The ACIT,(OSD), Circle -5, Ahmedabad V. P.G. Foils Ltd., Ahmedabad

ITA 2960/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67739 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 29-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

ITA NO 2906/AHD/2010 . A.Y. 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 2960/AHD/2010 (ASSESSMENT YEAR:2007-08 THE ACIT (OSD), CIRCLE-5, AHMEDABAD (APPELLANT) VS. P.G. FOILS LTD., 6, NEPTUNE TOWER, ASHRAM ROAD, AHMEDABAD (RESPONDENT) PAN: AAACP9274C APPELLANT BY : SHRI O.P. BATHEJA, SR. D.R . RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 16-09-201 3 DATE OF PRONOUNCEMENT : 27-09-2013 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-XI, AHMEDABAD DATED 13.09.2010 FOR A.Y. 2007-08. 2. THE FACTS AS CULLED OUT FROM THE ORDER OF LOWER AU THORITIES ARE AS UNDER: 3. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MA NUFACTURING LAMINATION AND TRADING OF ALUMINUM FOILS AND TRADIN G OF ALUMINUM. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 07-08 ON 26.10.2007 ITA NO 2906/AHD/2010 . A.Y. 2007-08 2 DECLARING TOTAL INCOME OF RS. 16,12,280/-. THE CAS E WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U NDER SECTION 143(3) VIDE ORDER DATED 09.11.2009 AND THE TOTAL INCOME WA S DETERMINED AT RS. 4,31,32,280/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 13.09.2010 PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVE D BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 4. THE ONLY GROUND OF REVENUE IS WITH RESPECT TO PREMI UM PAID ON KEYMAN INSURANCE. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS ING OFFICER NOTICED THAT ASSESSEE HAD PAID PREMIUM OF RS. 4,50,00,000/- OF KEYMAN INSURANCE PREMIUM FOR KEY-PERSONS NAMELY SHRI ABHAY SHAH AND SHRI PANKAJ SHAH. THE SUBMISSIONS MADE BY THE ASSESSEE W ITH RESPECT TO ALLOWING THE PREMIUM AS DEDUCTION WAS NOT FOUND ACC EPTABLE TO THE ASSESSING OFFICER. HE ACCORDINGLY WORKED OUT THE PR EMIUM BY CONSIDERING LOWER OF THE GROSS PROFIT METHOD/NET PR OFIT METHOD AND 10 TIMES REMUNERATION AND ACCORDING TO HIM THE ALLOWAB LE PREMIUM WORKED OUT TO RS. 34.80 LAKHS AS AGAINST 4,50,00,000/- CLA IMED BY THE ASSESSEE. HE ACCORDINGLY DISALLOWED THE EXCESS PREMIUM OF RS. 4,15,20,000/- AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF ASS ESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A), CIT(A) F OLLOWING HIS PREDECESSORS ORDER IN ASSESSEES OWN CASE FOR A.Y. 06-07 DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- ITA NO 2906/AHD/2010 . A.Y. 2007-08 3 3.2.3 I AM INCLINED TO ACCEPT THE CONTENTIONS PUT FORTH B Y THE A. R. OF THE APPELLANT. IT IS SEEN THAT THE SIMILAR ISSUE AROSE IN THE APPE LLANT'S OWN CASE FOR A. Y. 2006-07. THE SAME WAS DECIDED BY MY PREDECESSOR IN FAVOUR OF THE APPELLANT VIDE HIS ORDER IN APPEAL NO. CIT(A)-XI/JT.CIT.R.5/6 96/08-09 DATED 03-04- 2009, WHEREIN HE HELD AS UNDER:- '2.5. THE SUBMISSIONS MADE BY THE A. R. HAVE BEEN C ONSIDERED. THE CASE LAWS RELIED UPON BY THE A. R. ARE ALSO PERUSED. THE OBSE RVATIONS OF THE A.O. ARE ALSO VERIFIED. HAVING PERUSED THE FACTS AND CIRCUMS TANCES OF THE CASE, I AM OF THE VIEW THAT THE A. O. IS NOT JUSTIFIED TO MAKE TH E DISALLOWANCE OF KEYMAN INSURANCE PREMIUM PAYMENT ON THE GROUND THAT THE AP PELLANT HAS MADE EXCESSIVE PAYMENT OF PREMIUM AS PER THE GUIDELINES OF THE INSURANCE COMPANY. THE A. O. HAS NOT APPRECIATED THE FACT THA T THE SAME INSURANCE COMPANY ITSELF HAS PERMITTED THE APPELLANT TO TAKE THE KEYMAN INSURANCE PREMIUM POLICY WITH SUCH ASSURED RS. 22.50 CRORES A ND THE PREMIUM PAYMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS THE SECOND INSTALLMENT OF PREMIUM PAYMENT. THE APPELLANT HAD ALREADY PAID FIR ST PREMIUM FOR THE ASSESSMENT YEAR 2005-06 WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. FURTHER, IT IS SEEN THAT CIT-III ALSO HAS NOT DISPU TED THE APPELLANT'S CLAIM IN THIS REGARD WHILE PASSING ORDER U/S. 263 OF INCOME- TAX ACT FOR THE ASSESSMENT YEAR 2005-06. 2.6FURTHER, IT IS SEEN THAT THE A.O. THOUGH HAS ACC EPTED THE CORRECTNESS OF THE PAYMENTS OF THE PREMIUM AND ALSO DID NOT FIND ANYTH ING AGAINST THE APPELLANT'S CLAIM FROM THE CBDT'S CIRCULAR AS WELL AS THE INCOME-TAX ACT, HENCE THERE IS NO BAR WITH REGARD TO THE QUANTUM OF PREMIUM PAYMENT. HAVING CONSIDERED THE ABOVE, I AM OF THE VIEW THAT THE ADDITION MADE BY THE A.O. IS NOT IN ACCORDANCE WITH THE LAW. THEREFORE, THE A.O. IS DIRECTED TO ALLOW THE APPELLANTS CLAIM WITH REGARD TO KEYMAN I NSURANCE PREMIUM PAYMENT. ACCORDINGLY, THIS GROUND OF APPEAL IS ALL OWED. 3.2.4 IN THE LIGHT OF THE DECISION OF MY PREDECESS OR, THE CONTENTIONS OF THE A.R., THE CIRCULAR AND CASE-LAWS RELIED ON BY HIM. I AM OF THE VIEW THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT J USTIFIED. HENCE, I AM INCLINED TO DIRECT THE A.O. TO DELETE THE DISALLOWA NCE MADE BY HIM OF RS. 4,15,20,000/-. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF ASSESSING OFFICER. 7. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE GRANTING THE RELIEF HAS NOTED THA T THE PREMIUM PAID IN THE CURRENT FINANCIAL YEAR WAS THE SECOND INSTALLME NT AND THE FIRST ITA NO 2906/AHD/2010 . A.Y. 2007-08 4 INSTALLMENT OF PREMIUM PAID IN A.Y. 05-06 BY THE AS SESSEE HAS BEEN ACCEPTED AND NOT DISPUTED BY REVENUE. BEFORE US, TH E REVENUE COULD NOT CONTROVERT THE FINDINGS OF CIT(A), NOR COULD HE BRI NG ANY DECISION OF HIGH COURT IN ITS SUPPORT. WE ALSO FIND THAT THE HO N. BOMBAY HIGH COURT IN THE CASE OF CIT VS. B.N. EXPORTS (2010) 323 ITR 178 HAS HELD THAT PREMIUM ON THE KEYMAN INSURANCE POLICY OF PARTNER O F THE FIRM IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND IS ALLOWABLE AS BUSINESS EXPENDITURE. IN VIEW OF THE AFORESAID FACTS, WE FIN D NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF RE VENUE IS DISMISSED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 27 - 09 - 2013 . SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD