The DCITAnand Circle, Anand V. Rotomag Motors Controls (P) Ltd., Anand

ITA 41/AHD/2010

• Counselvise Citation: 4120514 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N C AMIN
• Keywords: Business expenditure

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , . .!'#$, % & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ./ I.T.A. NO.41/AHD/2010 ( ( ) ( ) ( ) ( ) / / / / ASSESSMENT YEAR : 2006-07) DY.CIT ANAND CIRCLE, ANAND ( ( ( ( / VS. ROTOMAG MOTORS CONTROLS (P) LTD. C-1/5, VITHAL UDYOGNAGAR TAL & DIST.ANAND * % ./+, ./ PAN/GIR NO. : AAACR 9061 K ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 / APPELLANT BY : SHRI VINOD TANWANI, SR.DR ./*- 1 0 / RESPONDENT BY : SHRI N.C. AMIN (2 1 3% / / / / DATE OF HEARING : 14/11/2011 4') 1 3% / DATE OF PRONOUNCEMENT : 25-11-2011 5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-IV, BARODA DATED 01/10/2009 PASSED FOR ASSESSMENT YEAR 2006-07 AND THE ONLY GROUND RAISED BY THE REVENUE READS AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING RS.16,24,153/- BEING PREMIUM FOR KEYMAN INSURANCE POLICIES, PLACING RELIANCE ON THE CBDTS CIR. NO.762 DATED 24-7-2000 AND IGNORING THE INFORMATION OBTAINED BY THE ASSESSING OFFICER FROM THE LIC AUTHORITY ON 15/9/20 08. ITA NO.41/AHD/2 010 DY.CIT VS. ROTOMAG MOTORS CONTROLS (P) LTD. ASST.YEAR - 2006-07 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 18 /12/2008 WERE THAT THE ASSESSEE-COMPANY DURING THE YEAR WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF MAGNET MOTORS PUMPS. IT WAS NOTICED THAT A SUM OF RS.16,24,153/- WAS CLAIMED AS KEYMAN INSURA NCE POLICY. IT WAS FOUND BY THE ASSESSING OFFICER THAT THE SAID PO LICY WAS IN THE NAME OF SHRI UMESH MOHAN BALANI DIRECTOR. IT HAS ALSO BEEN NOTICED BY THE ASSESSING OFFICER THAT THE SAID DIRECTORS SHARE HO LDING WAS ONLY TO THE EXTENT OF 41.47%. AS PER ASSESSING OFFICER, UNDER KEYMAN INSURANCE SCHEME, THE KEYMAN SHOULD HOLD MORE THAN 51% SHARE HOLDING. IT WAS ALSO NOTICED BY THE ASSESSING OFFICER THAT THOSE PO LICIES WERE COVERED UNDER THE TABLE 151/154 AS PER THE INSURANCE POLICY AND THAT THE SAID DIRECTORS SHARE HOLDING WAS LESS THAN 51%, THEREFOR E NOT ENTITLED FOR THE CLAIM. ACCORDINGLY, THE SAID PAYMENT WAS DISALLOWE D. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LD.CIT(A) HAS DISCUSSED THE ISSUE IN THE LIG HT OF THE DIRECTIONS OF THE CBDT CIRCULAR AND ALLOWED THE CLAIM AS FOLLO WS: 2.2. I HAVE CONSIDERED THE MATTER. THERE IS NO DI SPUTE THAT LIC HAD ISSUED THE POLICIES AS KEYMAN INSURANCE POLICIE S, FOR WHICH PREMIUM OF RS.16,24,153/- WAS PAID BY THE APPELLANT . IT IS FOR THE LIC TO SEE, BEFORE ISSUING A POLICY AS KEYMAN INSUR ANCE POLICY, WHETHER THE SAME IS WITHIN THE ELIGIBILITY CRITERIA FOR KEYMAN INSURANCE POLICIES. IT IS NOT OPEN FOR THE ASSESSI NG OFFICER OR ANYBODY ELSE TO QUESTION THE NATURE OF A POLICY, IF LIC HAS ISSUED IT AS KEYMAN INSURANCE POLICY. IN ANY CASE, AS PER LI CS CIRCULAR DATED 24.07.2000, KEYMAN INSURANCE COVER IS PERMISS IBLE, EVEN IF KEY PERSONS SHAREHOLDING IS LESS THAN 51%. THUS, THE POLICIES ITA NO.41/AHD/2 010 DY.CIT VS. ROTOMAG MOTORS CONTROLS (P) LTD. ASST.YEAR - 2006-07 - 3 - TAKEN BY THE APPELLANT FULFILLED THE ELIGIBILITY NO RMS LAID DOWN BY LIC. THE ASSESSING OFFICER HAD MADE THE DISALLOWAN CE WITHOUT PROVIDING OPPORTUNITY TO THE APPELLANT AND WITHOUT TAKING INTO ACCOUNT LICS CIRCULAR DATED 24.7.2000. PREMIUM P AID IN RESPECT OF KEYMAN INSURANCE POLICIES IS AN ALLOWABL E DEDUCTION AS PER CBDTS CIRCULAR NO.762. IN VIEW OF THIS, ADDIT ION OF RS.16,24,153/- IS DELETED. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT THERE WAS NO JUSTIFICATION FOR THE SAID DISALL OWANCE ON THE PART OF THE ASSESSING OFFICER. THE ISSUE NOW STOOD DIRECTLY CO VERED BY THE DECISION OF ITAT DELHI SMC BENCH (DELHI) IN THE CASE OF P.G.ELECTRONICS V/S. ITO REPORTED IN (2005) 098 TTJ 0896 (DEL-TRIB) AND SUNITA FINLEASE LTD. VS. DY.CIT REPORTED IN (2008) 118 TTJ 0263 (BILASPU R-TRIB). IN BOTH THESE DECISIONS, THE SAID CBDT CIRCULAR NO.762 DATED 18/02/1998 WAS REFERRED AND THEREAFTER HELD THAT THOUGH NOWHERE IN THE ACT IT IS PROVIDED THAT THE PREMIUM PAID ON THE KEYMAN INSURANCE POLI CY IS ALLOWABLE AS BUSINESS EXPENDITURE, EXCEPT BY A CBDT CIRCULAR NO. 762 DATED 18/02/1998, HENCE THE REVENUE AUTHORITIES ARE UNDER OBLIGATION TO CARRY- OUT THE INSTRUCTION. THEREFORE IT WAS DIRECTED TH AT ONCE THE BOARD HAD CLARIFIED THAT THE PREMIUM PAID ON THE KEYMAN INSUR ANCE POLICY IS TO BE ALLOWED AS BUSINESS EXPENDITURE, THEN IT OUGHT TO H AVE BEEN ALLOWED. THEREAFTER, THE COURTS HAVE HELD THAT THE CBDT CIRC ULAR IS BINDING UPON THE REVENUE AUTHORITIES. THE LD.AR AT THIS JUNCTUR E HAS ALSO CITED A DECISION IN THE CASE OF STATE OF KERALA & OTHERS VS . KURIAN ABRAHAM PVT.LTD. & ANOTHER REPORTED IN (2008) 303 ITR 284 ( KER.) FOR THE LEGAL PROPOSITION THAT THE ASSESSING OFFICER IS EXPECTED NOT TO CONTRAVENE AN INSTRUCTION ISSUED BY CBDT WHILE COMPLETING THE AS SESSMENT. BEFORE ITA NO.41/AHD/2 010 DY.CIT VS. ROTOMAG MOTORS CONTROLS (P) LTD. ASST.YEAR - 2006-07 - 4 - US, THE SAID CIRCULAR NO.762 DATED 18/02/1998 FINAN CE (NO.2) ACT, 1996, IS PLACED AND VIDE CLAUSE 14.4, IT WAS DIRECTED TH AT THE PREMIUM PAID ON THE KEYMAN INSURANCE POLICY IS TO BE ALLOWED AS B USINESS EXPENDITURE. 5. RESPECTFULLY FOLLOWING THESE DECISIONS, WE FIND NO FALLACY IN THE JUDGEMENT OF LD.CIT(A), HENCE HEREBY AFFIRM THE SAM E. GROUND RAISED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED . SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 25/ 11 /2011 63..(, .(../ T.C. NAIR, SR. PS 5 1 .7 8 7) 5 1 .7 8 7) 5 1 .7 8 7) 5 1 .7 8 7)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-IV, BARODA 5. 7 >> >/ // / + + + + ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD ITA NO.41/AHD/2 010 DY.CIT VS. ROTOMAG MOTORS CONTROLS (P) LTD. ASST.YEAR - 2006-07 - 5 - 1. DATE OF DICTATION..14.11.11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15.11.11 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 25.11.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25.11.11 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