ADDL CIT RG 13(3), MUMBAI V. JASMINE INDL CORPORATION, MUMBAI

ITA 6019/MUM/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7303 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 04-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M SUBRAMINIAN
• Keywords: Assessment record
• Section: 10(10D)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO.6019/MUM/2010 (ASSESSMENT YEAR : 2007-08) THE ASSTT. COMMISSIONER OF INCOME TAX 13(3), ROOM NO.430, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, NEW MARINE LINES, MUMBAI-400020. M/S JASMINE INDUSTRIAL CORPORATION, 505, GIRIRAJ, 5 TH FLOOR, SANT TUKARAM ROAD, MUMBAI-400009 PAN:AAAFJ1236F APPELLANT V/S RESPONDENT DATE OF HEARING : 4.10.2011 DATE OF PRONOUNCEMENT : 7.10.2011 APPELLANT BY : SHRI SUNIL KUMAR SINGH RESPONDENT BY : SHRI M.SUBRAMINIAN O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 17.5.2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE FIRM IS ENGAGED IN THE BUSINESS OF IRON AND STEEL MATERIAL, FILED RETURN DECLARING TOTAL INCOME AT RS.53,23,448 /-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO INTERA LIA ITA NO.6019/MUM/2010 (ASSESSMENT YEAR : 2007-08) 2 OBSERVED THAT THE ASSESSEE HAS CLAIMED KEYMAN INSUR ANCE PREMIUM OF RS.18,64,084/- PAID FOR THE YEAR UNDER CONSIDERATION. THE AO FURTHER OBSERVED THAT FROM THE ASSESSMENT RECORD FOR THE AYS 2003-04 AND SUBSEQUE NT ASSESSMENTS THE KEYMAN INSURANCE POLICES WERE TAKE N IN THE NAME OF PARTNERS SHRI AJAY MEHTA AND PRAFUL ME HTA. IT WAS ALSO FOUND THAT IN THE EARLIER YEARS THESE POLI CIES HAVE BEEN ASSIGNED TO UNION BANK OF INDIA ON 21.6.2006. ON CONSIDERATION OF FACTS OF THE CASE THE AO HELD THA T KEYMAN INSURANCE POLICIES WERE TAKEN TO USE THE SAME AS C OLLATERAL SECURITIES FOR ALLOWING THE ASSESSEE HUGE AMOUNT OF CREDIT FROM THE BANKS AND HENCE THE CLAIM WAS NOT ALLOWED AS DEDUCTION IN THE EARLIER YEARS. THE AO FURTHER OBSE RVED THAT THE ASSESSEE HAD GONE IN APPEAL AGAINST THE ASSESS MENT ORDERS AND FIRST APPELLATE AUTHORITY HAS DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE AND FURTHER APPEAL TO THE T RIBUNAL AND THE JURISDICTIONAL HIGH COURT HAVE BEEN PREFERR ED. ACCORDINGLY, THE AO DISALLOWED THE ASSESSEES CLAIM OF DEDUCTION ON ACCOUNT OF KEYMAN INSURANCE PREMIUM PA ID AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3. ON APPEAL, THE LD. CIT(A) FOLLOWING THE TRIBUNA L ORDERS, HOWEVER, DELETED THE DISALLOWANCE MADE BY THE AO. ITA NO.6019/MUM/2010 (ASSESSMENT YEAR : 2007-08) 3 4. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GR OUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A O TO ALLOW THE EXPENDITURE OF RS.18,64,084/- BEING PREM IUM PAID ON THE LIFE OF PARTNER UNDER THE KEYMAN INSUR ANCE POLICY BY MISINTERPRETING THE CBDTS CIRCULAR NO.7 62 DATED 18.2.1998 AND FAILING TO CONSIDER THE EXPLANA TION (2) TO SECTION 10(10D) OF THE IT ACT, 1961, WHICH NEEDS TO BE RESTORED; 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO B E RESTORED. 5. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE RELYING ON THE ORDER OF THE LD.CIT(A) FURTHER SUBMITS THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE ORDERS OF THE TRIBUNAL IN THE ASSESSEES OWN CASES (1) ACIT V/S M/S JASMINE INDUSTRIAL CORPORATION IN ITA NO.3611/MUM/2006 (AY 2003-04), (2) IN ITA NO.1973/MUM/2007(AY-2004-05) DATED 4.8.2009 AND (3) IN ITA NO. 4825/MUM/2008 (AY-2005-06) DATED 10.8.2009 . HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. ITA NO.6019/MUM/2010 (ASSESSMENT YEAR : 2007-08) 4 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. THE SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN 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. ITA NO.6019/MUM/2010 (ASSESSMENT YEAR : 2007-08) 5 ACCORDINGLY WE WHILE UPHOLDING THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) IN ALLOWING THE CLAIM OF RS.18,64,084/- REJECT THE GROUNDS TAKEN BY THE REVENUE. 9. IN THE RESULT, THE REVENUE APPEAL STANDS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH OCTOBER,2011. SD SD (RAJENDRA SINGH) (D .K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 7TH OCTOBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI