S.K. EXPORTS, MUMBAI V. DCIT RG 12(2), MUMBAI

ITA 6320/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0991 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 07-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Keywords: Set aside
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI D.K. AGARWAL, J.M. AND SHRI A.L. GEHLOT , A.M. ITA NO. 6320/M/2009 ASSESSMENT YEAR: 2006-07 S.K. EXPORTS, APPELLANT 11, CHURCHGATE CHAMBERS, 5, NEW MARINE LINE, CHURCHGATE, MUMBAI 400 020. (PAN AAAFS3572R) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT 12(2), MUMBAI. APPELLANT BY : MR. ANIL SATHE RESPONDENT BY : MR. R.S. SRIVASTAVA ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)- 23, MUMBAI, PASSED ON 25.09.2009 FOR THE ASSESSMENT YEAR 2006-07 WHEREIN THE ASSESSEE HAS RAISED THE FO LLOWING GROUNDS OF APPEAL:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF D ISALLOWANCE OF KEYMAN INSURANCE PREMIUM OF RS. 70,00,000/- PAID ON THE LIFE OF THE PARTNERS OF THE FIRM. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN C ONFIRMING THAT THE KEYMAN INSURANCE POLICY IS MERELY A COLOUR ABLE DEVICE TO POSTPONE THE TAX LIABILITY OF THE FIRM. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF C ONCLUDING THAT THE PARTNER CANNOT BE CONSIDERED AS A KEYMAN. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED BY NOT APPRECIATING THE RATIO OF JUDGMENT IN MODI MOTO RS (2009) 27 SOT 476. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF D ISALLOWANCE ITA NO. 6320/M/09 S.K. EXPORTS 2 OF RS. 2,85,000/- UNDER SECTION 40(A)(IA) IN RESPEC T OF PAYMENT MADE TO FOREIGN AGENT MACRO ROSSI OF ITALY. 2. GROUND NOS. 1 TO 4 ARE IN RESPECT OF KEYMAN INSU RANCE PREMIUM, WHICH IS COVERED BY THE DECISION OF ITAT, MUMBAI IN THE OWN CASE OF THE ASSESSEE IN ITA NO. 7265/MUM/2008 F OR AY 2005- 06 VIDE ITS ORDER DATED 19 TH JANUARY, 2010 WHEREIN THE ITAT FOLLOWED THE ANOTHER CO-ORDINATE BENCH DECISION IN ITA NO. 4453/MUM/2007 DATED 29 TH JANUARY09. THE RELEVANT FINDING OF THE ITAT IN AY 2005-06 IS REPRODUCED BELOW:- 5. COMING TO GROUND NO. 2 WHICH IS ON THE ISSUE OF ALLOWANCE OF PREMIUM PAID ON KEYMAN INSURANCE OF PA RTNERS OF THE FIRM, WE FIND THAT THE ISSUE IS SQUARELY COVERE D IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY NUMBER OF D ECISIONS OF THIS BENCH OF TRIBUNAL. FURTHER, WE FIND THAT TH E RATIO OF THE JUDGMENTS DECIDED IN THE FOLLOWING CASE LAWS SUPPOR T THE CLAIM OF THE ASSESSEE: 1. CIT VS. CHANDULAL KESHAVLAL & CO., [1960] 38 ITR 60 1 (SC) 2. HINDUSTAN PETROLEUM CORPN. LTD. V. DCIT, ITA NO. 3267/1992. 3. ITO VS. THAKUR VAIDYANATH AIYER & CO., 7 ITD 9 (BOM ). 6. THE AFORESAID DECISIONS WERE FOLLOWED BY THE TRI BUNAL B-1, BENCH, MUMBAI IN ITS ORDER DATED 29 TH JAN, 2009 IN ITA NO. 4453/MUM/2007 WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. RESPECTFULLY FOLL OWING SAME, WE ALLOW THIS ISSUE IN FAVOUR OF THE ASSESSEE . 3. MOREOVER, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. B.N. EXPORTS, [2010] 190 TAXMAN 325(BOM.) C ONFIRMED THE FINDINGS OF THE ITAT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE, WHICH WAS A PARTNERSHIP FIRM, IN PAYING THE PREMIUM FOR A KEYMAN INSURANCE POLICY OBTAINED BY IT ON THE LIFE OF ITS PARTNER MUST BE REGARDED AS AN EXPENDITURE INCURRED WHOLLY AND EXCL USIVELY FOR THE BUSINESS OF THE FIRM AND DISMISSED THE REVENUES A PPEAL FILED AGAINST THE ORDER OF TRIBUNAL WHERE THE REVENUE CON TENDED THAT A PARTNERSHIP FIRM HAS NO SEPARATE EXISTENCE FROM ITS PARTNERS SINCE A PARTNERSHIP FIRM IS NOT A JURISTIC ENTITY AND, MO REOVER, THERE IS NO RELATIONSHIP OF EMPLOYER AND EMPLOYEE BETWEEN A FIR M AND ITS PARTNERS, THERE BEING NO CONTRACT OF SERVICE. ITA NO. 6320/M/09 S.K. EXPORTS 3 4. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE TH E ORDER OF LEARNED CIT(A) AND ALLOW THE CLAIM OF ASSESSEE OF R S. 70,00,000/- PAID ON THE LIFE OF THE PARTNERS OF THE ASSESSEE FI RM. 5. AS REGARDS GROUND NO. 5 IN RESPECT OF DISALLOWAN CE OF RS. 2,85,000/-, THE LEARNED AR HAS NOT PRESSED THIS GRO UND AT THE TIME OF HEARING BEFORE US, THEREFORE, THE SAME IS DISMIS SED AS NOT PRESSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JULY, 2010. SD/- SD/- (D. K. AGARWAL) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 28 TH JULY, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, H BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 28.7.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 28.7.10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM ITA NO. 6320/M/09 S.K. EXPORTS 4 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER