE SIGNIFICANCE OF THE SERVICES OF THOSE PERSONS AND HOW THEIR SERVICES WAS PROFITABLE TO TH E BUSINESS CARRIED ON BY THE ASSESSEE. IN HIS OPINION, THOSE PERSONS C OULD NOT BE CONSIDERED AS KEY PERSONS, RESULTANTLY IT WAS DISALLOWED. ITA NO.172/AHD/ 2011 DY.CIT V. M/S.PRAKASH CHEMICAL P.LTD. ASST.YEAR - 2007-08 - 3 - 3.1. THE MATTER WAS CARRIED BEFORE THE FIRST APPELL ATE AUTHORITY WHO HAS DISCUSSED A DECISION OF HONBLE BOMBAY HIGH COURT P RONOUNCED IN THE CASE OF CIT VS. B.N.EXPORTS [2010]190 TAXMAN 325 ( BOM), WHEREIN IT WAS HELD THAT THE ALLOWABILITY OF THE EXPENDITURE INCURRED ON PREMIUM PAID TOWARDS THE KEYMAN INSURANCE POLICY COULD NOT BE CONFINED ONLY TO A SITUATION WHERE POLICY IS IN RESPECT OF LIFE OF A N EMPLOYEE. FOR THE PURPOSE OF CLAUSE (10D), A KEYMAN INSURANCE POLICY IS A LIFE INSURANCE POLICY TAKEN BY A PERSON ON THE LIFE OF AN ANOTHER PERSON, WHO IS AN EMPLOYEE OF THE PERSON WHO HAS SUBSCRIBED TO THE PO LICY OF INSURANCE WHICH IS CONNECTED IN ANY MANNER WHATSOEVER WITH TH E BUSINESS OF THE SUBSCRIBER TO THE POLICY. LD.CIT(A) HAS ALSO DISC USSED CBDT CIRCULAR NO.762 DATED 18/02/1998 AND ALLOWED THE CLAIM. 3.2. IN ADDITION TO ABOVE PRECEDENTS, THE ISSUE OF KEYMAN INSURANCE IS ALSO COVERED BY THE DECISIONS OF (I) P.G. ELECTRONICS VS. ITO 98 TTJ 896, CIT VS. B.N. EXPORTS 37 DTR 381(BOM), SUNITA FINL EASE LTD. VS. DCIT 118 TTJ 263 (ITAT)[BILASPUR] AND ITO VS. MODI MOT ORS 27 SOT 476 [ITAT](BOM) AND ALLOWED THE CLAIM. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, THE ISSUE NOW STOOD COVERED BY A LATEST DECISION OF ITAT D BENC H AHMEDABAD PRONOUNCED IN THE CASE OF M/S.GEE AAR TEX VS. ACIT IN ITA NO.3469/AHD/2008 (FOR A.Y. 2005-06), DATED 31/03 /2009, WHEREIN THE ISSUE WAS DISCUSSED AT LENGTH AND FINALLY HELD THAT IN THE LIGHT OF THE CBDT CIRCULAR (SUPRA) AND THE EXPLANATION TO SECTIO N 10(10D) THE PREMIUM PAID UNDER THE KEYMAN INSURANCE POLICY ON THE LIFE OF A ITA NO.172/AHD/ 2011 DY.CIT V. M/S.PRAKASH CHEMICAL P.LTD. ASST.YEAR - 2007-08 - 4 - PARTNER SHOULD NOT BE DISALLOWED. THOUGH FROM THE SIDE OF THE REVENUE, LD.DR MR.A.K.PATEL HAS OBJECTED THE RELIEF GRANTED BY LD.CIT(A) ON THE GROUND THAT THE KEYMAN INSURANCE POLICY PERTAINED O NLY TO THE DIRECTORS OF THE COMPANY, AND NOT FOR THE EMPLOYEES OF THE C OMPANY, THEREFORE, THE AO HAS RIGHTLY DISALLOWED THE SAME, BUT THAT AS PECT OF HIS ARGUMENT HAS ALREADY BEEN CONSIDERED BY THE RESPECTED CO-ORD INATE BENCH, THEREFORE FOLLOWING THE AFORESAID DECISION, WE FIND NO FORCE IN THIS GROUND OF THE REVENUE, HENCE DISMISSED. 5. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 14.10. 2011. SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 14/ 10 /2011 6..), .)../ T.C. NAIR, SR. PS '5 2 /7 8'7* '5 2 /7 8'7* '5 2 /7 8'7* '5 2 /7 8'7*/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-III, BARODA 5. 7<# /) , , / DR, ITAT, AHMEDABAD 6. # =3 / GUARD FILE. '5) '5) '5) '5) / BY ORDER, 07 / //TRUE COPY// > >> >/ // / , , , , ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD ITA NO.172/AHD/ 2011 DY.CIT V. M/S.PRAKASH CHEMICAL P.LTD. ASST.YEAR - 2007-08 - 5 - 1. DATE OF DICTATION..10.10.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.10.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 14.10.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.10.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER