The ITO, Ward-6(1), Surat V. M/s. Ashoka Dyeing & Printing Mills, Surat

ITA 3691/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9860 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 14-11-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Business expenditure; Capital receipt; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH C CC C BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI MUKUL SHRAWAT MUKUL SHRAWAT MUKUL SHRAWAT MUKUL SHRAWAT, , , , JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI SHRI SHRI SHRI N.S.SAINI N.S.SAINI N.S.SAINI N.S.SAINI, , , , ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATE OF HEARING : 23-9 10 DRAFTED ON: 2 3-9-10 ITA NO. 3691 /AHD/ 2008 ASSESSMENT YEAR :2005-06 INCO ME TAX OFFICER, WARD 6(1), AAYAKAR BHAVAN, MAJURA GATE, SURAT. VS. M/S. ASHOKA DYEING & PRINTING MILLS 261-B, GIDC PANDESARA, SURAT. PAN/GIR NO. : AAEFA 2678 Q (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SHELLY JINDAL, CIT(LEARNED DEPARTMENTAL REPRESENTATIVE) RESPONDENT BY: NONE O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV , SURAT, DATED 18-8-2008. 2. THE SOLE GROUND OF APPEAL OF THE REVENUE READS A S UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-IV, SURAT HAS ERRED IN DELETING THE ADDITION OF `.14,38 ,100/- MADE BY THE ASSESSING OFFICER ON THE GROUND OF DISA LLOWED INSURANCE PREMIUM PAID UNDER KEYMAN INSURANCE POLI CY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE A. O. OBSERVED THAT IN VIEW OF THE LEGISLATURE KEYMAN IS EITHER AN EM PLOYEE OF THE ORGANIZATION OR ANY OTHER SALARIED PERSON WHO IS A KEY PERSON IN THE ORGANIZATION. CONSEQUENTLY, THE KEYMAN INSURANC E IS AN - 2 - INSURANCE POLICY WHERE THE PROPOSER AS WELL AS THE PREMIUM PAYER IS THE EMPLOYER, THE LIFE TO BE INSURED IS TH AT OF THE EMPLOYEE, AND THE BENEFIT, IN CASE OF A CLAIM, GOES TO THE EMPLOYER. THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATI ONSHIP IS A SINE-QUA-NON FOR THE DEDUCTIBILITY OF KEYMAN INSURA NCE PREMIA. 4. HOWEVER, SUCH KIND OF A RELATIONSHIP IS CONSPIC UOUSLY ABSENT BETWEEN THE PARTNERSHIP FIRM AND THE PARTNER S. THE PARTNERS CONSTITUTE THE FIRM. THE FIRM HAS ONLY AN ARTIFICIAL IDENTITY UNDER THE INCOME TAX ACT, 1961. IN EFFECT, ANY EXPENDITURE ON LIFE INSURANCE OF PARTNERS, BY WHATE VER NAME CALLED (INCLUDING KEYMAN POLICY), BY THE FIRM GOES TO INSURE THE PARTNERS ONLY. SINCE THE PARTNERS AND THE FIRM ARE INEXTRICABLY LINKED, BY THE CHANNEL OF KEYMAN INSURANCE, THE PAR TNERS INSURE THEMSELVES ONLY. UNLIKE A COMPANY WHERE THE EMPLOYEE/DIRECTOR AND THE EMPLOYER ARE TWO DIFFEREN T PERSONS, IN THE FIRM THE PARTNERS AND THE FIRM ARE INSEPARAB LE. HENCE, EXPENDITURE ON PREMIA OF KEYMAN INSURANCE FOR A FIR M ON LIFE OF PARTNERS BESTOWS PERSONAL BENEFITS TO THE PARTNERS. THE FIRM MAKES OUTLAYS ON ITSELF; HENCE, THE PREMIA BECOMES A PERSONAL EXPENDITURE. ANY PERSONAL EXPENDITURE IS NOT DEDUCT IBLE UNDER SECTION 37(1) OF THE INCOME TAX ACT,1961. 5. WITHOUT PREJUDICE TO THE ARGUMENTS OF ABOVE PARA ; FURTHER, THE AMOUNT ON CLAIM OR MATURITY UNDER A KE YMAN INSURANCE POLICY IS NOT EXEMPT UNDER SECTION 10(10D ) OF THE INCOME TAX ACT WHEN THE COMPANY PAYS THE PREMIA, BE CAUSE IN SUCH SITUATION THE BENEFITS RECEIVED ACQUIRE THE NA TURE OF CAPITAL RECEIPTS. HENCE LOGICALLY THE EXPENDITURE ON PREMIA PARTAKE THE NATURE OF CAPITAL EXPENDITURE AND ANY CAPITAL EXPEN DITURE IS NOT DEDUCTIBLE UNDER SECTION 37(1) OF THE INCOME TAX AC T,1961. - 3 - 6. IN RESPECT OF SUCH TYPES OF INSURANCE IN PARTNER SHIP FIRMS, THE JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE O F CIT V. KHODIDAS MOTIRAM PANCHAL(1986) 161 ITR-99 (GUJ.) HA S DENIED THE ALLOWABILITY OF PREMIA BY ADOPTING THE FOLLOWIN G RATIO: .THE CONTENTION THAT THE EXPENDITURE IS IN THE NA TURE OF CAPITAL EXPENDITURE IS WELL-FOUNDED. BY TAKING OUT THESE INSURANCE POLICIES, THE ASSESSEE-FIRM DESIRES TO EN SURE THE AVAILABILITY OF LIQUID CASH FOR PAYMENT TO THE LEGA L REPRESENTATIVES OF THE DECEASED PARTNER IN THE EVEN T THE SURVIVING PARTNERS DESIRE TO CONTINUE THE FIRM. WHE N THE SHARE OF THE DECEASED PARTNER IS PAID OFF, THE SHAR ES OF THE SURVIVING PARTNERS IN THE ASSETS OF THE FIRM CAN BE AUGMENTED. WHAT IS, THEREFORE, SOUGHT TO BE ACQUIR ED IS CAPITAL, THAT IS, LIQUID CASH NEEDED FOR BUYING THE SHARE OF THE DECEASED PARTNER BY PAYING OFF HIS LEGAL REPRESENTATIVES. IF THE AMOUNT RECEIVED FROM THE INSURANCE COMPANY ON THE DEMISE OF THE PARTNER IS A CAPITAL ASSET LIKE ANY OTHER AMOUNT BORROWED BY THE PARTNERSHIP FIRM FROM THIRD PARTIES, WHAT THE PARTN ERSHIP FIRM EXPENDS FOR ACQUIRING THAT CAPITAL ASSET CAN O NLY BE SAID TO BE CAPITAL EXPENDITURE WITHIN THE MEANING O F SEC. 37(1) OF THE ACT. 7. HENCE, THE SOLE PURPOSE OF TAKING OUT THESE INSU RANCE POLICIES IS TO SECURE LIQUID CASH AT THE TIME IT WI LL BE NEEDED TO PAY OFF THE LEGAL REPRESENTATIVES OF THE DECEASED P ARTNER. IF THE AMOUNT PAID BY WAY OF INSURANCE PREMIA IS FOR SECUR ING THIS LIQUID CASH, A CAPITAL ASSET, THEN THE EXPENDITURE INCURRED THEREFORE COULD ONLY BE SAID TO BE IN THE NATURE OF CAPITAL EXPENDITURE. THEREFORE, THE KEYMAN INSURANCE PREMIA CAN NOT DEDUCTIBLE UNDER SEC. 37(1).HENCE THE POSITION OF L AW AS REGARDS TO NON-DEDUCTIBILITY OF PREMIUM IS CLEAR AS PER THE JURISDICTIONAL HIGH COURT. 8. IN ADDITION, THE LIFE INSURANCE CORPORATION OF I NDIA (LIC) HAS DESIGNED KEYMAN INSURANCE TO ENABLE COMPANIES AND PARTNERSHIP FIRMS TO INDEMNIFY THEMSELVES AGAINST T HE LOSS OR REDUCTION OF FUTURE EARNINGS THAT MAY RESULT FROM D EATH OR - 4 - REGISTRATION OF THE KEYMAN. ACCORDING TO THAT THE K EYMAN CANNOT BE GIVEN IF HE HAS A SHARE, EQUAL TO OR MORE THAN 51% IN THE FIRM IS FAMILY (SPOUSE AND MINOR CHILDREN) HAS A SHARE EQUAL TO OR MORE THAN 70%OF THE CAP ITAL IN THE FIRM. THE COMPANY IS INCURRING LOSSES CONSISTENTLY AND THE KEYMAN IS ILLITERATE. THESE ARE THE RULES LAID DOWN BY THE LIC FOR ITS OW N ADMINISTRATION AND PROCEDURE. THE FIRM IN THE INSTA NT CASE FAILS TO FULFILL THESE CONDITIONS, AS ONE PARTNER HAS 90% OF THE SHARE AND ANOTHER IS HIS WIFE WITH10% OF SHARE. 9. HOWEVER, NOTWITHSTANDING ANYTHING, EVEN IF THE A BOVE CONDITIONS ARE FULFILLED AND A PARTNER IS TREATED A S KEYMAN, THE INCOME TAX ACT, 1961 WOULD NOT PERMIT THE DEDUCTION IN RESPECT OF KEYMAN INSURANCE PREMIUM BECAUSE OF THE REASONS DISCUSSED ABOVE. 10. LAST BUT NOT THE LEAST, THE LAW RELATING TO DED UCTIBILITY OF THE PREMIUM ON KEYMAN POLICY HAS BEEN SETTLED AS SU CH PREMIUM IS NOT DEDUCTIBLE FOR PARTNERSHIP FIRMS WHERE NO EMPLOYEE-EMPLOYER RELATIONSHIP EXISTS BETWEEN THE F IRM AND THE PARTNERS. THIS POSITION HAS BEEN CLARIFIED IN BOARD S CIRCULAR NO.762 AS QUOTED BY THE LD. A.R. AND MENTIONED ABOV E. A KEYMAN INSURANCE POLICY OF THE LIFE INSURANCE CORPORATION OF INDIA, ETC. PROVIDES FOR AN INSURANC E POLICY - 5 - TAKEN BY A BUSINESS ORGANIZATION OR A PROFESSIONAL ORGANIZATION ON THE LIFE OF AN EMPLOYEE, IN ORDER T O PROTECT THE BUSINESS AGAINST THE FINANCIAL LOSS, WHICH MAY OCCUR FROM THE EMPLOYEES PREMATURE DEATH. THE KEYMAN I S AN EMPLOYEE OR A DIRECTOR, WHOSE SERVICES ARE PERCE IVED TO HAVE A SIGNIFICANT EFFECT ON THE PROFITABILITY O F THE BUSINESS. THE PREMIUM IS PAID BY THE EMPLOYER. 11. AS PER THE SPIRIT AND LETTER OF THE BOARD CIRCU LAR, THE PARTNERSHIP FIRMS ARE NOT ELIGIBLE FOR DEDUCTION IN RESPECT OF ANY PREMIUM PAID AS KEYMAN INSURANCE PREMIUM ON LIFE OF PARTNER ON ACCOUNT OF THE WANT OF ANY EMPLOYEE-EMPLOYER REL ATIONSHIP AND ABSENCE OF DISTINCT SEPARATION BETWEEN THE FIRM AND THE PARTNERS. 12. HENCE THE FOLLOWING EMERGE FROM THE ABOVE DISCU SSION REGARDING THE DEDUCTIBILITY OF PREMIUM PAID ON PART NERS LIFE: THE PARTNER IS NOT A KEYMAN OF THE FIRM, BUT CONSTI TUTES THE FIRM THERE IS NO EMPLOYEE-EMPLOYER RELATIONSHIP BETWEEN THE FIRM AND THE PARTNER. THE EXPENDITURE BY THE FIRM ON THE PREMIUM FOR INSU RANCE OF KEYMAN IS A CAPITAL EXPENDITURE. THE EXPENDITURE BY THE FIRM ON THE PREMIUM FOR INSU RANCE OF KEYMAN IS A PERSONAL EXPENDITURE BY THE PARTNERS . 13. ON ACCOUNT OF THE REASONS DISCUSSED ABOVE, THE DEDUCTION OF RS.14,38,100/- CLAIMED WITH REGARD TO THE PREMIU M OF KEYMAN INSURANCE POLICY ON LIFE OF PARTNERS IS DISA LLOWED AND ADDED BACK TO THE TAXABLE INCOME. - 6 - 14. ON APPEAL, THE LD. C.I.T.(A) HELD AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS AND FIND THAT T HE DECISION OF HON'BLE GUJARAT HIGH COURT RELIED UPON BY THE LEARNED ASSESSING OFFICER PERTAINS TO A.Y. 1971- 72.SUBSEQUENT TO THAT SECTION 2(24)(XI) WAS AMENDED WITH EFFECT FROM 1-10-1996 BY THE FINANCE ACT,1996 AS A RESULT OF WHICH ANYSUM RECEIVED UNDER A KEYMAN INSURANCE POLICY INCLUDING THE SUM ALLOCATED BY WAY OF BONUS ON SUCH POLICY WOULD FORM PART OF THE TOTAL I NCOME AND THE EXPRESSION KEYMAN INSURANCE POLICY HAS THE SAME MEANING ASSIGNEDE TO IT IN THE EXPLANATION-2 IN THE CLAUSE 10-D OF SECTION 10 WHICH SAYS THAT ANY SUM RECEIVED UNDER A KEYMAN INSURANCE POLICY WOULD FORM PART OF A PERSON. IT IS ALSO IMPORTANT TO NOTE THAT FIRM IS A N ARTIFICIAL ENTITY CONSTITUTED BY THE PARTNERS WHO ARE SEPARATE ENTITIES ALTHOUGH JOINTLY AND SEVERALLY LIABLE TO T HE FIRM BUT A PARTNERSHIP FIRM WOULD HAVE AN INSURABLE INTEREST IF BY THE DEATH OF ANY PARTNER, IT WILL SUSTAIN A LOSS OR A PECUNIARY LIABILITY. I HAVE ALSO GONE THROUGH THE I NSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT (IRDA), 19 99 WHICH SPECIFICALLY ALLOWS REDUCTION OF INSURANCE PR EMIUM UNDER PARTNERSHIP INSURANCE AS EXPENSES UNDER SECTI ON 37(1) OF THE I.T. ACT. IT IS SEEN THAT THE AMENDMEN T TO SEC. 2(24)(XI) HAS RESULTED IN AN AMOUNT RECEIVED O N MATURITY OR ON THE DEATH OF A PARTNER UNDER THE KEY MAN INSURANCE SCHEME AS INCOME CHARGEABLE TO TAX. BYTHE SAME LOGIC, THE PREMIUM PAID FOR OBTAINING SUCH INS URANCE POLICY WOULD BE AN EXPENDITURE ALLOWABLE UNDER SECT ION 37(1) OF THE I. T. ACT. FURTHER, THE LEARNED ASSESS ING OFFICERS OBSERVATION THAT SUCH PREMIUM COULD BE A LLOWED ONLY IF AN EMPLOYEE-EMPLOYER RELATIONSHIP EXISTED BETWEEN THE PREMIUM PAYER AND THE KEYMAN IS ALSO WITHOUT MERITS SINCE AS PER EXPLANATIONM TO SECTION 10(10D). KEYMAN INSURANCE POLICY MEANS A LIFE INSURANCE POLICY TAKEN BY A PERSON ON THE LIFE OF A NOTHER PERSON WHO IS OR WAS THE EMPLOYEE OF THE FIRST MENT IONED PERSON OR IS OR WAS CONNECTED IN ANY MANNER WHATSOE VER WITH THE BUSINESS OF FIRST MENTIONED PERSON. IN TH E INSTANT CASE, THE FIRST MENTIONED PERSON IS THE PAR TNERSHIP FIRM WHILE THE POLICY HAS BEEN TAKEN ON THE LIFE OF THE PARTNER WHO IS THE SECOND MENTIONED PERSON. THEREFO RE, THE LEARNED ASSESSING OFFICERS ACTION IN DISALLOWI NG THE INSURANCE PREMIUM PAID BY THE FIRM UNDER KEYMAN - 7 - INSURANCE POLICY IS NOT IN ORDER AND THE ADDITION I S DIRECTED TO BE DELETED. THE CBDT CIRCULAR READ IN I TS ENTIRETY IS ALSO IN FAVOUR OF THE APPELLANT. 15. THE AR SUBMITTED THAT THE ISSUE REGARDING PRE MIUM PAID FOR KEYMAN INSURANCE POLICY FOR THE PARTNER OF THE FIRM IS COVERED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF C.I.T. VS. M/S. B.N. EXPORTS (2010)323 ITR-178 (BOM ) AND BY THE ORDER OF THE AHMEDABAD BENCH OF THE TRIBUNAL DA TED 6-3- 2009 IN THE CASE OF ACIT VS.M/S.GEM ART ITA NO.1722/AHD/.2008 FOR THE A.Y. 2005-06 & ACIT VS.M/ S.GEM ART ITA NO.2725/AHD/.2007 FOR THE A.Y. 2004-05 ORDE R DT. 26-3-2010 THEREFORE, FOLLOWING THE SAME THE APPEAL OF THE ASSESSEE IS ALLOWED. 16. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE A.O. HAS DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF PREMIUM OF RS.14,38,100/-UNDER KEYMAN INSURANCE POLICY FOR THE REASON THAT THE EXPENSES WERE INCURRED ON THE LIFE OF THE PARTNER AND THERE WAS NO EMPLOYER-EMPLOYEE RELATIONSHIP AND AB SENCE OF DISTINCT SEPARATION BETWEEN THE FIRM AND THE PARTNE RS. IN APPEAL, THE CIT (A) CONFIRMED THE DISALLOWANCE. WE FIND THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF B.N. EXPOR TS (SUPRA) IN SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE HELD THAT WHERE KEYMAN INSURANCE POLICY WAS TAKEN NOT FOR THE PERSO NAL BENEFIT OF THE PARTNER BUT FOR THE BENEFIT OF THE FIRM IN O RDER TO PROTECT ITSELF AGAINST THE SET-BACK THAT MAY BE CAUSED ON A CCOUNT OF THE DEATH OF THE PARTNER, THE INSURANCE PREMIUM WAS DED UCTIBLE. - 8 - THE RELEVANT PORTION OF THE BOMBAY HIGH COURT DECIS ION IS EXTRACTED HEREUNDER : IN THIS APPEAL, THE COURT HAS TO DETERMINE THE QUE STION OF EXPENDITURE INCURRED TOWARDS THE PAYMENT OF INSURA NCE PREMIUM ON A KEYMAN INSURANCE POLICY. THE CIRCULAR WHICH HAS BEEN ISSUED BY THE CENTRAL BOARD OF DIREC T TAXES CLARIFIES THE POSITION BY STIPULATING THAT TH E PREMIUM PAID FOR A KEYMAN INSURANCE POLICY IS ALLOW ABLE AS BUSINESS EXPENDITURE. IN THE PRESENT CASE, ON TH E QUESTION WHETHER THE PREMIUM WHICH WAS PAID BY THE FIRM COULD HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE. TH ERE IS A FINDING OF FACT BY THE TRIBUNAL THAT THE FIRM HAD NOT TAKEN INSURANCE FOR THE PERSONAL BENEFIT OF THE PAR TNER, BUT FOR THE BENEFIT OF THE FIRM, IN ORDER TO PROTEC T ITSELF AGAINST THE SET BACK THAT MAY BE CAUSED ON ACCOUNT OF THE DEATH OF A PARTNER. THE OBJECT AND PURPOSE OF A KEY MAN INSURANCE POLICY IS TO PROTECT THE BUSINESS AGAINST A FINANCIAL SET BACK WHICH MAY OCCUR, AS A RESULT OF A PREMATURE DEATH, TO THE BUSINESS OR PROFESSIONAL ORGANIZATION. THERE IS NO RATIONAL BASIS TO CONFINE THE ALLOWABILITY OF THE EXPENDITURE INCURRED ON THE PRE MIUM PAID TOWARDS SUCH A POLICY ONLY TO A SITUATION WHER E THE POLICY IS IN RESPECT OF THE LIFE OF AN EMPLOYEE. A KEYMAN INSURANCE POLICY IS OBTAINED ON THE LIFE OF A PARTN ER TO SAFEGUARD THE FIRM AGAINST A DISRUPTION OF THE BUSI NESS THAT MAY RESULT DUE TO THE PREMATURE DEATH OF A PAR TNER. THEREFORE, THE EXPENDITURE WHICH IS LAID OUT FOR TH E PAYMENT OF PREMIUM ON SUCH A POLICY IS INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. 18. WE FIND THAT BOTH THE PARTIES BEFORE US HAS NO T BROUGHT ANY MATERIAL WHICH COULD SHOW THAT THE KEYMAN INSUR ANCE POLICY WAS TAKEN FOR THE BENEFIT OF THE BUSINESS OF THE PARTNERSHIP FIRM TO PROTECT IT FROM DISRUPTION OF B USINESS ON THE DEATH OF THE PERSON ON WHOSE LIFE KEYMANS INSURANC E WAS TAKEN OR THE SAME WAS TAKEN FOR THE BENEFIT OF THE INDIVIDUAL PARTNER ON WHOSE LIFE SUCH INSURANCE WAS TAKEN. IN THE CIRCUMSTANCES IN OUR CONSIDERED OPINION IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THIS ISSUE BACK TO T HE FILE OF THE LEARNED ASSESSING OFFICER FOR PROPER VERIFICATION. THE LEARNED ASSESSING OFFICER IS DIRECTED TO RECONSIDER THE ISS UE IN LIGHT OF - 9 - THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF B.N. EXPORTS (SUPRA) AS PER LAW AFTER ALLOWING REAS ONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 19. BEFORE PARTING WITH THE ISSUE WE WOULD ALSO LIK E TO OBSERVE THAT THE LEARNED ASSESSING OFFICER HAS RELI ED UPON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF KHODIDAS MOTIRAM, PANCHAL (SUPRA) FOR DISALLOWING T HE CLAIM OF THE ASSESSEE FIRM. WE FIND THAT IN THE AFORESAID DE CISION THE HON'BLE HIGH COURT HAS DISALLOWED THE CLAIM OF THE ASSESSEE BY TREATING THE AMOUNT OF PREMIUM PAID IN RESPECT OF K EYMANS INSURANCE POLICY AS CAPITAL EXPENDITURE. HOWEVER, I N VIEW OF THE SUBSEQUENT POSITION ADMITTED BY THE HON'BLE C.B.D.T . WHICH IS THE HIGHEST BODY FOR TAX ADMINISTRATION IN THE COUN TRY THAT KEYMANS INSURANCE PREMIUM CAN BE TREATED AS AN ALL OWABLE EXPENDITURE THE BENEFIT GIVEN BY THE CIRCULAR TO TH E ASSESSEE CANNOT BE TAKEN AWAY ON THE BASIS OF EARLIER LEGAL PRONOUNCEMENT. IT IS AN ESTABLISHED POSITION OF LAW THAT BENEVOLENT CIRCULAR ARE BINDING AND THE DEPARTMENT IS EXPECTED TO FOLLOW THE SAME IN THE SPIRIT IN WHICH THE SAME IS ISSUED BY THE C.B.D.T. THEREFORE, THIS GROUND OF THE APPEAL I S ALLOWED FOR STATISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30 TH DAY OF SEPTEMBER,2010. SD/- SD/- (MUKUL SHRAWAT) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTAN T MEMBER AHMEDABAD: ON THIS 30 TH DAY OF SEPTEMBER , 2010 PATKI - 10 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-IV,SURAT. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 24-9-2010 ----------- - 2. DRAFT PLACED BEFORE AUTHORITY 24-9-2010 -- ---------- 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 29-9-2010 ---------JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 29-9-2010 --------JM/AM 5. APPROVED DRAFT COMES TO P.S 30-9-2010 ----- --- 6. KEPT FOR PRONOUNCEMENT ON 30-9-2010 ------ -- 7. FILE SENT TO THE BENCH CLERK 30-9-2010 ---- ----- 8. DATE ON WHICH FILE GOES TO THE ------------ ---------- 9. DATE OF DISPATCH OF ORDER ------------ ----------