The ITO, Ward-4(2), Ahmedabad V. Kunal Organics Pvt.Ltd., Ahmedabad

ITA 4430/AHD/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9605 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-10-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 14-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIB JAIN
• Assessee Lawyers: A P NANAVATY
• Section: 10(10D)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D, AHMEDABAD BEFORE SHRI BHAVNESH SAINI (JM) AND SHRI D.C. AGARW AL (AM) I.T.A. NO.4430/AHD/2007 (ASSESSMENT YEAR : 2004-05) ITO, WD.4(2) VS KUNAL ORGANICS PVT LTD AHMEDABAD 34, MADHUBAN, MADALPUR GARNALA ELLISBRIDGE, AHMEDABAD PAN : AAACK6202F (APPELLANT) (RESPONDENT) C.O. NO.292/AHD/2010 (ARISING OUT OF I.T.A. NO.4430/AHD/2007) (ASSESSMENT YEAR : 2004-05) KUNAL ORGANICS PVT LTD VS AO, WD.4(2) AHMEDABAD AHMEDABAD (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI RAJIB JAIN ASSESSEE BY : SHRI AP NANAVATY O R D E R BHAVNESH SAINI : THE DEPARTMENTAL APPEAL AS WELL AS THE CROSS OBJECTION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-V III, AHMEDABAD DATED 08-10- 2007 FOR ASSESSMENT YEAR 2004-05. 2. THE CROSS OBJECTION OF THE ASSESSEE IS TIME BARR ED BY 867 DAYS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE WOULD NOT PRESS THE GROUNDS OF APPEAL IN THE CROSS OBJECTION. IN THIS VIEW OF THE MATTER, THE CROSS OBJECTION IS DISMISSED AS WITHDRAWN. 3. THE REVENUE, IN ITS APPEA,L CHALLENGED THE ORDER OF LD.CIT(A) IN DELETING THE ADDITION OF RS.11,03,500 BEING GUARANTEED INCOM E / BONUS IN RESPECT OF KEYMAN INSURANCE POLICY. THE ASSESSING OFFICER OBS ERVED THAT THE ASSESSEE HAD TAKEN KEYMAN INSURANCE POLICY AND ASSESSEE HAD EARN ED THE IMPUGNED AMOUNT I.T.A. NO.4430/AHD/2007 CO NO292/AHD/2010 2 ON ACCOUNT OF GUARANTEED ADDITION OF THE BONUS ON T HIS POLICY. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAME WAS NOT OFF ERED FOR TAX. THE ASSESSEE SUBMITTED THAT THERE WAS NO RIGHT TO ENFORCE POLICY PROCEEDS OR BONUS THEREON AS LONG AS INSURANCE POLICY WAS IN FORCE. HENCE, THE IMPUGNED AMOUNT WAS NOT INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE. TH E ASSESSING OFFICER RELYING UPON THE PROVISIONS OF SECTION 10(10D) / 28(VI) OF THE A CT REACHED THE CONCLUSION THAT ASSESSEE HAD FAILED TO OFFER THE IMPUGNED AMOUNT WH ICH WAS REQUIRED TO BE TAXED IN THE YEAR UNDER APPEAL. IT WAS SUBMITTED B EFORE THE LD.CIT(A) THAT THE CIT(A) IN ASSESSMENT YEAR 2001-02 DELETED SIMILAR A DDITION. IT WAS ALSO SUBMITTED THAT BONUS HAS NOT ACCRUED BECAUSE POLICY HAS NOT BEEN TERMINATED NOR HAS THE TERMS OF POLICY EXPIRED. SECTION 28(VI ) SPECIFICALLY LEVIES TAX ON RECEIPT AND NOT ON THE BASIS OF ACCRUAL OR RECEIVAB LE BASIS. SINCE THERE IS NO RECEIPT OF BONUS NOR DID IT ACCRUE IN FAVOUR OF THE ASSESSEE, THE SAME CANNOT BE TAXED. IT WAS SUBMITTED THAT ON THE SAME SET OF FA CTS, CIT(A) HAS ALREADY DELETED THE ADDITION IN PRECEDING ASSESSMENT YEAR 2001-02. IT WAS SUBMITTED THAT ASSESSING OFFICER OVERLOOKED THE FACT THAT THE AMOU NT WAS PAYABLE ONLY ON MATURITY OR TERMINATION OF THE POLICY. IT WAS THER EFORE PRAYED THAT THE ADDITION MAY BE DELETED. THE ASSESSEE RELIED UPON THE DECIS ION OF THE SUPREME COURT IN THE CASE OF E.D. SASSOON & CO LTD 26 ITR 27 (SC). THE LD.CIT(A), CONSIDERING THE SUBMISSIONS OF THE ASSESSEE NOTED THAT SIMILAR ADDITION HAS BEEN DELETED BY THE CIT(A) IN ASSESSMENT YEAR 2001-02. LD.CIT(A), FOLLOWING THE SAME ORDER, DELETED THE ADDITION. 4. LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF IT AT, AHMEDABAD BENCH D IN THE CASE OF THE SAME ASSESSEE FOR ASSESSMENT YEAR 1 998-99 AND 2001-02 IN ITA NOS 1188 & 1189/AHD/2005 DATED 08 TH FEBRUARY, 2008 AND DEPARTMENTAL APPEAL ON THE IDENTICAL GROUND HAS BEEN DISMISSED. THE LE ARNED DEPARTMENTAL REPRESENTATIVE DID NOT DISPUTE THE ABOVE FACT. I.T.A. NO.4430/AHD/2007 CO NO292/AHD/2010 3 5. ON CONSIDERATION OF THE ABOVE FACTS AND SUBMISSI ONS OF THE PARTIES, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT, AHMEDABAD BENCH D IN ASSESSEE S OWN CASE FOR THE PRECEDING ASSESSMENT YEARS NOTED ABOVE IN WHICH THE TRIBUNAL WHILE DISMISSING THE DEPARTMENTAL APPEAL HELD AT PARAGRAPH 4 AS UNDE R: 4. HAVING HEARD BOTH THE PARTIES AND LOOKING TO TH E FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSE E HAS TAKEN INSURANCE POLICY. THE ASSESSEE HAS EARNED AMOUNT O F GUARANTEED ADDITION / BONUS ON THESE POLICIES. THE KEYMAN INS URANCE POLICY IS EXCLUDED FROM THE SCOPE OF EXEMPTION U/S 10(10D) OF THE ACT BUT WE FIND THAT SECTION 28(VI) OF THE ACT SPECIFIES TH AT ANY SOME RECEIVED UNDER A KEYMAN INSURANCE POLICY INCLUDING THE SUM ALLOCATED BY WAY OF BONUS ON SUCH POLICY ARE CHARGE ABLE TO TAX UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS WE FIND THAT AS PER THE TERMS OF KEYMAN INSURANCE POLICY, THE AMOUNT OF BONUS IS ON ALLOCATED SUM ASSURED. THE AMOUNT OF BONUS WAS ACC RUED ACCORDING TO THE CONDITIONS OF THE POLICY UPON TERM INATION OR MATURITY OF THE POLICY. WE FIND THAT THE CIT(A) HA S HELD THAT THE AMOUNT ACCRUED TO THE ASSESSEE CANNOT BE CHARGED TO TAX. THE BONUS IS RECEIVABLE BY THE ASSESSEE. THE LEARNED C IT(A) HAS ALSO RELIED UPON THE DECISION OF ED SASSOON & CO. LTD. V S CIT (26 ITR 27(SC), WHEREIN IT HAS BEEN HELD THAT IF THE INCOME MAY ACCRUE WITHOUT THE ACTUAL RECEIPT OF THE SAME, IF THE ASSE SSEE ACQUIRES A RIGHT TO RECEIVE THE INCOME, THE INCOME CAN BE SAID TO HAVE ACCRUED TO HIM THOUGH IT MAY BE RECEIVED LATER ON ITS BEING ASCERTAINED. THE AMOUNT IN QUESTION IS RECEIVABLE AND THE ASSESS EE HAS NOT RECEIVED THIS AMOUNT. THEREFORE, THE CIT(A) IS JUS TIFIED IN HIS ACTION IN DELETING THE IMPUGNED ADDITION AND AS SUCH, OUR INTERFERENCE IS NOT REQUIRED. SINCE THE LD. CIT(A) HAS FOLLOWED THE ORDER FOR ASS ESSMENT YEAR 2001-02 WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL AS NOTED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) IN DELETING THE ADDIT ION. 6. IN THE RESULT, BOTH THE DEPARTMENTAL APPEAL AND THE CROSS OBJECTION BY ASSESSEE ARE DISMISSED. I.T.A. NO.4430/AHD/2007 CO NO292/AHD/2010 4 ORDER PRONOUNCED ON THIS 15 TH DAY OF OCTOBER, 2010. SD/- SD/- (D.C. AGARWAL) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 15 TH OCTOBER, 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-II, BARODA 4. THE CIT(A)-IV, BARODA 5. THE DR, D BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, AHMEDABAD BENCH