ACIT 21(1), MUMBAI V. GRISHMA METAL TECHNOLOGY, MUMBAI

ITA 4139/MUM/2010

• Counselvise Citation: 413919914 RSA 2010
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 21-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Assessee Lawyers: JIGNESH R SHAH
• Section: 10(10D); 37(1)

Judgement Text

+IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND R.K.PANDA (A.M ) ITA NO.4139/MUM/2010 (ASSESSMENT YEAR: 2007-08) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-21(1), 6 TH FLOOR, ROOM NO.601, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI-400051. M/S GRISHMA METAL TECHNOLOGY 702, GURU ASHISH, BAPUBHAI VASHI ROAD, VILE PARLE (W), MUMBAI-400056 PAN:AABFG6891Q APPELLANT V/S RESPONDENT APPELLANT BY : SHRI T.T.J ACOB RESPONDENT BY : SHRI JIGNESH R SHAH. O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 5.3.2010 PASSED BY THE LEAR NED COMMISSIONER OF INCOME TAX(A) FOR THE ASSESSMENT YE AR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS O F MANUFACTURING AND SALE OF METALLIC SALTS OF MOLYBD ENUM, USED IN MANUFACTURING OF METALS, FILED RETURN DECL ARING TOTAL INCOME OF RS.45,07,640/-. DURING THE COURSE OF ASS ESSMENT, THE AO OBSERVED THAT THE ASSESSEE FIRM HAS PURCHAS ED ITA NO.4139/MUM/2010 (ASSESSMENT YEAR: 2007-08) 2 KEYMAN INSURANCE POLICY IN THE FORM OF ICICI PRUD ENTIAL LIFE INSURANCE AND LIFE INSURANCE CORPORATION OF I NDIA, IN THE NAME OF TWO PARTNERS SHRI BHAVIN N.PATEL & MRS. HETAL BHAVIN PATEL AND DEBITED THE PREMIUM PAID OF RS.82,48,725/- TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE CLAIMED DEDUCTION OF THIS AMOUNT UNDER SECTION 10( 10D) OF THE INCOME TAX, 1961 (THE ACT). THE ASSESSEE WAS A SKED TO EXPLAIN AS TO WHY THE INSURANCE PREMIUM OF RS.82,4 8,725/- SHOULD NOT BE DISALLOWED. THE ASSESSEE FILED A DE TAILED REPLY INTERALIA STATING THAT THE INSURANCE POLICY H AVE BEEN TAKEN BY THE PARTNERSHIP FIRM AND NOT THE INDIVIDUA L PARTNERS AND THAT THE INSURANCE PREMIUM IS ALSO PAID BY THE FIRM AND ENTIRE INSURANCE PREMIUM OF RS.82,48,725/- IS INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE SAME IS OF REVENUE IN NATURE ALLOWABLE UNDER SECTIO N 37(1) OF THE ACT. IN SUPPORT, THE ASSESSEE HAS ALSO RELIED ON VARIOUS DECISIONS INCLUDING THE CBDT CIRCULAR. HOWEVER, T HE AO DID NOT ACCEPT THE ASSESSEES SUBMISSIONS. HE WAS OF T HE VIEW THAT SINCE PARTNERS ARE NOT INDEPENDENT AND DISTIN CT FROM THE FIRM, THEY CANNOT BE TERMED AS ANOTHER PERSON WITHIN THE MEANING OF SECTION 10(10D) OF THE ACT. THE C ASE OF THE ASSESSEE ACCORDING TO THE AO IS AKIN TO THAT OF TH E SOLE PROPRIETOR TAKING KEYMAN INSURANCE POLICY IN HIS OW N NAME AND CLAIMING PREMIUM PAID AS DEDUCTION. THIS IS NEI THER PERMISSIBLE NOR LEGAL IN THE EYES OF LAW. THE AO O N THE ITA NO.4139/MUM/2010 (ASSESSMENT YEAR: 2007-08) 3 ASSESSEES PLEA THAT THE SUMS RECEIVED ON THE MAT URITY OR SURRENDER OF THE POLICY WILL BE TAXABLE IN VIEW OF THE SECTION 2(24)(XI) OF THE ACT OBSERVED THAT THE PLEA TAKEN BY THE ASSESSEE IS ENTIRELY MISPLACED BECAUSE THE ISSUE INVOLVED IS NOT THE TAXABILITY OF THE SUMS RECEIVED BUT ALL OWING OF THIS AS DEDUCTION. THE PREMIUM PAID FOR SELF OR ULTIMAT E EARNING OR DISTRIBUTION OF ASSETS CAN NEVER BE ALLOWED AS DEDUCTION AND HENCE, HE HELD THAT THE PREMIUM PAID BY THE PAR TNERSHIP CONCERN FOR KEYMAN INSURANCE POLICY TAKEN BY THE PA RTNERS IS NOT A ADMISSIBLE DEDUCTION AND ACCORDINGLY, HE DISA LLOWED THE PREMIUM PAID OF RS.82,48,725/- AND ADDED TO TH E INCOME OF THE ASSESSEE. 3. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME ( A) FOLLOWING HIS OWN APPELLATE ORDER AND THE ORDER OF THE TRIBUNAL, HOWEVER, ALLOWED THE DEDUCTION OF RS.82, 48,725/- UNDER SECTION 37(1) OF THE ACT. 4. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE REVENUE IS IN A PPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE DELETI ON OF DISALLOWANCE OF PREMIUM OF RS.82,48,725/- PAID BY THE FIRM IN RESPECT OF INSURANCE POLICY ON THE LIVES OF THE PARTNERS UNDER KEYMAN INSURANCE POLICY. . 5. AT THE TIME OF HEARING, THE LEARNED DR SUBMITS THAT FOR THE REASONS AS DISCUSSED IN THE ASSESSMENT ORDER, T HE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN ITA NO.4139/MUM/2010 (ASSESSMENT YEAR: 2007-08) 4 DELETING THE DISALLOWANCE OF PREMIUM OF RS.82,48,7 25/- PAID BY THE FIRM IN RESPECT OF INSURANCE POLICY ON THE L IVES OF THE PARTNERS UNDER KEYMAN INSURANCE POLICY UNDER SECTIO N 37(1) OF THE ACT. HE, THEREFORE SUBMITS THAT THE ORDER OF THE AO BE RESTORED. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITS THIS ISSUE IS SQUA RELY COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING DECISIONS AND CBDT CIRCULAR:- S.NO. PARTICULARS CITATION 1 CIT V/S B.N.EXPORTS (2010) 323 ITR 178 (BOM) 2 CIRCULAR NO.762 DATED 18.2.1998 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) [1998] 230 ITR 12,20-21 3 ITO V/S MODI MOTORS [2009] 27 SOT 476 (MUM) 4 INCOME TAX OFFICER V/S THAKUR VAIDYNATH AIYER & CO. [1984] 7 ITD 9 (MUM) 5 P.G.ELECTRONICS V/S ITO [2005] 98 TTJ (DEL) 896 6 SUNITA FINLEASE LTD. V/S DY.CIT [2008] 118 TTJ (BILASPUR) 263 7 ESCORTS HEART INSTITUTE & RESEARCH CENTRE LTD V/S ASSTT. CIT [2011] 128 ITD 108 (DEL) HE FURTHER SUBMITS THAT THE PLEA TAKEN BY THE REVE NUE IN GROUND NO. 1(III) THAT THE BENEFICIARIES OF THE POL ICY IS NOT THE ASSESSEE FIRM BUT THE NOMINEES WHO ARE FAMILY MEMB ERS OF THE PARTNERS DOES NOT BORNE OUT EITHER FROM THE ASS ESSMENT ORDER OR FROM THE ORDER OF THE LEARNED COMMISSIONER OF ITA NO.4139/MUM/2010 (ASSESSMENT YEAR: 2007-08) 5 INCOME TAX(A). THE LEARNED COUNSEL FOR THE ASSESS EE WHILE REFERRING TO LETTER OF ICICI PRUDENTIAL LIFE INSUR ANCE APPEARING AT PAGES 41 AND 42 OF THE ASSESSEES PAPE R BOOK SUBMITS THAT THE ASSESSEE HAS SHOWN THE PAYMENT RECEIVED FROM THE ICICI PRUDENTIAL LIFE INSURANCE ON THE SUR RENDER OF THE KEY INSURANCE POLICY OF IN THE HANDS OF THE A SSESSEE FIRM IN THE RELEVANT ASSESSMENT YEAR. HE, THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LEARNED COMMISSIONER O F INCOME TAX (A) UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE O N RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTH ER FIND THAT THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE AS SESSEE FIRM HAS TAKEN THE KEYMAN INSURANCE POLICY FOR THE PER SONAL BENEFITS OF THE PARTNERS AND NOT FOR THE BENEFIT O F THE FIRM. THIS BEING SO, WE ARE OF THE VIEW THAT THE ISSUE I S SQUARELY COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S B.N.EXPORTS (2010) 323 ITR 178 (BOM) WHEREIN IT HAS BEEN HELD (HEAD NOTES): HELD, DISMISSING THE APPEAL, THAT THERE WAS A FIND ING OF FACT BY THE TRIBUNAL THAT THE FIRM HAD NOT TAKEN IN SURANCE FOR THE PERSONAL BENEFIT OF THE PARTNER, BUT FOR TH E BENEFIT OF THE FIRM, IN ORDER TO PROTECT ITSELF AGAINST THE SETBACK THAT MAY BE CAUSED ON ACCOUNT OF THE DEATH OF THE PARTNER. THE INSURANCE PREMIUM WAS DEDUCTIBLE. ITA NO.4139/MUM/2010 (ASSESSMENT YEAR: 2007-08) 6 THE SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASES AS REFERRED ABOVE. 8. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BR OUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING TH E ABOVE DECISION AND THE CONSISTENT VIEW OF THE TRIBUNAL H OLD THAT SINCE THE PAYMENT OF PREMIUM OF KEYMAN INSURANCE PO LICY IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND HENCE, THE SAME IS ALLOWABLE AS REVENUE EXPENDI TURE. ACCORDINGLY WE WHILE UPHOLDING THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A), IN ALLOWING THE CLAIM OF RS. RS.82,48,725/- REJECT THE GROUNDS TAKE N BY THE REVENUE. 9. IN THE RESULT, REVENUES APPEAL STANDS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH MAY, 2011 SD SD (R.K.PANDA) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 27 TH MAY, 2011 SRL:23511 ITA NO.4139/MUM/2010 (ASSESSMENT YEAR: 2007-08) 7 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILED. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI