The ACIT, Circle-4,, Baroda V. Prakash Chemicals Agencies Pvt.Ltd., Baroda

ITA 63/AHD/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6884 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAMES KURAIR
• Assessee Lawyers: M K PATEL
• Section: 10(10D)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD .., .. , ! BEFORE SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER AND SHRI A.K.GARODIA, HONBLE ACCOUNTANT MEMBER ITA NO.63/AHD/2011 ASSESSMENT YEAR:2007-08 ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-4, BARODA V/S. PRAKASH CHEMICAL AGENCIES (P) LTD., INDUCHACHA HOUSE, OPP. CHHANI OCTROI NAKA, BARODA -390 022 PAN NO.AACCP6646G (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI JAMES KURAIR, DR RESPONDENT BY:- SHRI M.K. PATEL, AR DATE OF HEARING 02-12-2011 DATE OF PRONOUNCEMENT 09-12-2011 ' ' ' ' /O R D E R PER A.K. GARODIA, ACCOUNTANT MEMBER:- THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDE R OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-III, BARODA DA TED 31-08-2010 FOR ASSESSMENT YEAR 2007-08. THE GROUND RAISED BY REVEN UE IS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN ALLOWING KEYMAN INSURANCE P REMIUM AMOUNTING TO RS.37,00,000/-, OVERLOOKING THE FACT THAT THE EX PENDITURE WAS DISALLOWABLE US.37(1) OF THE INCOME TAX ACT, 1961, AS THE ASSESSEE COULD NOT ESTABLISH THAT THE PAYMENT WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEE BUSINESS. ITA NO.63/AHD/2011 A.Y .2007-08 ACIT CIR-4 BRD V. PRAKASH CHEMICAL AGENCIES (P) LTD. PAGE 2 2. LD. DR OF THE REVENUE HAS SUPPORTED THE ASSESSME NT ORDER WHEREAS LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF LD. C IT(A). IT WAS ALSO SUBMITTED BY HIM THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT( A) AS PER PARA-6.3 OF HIS ORDER AND IN THE SAME, IT WAS NOTED BY HIM THAT THI S ISSUE HAS BEEN DECIDED BY HIS PREDECESSOR IN ASSESSEES OWN CASE FOR ASSES SMENT YEAR 2006-07. HE SUBMITTED THAT ALTHOUGH THE APPEAL OF REVENUE FOR A SSESSMENT YEAR 2006-07 IS STILL PENDING BEFORE TRIBUNAL BUT IN ONE OF THE GROUP CONCERNS I.E. IN THE CASE OF DCIT V. M/S. PRAKASH CHEMICAL PVT. LTD. IN ITA NO.172/AHD2011 DATED 14- 10-2011, SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIB UNAL IN FAVOUR OF ASSESSEE BY FOLLOWING THE JUDGMENT OF HONBLE BOMBAY HIGH CO URT RENDERED IN THE CASE OF CIT V. B.N. EXPORTS (2010) AS REPORTED IN 190 TAXMAN 325 (BOM). HE SUBMITTED A COPY OF TRIBUNALS DECISION. 3. IN REJOINDER, IT WAS SUBMITTED BY LD. DR OF THE REVENUE THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARAA-4.6 AND 4.7 OF TH E ASSESSMENT ORDER THAT IN THE PRESENT CASE, THE ASSESSEE HAS NOT BEEN ABLE TO EVEN FURNISH THE DETAILS OF PERSONS FOR WHOM THE KEYMAN INSURANCE POLICY HAS BEEN TAKEN. IN REPLY, IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THIS O BSERVATION OF AO IS NOT FACTUALLY CORRECT BECAUSE IN PARA-4.1 OF THE ASSESS MENT ORDER, THE AO HAS NOTED THE DETAILS GIVEN BY THE ASSESSEE REGARDING N AME OF PERSONS FOR WHOM THE PREMIUM FOR KEYMAN POLICY HAS BEEN PAID. IT WAS ALSO SUBMITTED THAT ALL THE PERSONS ARE DIRECTORS OF THE ASSESSEE-COMPANY, OUT OF WHICH. TWO PERSONS ARE EMPLOYEES ALSO. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSIN G THE MATERIAL ON RECORD AND GONE THROUGH THE ORDER OF AUTHORITIES BE LOW AND THE TRIBUNALS DECISION CITED BY LD. AR OF THE ASSESSEE. THE RELEV ANT PARA OF TRIBUNALS ORDER CITED BY LD. AR OF THE ASSESSEE ARE PARA-3..1 , 3.2 AND 4 WHICH ARE REPRODUCED BELOW:- 3.1 THE MATTER WAS CARRIED BEFORE THE FIRST APPELL ATE AUTHORITY WHO HAS DISCUSSED A DECISION OF HONBLE BOMBAY HIGH COURT P RONOUNCED IN THE CASE OF CIT VS. B.N. EXPORTS [2010] 190 TAXMAN 325 (BOM), WHEREIN IT ITA NO.63/AHD/2011 A.Y .2007-08 ACIT CIR-4 BRD V. PRAKASH CHEMICAL AGENCIES (P) LTD. PAGE 3 WAS HELD THAT THE ALLOWABILITY OF THE EXPENDITURE I NCURRED ON PREMIUM PAID TOWARDS THE KEYMAN INSURANCE POLICY COULD NOT BE CONFINED ONLY TO A SITUATION WHERE POLICY IS IN RESPECT OF LIFE OF A N EMPLOYEE. FOR THE PURPOSE OF CLAUSE (10D), A KEYMAN INSURANCE POLICY IS A LIFE INSURANCE POLICY TAKEN BY A PERSON ON THE LIFE OF AN ANOTHER PERSON, WHO IS AN EMPLOYEE OF THE PERSON WHO HAS SUBSCRIBED TO THE PO LICY OF INSURANCE WHICH IS CONNECTED IN ANY MANNER WHATSOEVER WITH TH E BUSINESS OF THE SUBSCRIBED TO THE POLICY. LD. CIT(A) HAS ALSO DISCU SSED CBDDT CIRCULAR NO.726 DATED 18/02/1998 AND ALLOWED THE CLAIM. 3.2 IN ADDITION TO ABOVE PRECEDENTS, THE ISSUE OF K EYMAN INSURANCE IS ALSO COVERED BY THE DECISIONS OF (I) P.G. ELECTRONI CS VS. ITO 98 TTJ 896, CIT VS. B.N. EXPORTS, 37 DTR 381 (BOM), SUNITA FINL EASE LTD. VS. DCIT 118 TTJ 263 (ITAT) [BILASPUR] AND ITO VS. MODI MOTO RS 27 SOT 476 (ITAT) (BOM) AND ALLOWED THE CLAIM. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, THE ISSUE NOW STOOD COVERED BY A LATEST DECISION OF ITAT D BENCH AHMEDABAD PRONOUNCED IN THE CASE OF M/S. GEE AAR TEX VS. ACIT IN ITA NO.3469/AHD/2008 (FOR A.Y. 2005-06), DATED 31/03/2009, WHEREIN THE ISSUE WAS DISCUSSED AT LENGTH AND FINALLY HELD THAT IN THE LIGHT OF THE CB DDT CIRCULAR (SUPRA) AND THE EXPLANATION TO SECTION 10(10D) THE PREMIUM PAID UNDER THE KEYMAN INSURANCE POLICY ON THE LIFE OF A PARTNER SHOULD NOT BE DISALLOWED. THOUGH FROM THE SIDE OF THE REVENUE, LD . DR MR. A.K. PATEL HAS OBJECTED THE RELIEF GRANTED BY LD. CIT(A) ON TH E GROUND THAT THE KEYMAN INSURANCE POLICY PERTAINED ONLY TO THE DIREC TORS OF THE COMPANY, AND NOT FOR THE EMPLOYEES OF THE COMPANY, THEREFORE, THE AO HAS RIGHTLY DISALLOWED THE SAME, BUT THAT ASPECT OF HIS ARGUMENT HAS ALREADY BEEN CONSIDERED BY THE RESPECTED CO-ORDINAT E BENCH, THEREFORE FOLLOWING THE AFORESAID DECISION, WE FIND NO FORCE IN THIS GROUND OF THE REVENUE, HENCE, DISMISSED. 5. IN THE PRESENT CASE, A CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT TWO PERSONS NAMELY, MR. SUDIP SHAH AND MR. DILIP SHAH A RE EMPLOYED AND THE ASSESSEE PAID THE PREMIUM OF RS.25 LAKH FOR THEM AN D OTHER SIX PERSONS ARE DIRECTORS HANDLING VARIOUS ASPECTS OF BUSINESS ON W HOSE LIFE TOTAL RS.12 LAKH PREMIUM WAS PAID. IT IS ALSO NOTED BY LD. CIT(A) ON PAGE-34 OF HIS ORDER THAT IT WAS SUBMITTED BY ASSESSEE BEFORE HIM THAT BY LETTER DATED 05-12-2008 GIVEN TO THE ASSESSING OFFICER, COPY OF WHICH SUBMITTED B EFORE LD. CIT(A) ALSO, THE DETAILS OF PERSONS, DATE OF JOINING, NATURE OF WORK DONE BY THEM WERE GIVEN TO THE AO TO PROVE THAT KEYMAN INSURANCE PREMIUM WAS P AID FOR THOSE PERSONS, ITA NO.63/AHD/2011 A.Y .2007-08 ACIT CIR-4 BRD V. PRAKASH CHEMICAL AGENCIES (P) LTD. PAGE 4 WHO ARE EITHER EMPLOYEE OR DIRECTOR HANDLING KEY FU NCTIONS. LD. CIT(A) ALSO CONSIDERED THE BOARDS CIRCULAR NO.762. IN THE LIGH T OF THESE FACTS, THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE T RIBUNAL DECISION CITED BY LD. AR OF THE ASSESSEE RELEVANT PORTION OF WHICH HA S BEEN ALREADY REPRODUCED ABOVE, AND HENCE, BY RESPECTFULLY FOLLOW ING THE TRIBUNAL DECISION, WE DECIDE THE ISSUE IN FAVOUR OF ASSESSEE AND DECLI NE TO INTERFERE IN THE ORDER OF LD. CIT(A). 6. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 09/12/2011 # ' $ %& '() 09 / 12 / 2011 !+ , $ - . SD/- SD/- ( .. ) ( .. ) (D.K.TYAGI) (A.K. GARODIA) ( ) ( ! ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, *DKP '()- 09/12/2011 . ' ' ' ' $ $$ $ 012 012 012 012 32&1 32&1 32&1 32&1 / COPY OF ORDER FORWARDED TO:- 1. 56 / APPELLANT 2. 056 / RESPONDENT 3. (( 1 +9 / CONCERNED CIT 4. +9- / CIT (A) 5. 2<= 01' , , / DR, ITAT, AHMEDABAD 6. ? @# / GUARD FILE. BY ORDER/ ' , /TRUE COPY/ A/ (B , .