ITO 26(2)(4), MUMBAI V. PHARMA SEARCH, MUMBAI

ITA 2679/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9059 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURUDR
• Assessee Lawyers: DEVENDRA JAINAR
• Keywords: Business expenditure
• Section: 143(3); 37(1); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2679/MUM/2016 ASSESSMENT YEAR: 2006-07 ITO 26(2)(4), VS. M/S. PHARMA SEARCH., ROOM NO. 707, 2 ND FLOOR, 2202, TURINO, HIRANANDANI GARDEN, PRATYAKASHAKAR BHAVAN, BANDRA POWAI, KURLA, MUMBAI 400051 MUMBAI - 400076 PAN: AAIFP1230H (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M.V. RAJGURU,DR ASSESSEE BY: SHRI DEVENDRA JAIN,AR DATE OF HEARING : 02/0 1/2017 DATE OF PRONOUNCEMENT: 02/01/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR 2006-07. THE APPEAL IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER (APPEALS) 38, MUMBAI AND ARISES OUT OF THE ORDER UNDER SECTION 143(3) READ WITH SECTION 147 OF THE I NCOME TAX ACT, 1961 (THE ACT). 2. THE GROUND OF APPEAL RAISED BY THE REVENUE IN TH IS APPEAL IS THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE A DDITION OF RS. 50,00,000/- MADE BY THE ASSESSING OFFICER (AO) U/S 37(1) WITHOUT INTERPRETING THE PROVISIONS OF THE SECTION IN ITS R IGHT PERSPECTIVE AND TRUE MEANING. IT IS FURTHER STATED THAT THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAS SUBSCRIBED T O A PLAN OF AN ENDOWMENT POLICY AND NOT TO A KEYMAN INSURANCE POLI CY. ITA NO. 2679/MUM/2016 2 3. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDIN GS NOTICED THAT THE ASSESSEE-FIRM HAD CLAIMED AN EXPENSE OF RS . 50,00,000/- RELATING TO INSURANCE PREMIUM. THE ASSESSEE-FIRM HA D ARRANGED TO DRAW INSURANCE POLICY NUMBERING 25 IN ALL, INVOLVIN G THE PAYMENT OF PREMIA OF RS. 2,00,000/- EACH PER ANNUM. THE PERIOD FOR WHICH SUCH PREMIA WERE REQUIRED TO BE PAID WAS STATED TO BE 3 YEARS. THE ASSESSEE FIRM AS A PROPOSER OF THE POLICIES HAD E FFECTED TO PROVIDE INSURANCE COVER TO INDEMNIFY AGAINST THE RISK OF LO SS OF LIVES IN THEIR KEY PERSONS I.E. SHRI VIKAS PURI AND SMT. CHITRA IY ER PURI, WHO WERE PARTNERS DURING THE IMPUGNED ASSESSMENT YEAR. THE A O DISALLOWED RS. 50,00,000/- U/S 37(1) HOLDING THAT THE COST OF INSURANCE PREMIA ON THE LIVES OF THE PARTNERS MADE BY THE ASSESSEE-F IRM FROM ITS OWN FUNDS WOULD BE IN THE NATURE OF EXPENSES INCURRED F OR THE ENJOYMENT OF PERSONAL BENEFITS OF THE PARTNERS AND, THEREFORE , DID NOT AMOUNT TO BEING IN THE NATURE OF BUSINESS EXPENDITURE. 4. THE ASSESSEE-FIRM PREFERRED AN APPEAL AGAINST TH E ORDER OF THE AO BEFORE THE LEARNED CIT(A). WE FIND THAT THE LEAR NED CIT(A) FOLLOWED THE ORDER OF THE ITAT C BENCH, MUMBAI (ITA NO. 7303/MUM/2010) DATED 02.05.2012 IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2007-08 AND ALLOWED THE APPEAL. 5. THE LEARNED DR SUPPORTS THE ORDER OF THE AO. THE LEARNED COUNSEL OF THE ASSESSEE RELIES ON THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2007-08 AND 2 008-09. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE SAME ISSUE ARO SE BEFORE THE ITAT C BENCH MUMBAI IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2007-08 (ITA NO. 7303/MUM/2010). THE TRIBUNAL RELIED ON THE JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ESCORTS HEALTH INSTITUTE & RESEARCH CENTRE LTD. (ITA NO. 398/2009) AND HELD THAT THE EXPENDITURE INCURRED ON KEYMAN INSURANCE PREMIUM WA S TO BE ALLOWED AS BUSINESS EXPENDITURE. 6.1 ALSO THE SAME ISSUE AROSE BEFORE THE ITAT SMC BENCH, MUMBAI IN THE CASE OF THE ASSESSEE FOR THE A.Y. 200 8-09 (ITA NO. 2680/MUM/2016). THE TRIBUNAL FOLLOWED ITS ORDER FOR THE A.Y. 2007- 08 AND DISMISSED THE APPEAL FILED BY THE REVENUE. ITA NO. 2679/MUM/2016 3 7. AS THE FACTS ARE SIMILAR, WE FOLLOW THE ORDER OF THE CO-ORDINATE BENCH FOR THE A.Y. 2007-08 AND 2008-09 AND DISMISS THE APPEAL FILED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/01/2017 SD/- SD/- (MAHAVIR SINGH) (N. K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI; DATED: 02/01/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI