ACIT, Jaipur V. ELECTROLITES(POWER) PVT. LTD., Jaipur

ITA 78/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99467 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G G MUNDRA CA A DHK
• Keywords: Business expenditure
• Section: 143(3); 148; 37

Judgement Text

ITA NO.78/JP/2014 ACIT, CI RCLE- 3 VS. M/S. ELECTROLITES (POWER) (P) LTD. , J AIPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 78/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 THE ACIT CIRCLE- 3 JAIPUR CUKE VS. M/S. ELECTROLITES (POWER) (P) LTD. 122, NAVJEEVAN COMPLEX 29, STATION ROAD, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACE 4080 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI KAILASH MANGAL, JCIT -DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.G. MUNDRA, CA A LQUOKBZ DH RKJH[K@ DATE OF HEARING : 04/11/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 06 /11/2015 VKNS'K@ ORDER PER VIKRAM SINGH YADAV:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A) - 1, JAIPUR DATED 28-11-2013 FOR THE ASSESSMENT YEA R 2005-06 WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DEL ETING THE ADDITION OF RS. 25.00 LACS ON THE GROUND THAT P OLICY OF KEYMAN INSURANCE POLICY. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HOLDING THE POLI CY AS KEYMAN INSURANCE POLICY IS PERVERSE ON FACTS? ITA NO.78/JP/2014 ACIT, CI RCLE- 3 VS. M/S. ELECTROLITES (POWER) (P) LTD. , J AIPUR 2 2.1 BRIEF FACTS OF THE CASE ARE THAT ORIGINAL ASSES SMENT U/S 143(3) OF THE ACT WAS COMPLETED AT TOTAL INCOME OF RS. 15,66,550/ - VIDE ORDER DATED 19- 10-2007 AS AGAINST TOTAL INCOME OF RS. 14,56,109/- DECLARING IN THE RETURN OF INCOME FILED ON 30-10-2005. SUBSEQUENTLY, THE AO, O N PERUSAL OF THE RECORD, FOUND THAT IN THE PROFIT AND LOSS ACCOUNT, THE AS SESSEE COMPANY HAD DEBITED RS. 25.00 LACS ON ACCOUNT OF ONE TIME PREMIUM PAID FOR KEYMAN INSURANCE POLICY WITH SUM ASSURED OF RS. 1.25 CRORES. THE AO FURTHER NOTICED THAT THE CLAIM OF THE ASSESSEE WAS ACTUALLY MADE FOR A POLIC Y TAKEN UNDER UNIT GAIN PLAN PLUS SP FROM BAJAJ ALLIANZ INSURANCE COMPANY. MATURITY VALUE IS NOT FIXED DUE TO UNIT GAIN PLAN AND AO WAS OF THE VIEW THAT THIS IS NOT A KEYMAN INSURANCE POLICY AND PREMIUM THEREOF WAS NOT ALLOWABLE U/S 29 TO 41 OF I.T. ACT. THE OMISSION ON THE PART OF ASSESSE E RESULTED UNDER COMPUTATION OF INCOME BY RS. 25.00 LACS. IN VIEW OF THESE FACTS, NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON 30-03-2012 AND TH EREAFTER THE ASSESSMENT WAS COMPLETED U/S 143(3) /148 VIDE ORDER DATED 5-03 -2013 WHEREBY ADDITION OF PREMIUM PAID TOWARDS SAID POLICY WAS MADE TO THE INCOME OF THE ASSESSEE. 2.2 THE LD. CIT(A) ALLOWED RELIEF TO THE ASSESSEE BY FOLLOWING OBSERVATIONS. ITA NO.78/JP/2014 ACIT, CI RCLE- 3 VS. M/S. ELECTROLITES (POWER) (P) LTD. , J AIPUR 3 6.1 IT IS, THEREFORE, NOTED THAT THERE IS NOTHING I N THE ASSESSMENT ORDER TO SHOW THAT THE SAID POLICY WAS NOT A KEYMAN INSURANCE POLICY. IT IS NOTED FROM THE DETAILS FURNISHED BY THE APPELLANT THAT THE INSURER HAS ISSUED THE POLICY AS A KEYMAN POLIC Y WHICH INCLUDES KEYMAN CLAUSE. THIS CLAUSE READS AS UNDER: NOTWITHSTANDING ANYTHING WITHIN MENTIONED TO THE CONTRARY IT IS HEREBY AGREED AND DECLARED THAT IN THE EVENT OF THE EMPLOYEE LIFE ASSURED LEAVING THE EMPLOYMENT OF THE EMPLOYER, THE WITHIN MENTIONED POLICY SHALL BE: (1) EITHER SURRENDERED TO THE COMPANY FOR ITS CA SH VALUE, OR (2) ASSIGNED ABSOLUTELY IN FAVOUR OF THE EMPLOYEE L IFE ASSURED. THIS CLEARLY INDICATES THAT THE POLICY IS IN THE NA TURE OF KEYMAN POILCY. NOT ONLY IS IT CLEARLY WRITTEN IN TH E POLICY ITSELF THAT THIS IS A KEYMAN INSURANCE POLICY, THE NAME OF THE POLICY HOLDER ITSELF HAS BEEN MENTIONED AS M/S ELEKTROLITES (POWE R) PVT. LTD. THESE SPECIFIC DETAILS CLEARLY SHOW THAT THE POLICY WAS IN THE NATURE OF KEYMAN POLICY. THE OBSERVATION OF THE AO THAT TH E POLICY WAS ISSUED BY A PRIVATE INSURANCE COMPANY AND IS SUBJEC T TO NAV OF THE UNITS ETC. DOES NOT MEAN THAT THE POLICY WAS NOT A KEYMAN POLICY. THESE ARE ONLY MODES OF INVESTMENT OF THE MONEY REC EIVED FROM THE POLICY HOLDER AND DO NOT DETERMINE THE NATURE OF TH E POLICY. A PERUSAL OF THE POLICY SCHEDULE SHOWS THAT THE POLIC Y HOLDER IS THE APPELLANT WHILE THE PERSON WHOSE LIFE HAS BEEN INSU RED IS MR. ANIL KUMAR SABOO. IT, THEREFORE, CANNOT BE SAID THAT THE POLICY WAS NOT A KEYMAN INSURANCE POLICY MERELY BECAUSE IT WAS A SIN GLE PREMIUM AND UNIT BASED POLICY. 6.2 SO FAR AS THE ISSUE REGARDING THE CLAIM OF PREM IUM BEING ALLOWABLE U/S 37 OR NOT IS CONCERNED, IT IS S EEN THAT THE KEYMAN INSURANCE POLICY IS TAKEN TO PROTECT THE INT ERESTS OF THE BUSINESS AND, HENCE, AS HELD BY THE HONBLE BOMBAY HIGH COURT (323 ITR 178) (SUPRA), IT IS ALLOWABLE EXPENDITURE U/S 37. IN THE CASE OF RAJAN NANDA (205 TAXMAN 138), IT WAS HELD BY THE HONBLE DELHI HIGH COURT THAT EVEN WHEN SUCH POLICIES ARE ASSIGNE D TO THE ITA NO.78/JP/2014 ACIT, CI RCLE- 3 VS. M/S. ELECTROLITES (POWER) (P) LTD. , J AIPUR 4 EMPLOYEE LATER ON, THE DEDUCTION CLAIMED TOWARDS PR EMIUM (LESS SURRENDER VALUE RECEIVED BACK) COULD NOT BE DISALLO WED. 2.3 THE LD. DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW. 2.4 THE LD. AR OF THE ASSESSEE DURING THE COURSE OF HEARING SUBMITTED THAT THE SAID KEYMAN INSURANCE PREMIUM OF RS. 25.00 LACS PAID BY THE ASSESSEE COMPANY IS ALLOWABLE BUSINESS EXPENDITURE U/S 37 OF THE ACT. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT THE LD. CIT(A) HAD EXAMINED IN DETAIL ALL THE FACTS OF THE CASE AND POSITION OF LAW AND BY DE TAILED ORDER ALLOWED THE CLAIM OF THE ASSESSEE FOR A SUM OF RS. 25.00 LACS A S PREMIUM PAID BY THE ASSESSEE FOR KEYMAN INSURANCE POLICY AS REVENUE EX PENDITURE ALLOWABLE U/S 37 OF THE ACT. THUS THE APPEAL OF THE DEPARTMENT HA S NO MERIT WHICH DESERVES TO BE DELETED. 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS CLEAR FROM THE ORDER OF THE LD. CIT(A) THAT HE HAS GONE THROUGH THE DETAILED TERMS AND CONDITIONS OF K EYMAN INSURANCE POLICY ISSUED BY M/S. BAJAJ ALLIANZ INSURANCE COMPANY AND HAS ALSO SOUGHT CERTAIN CLARIFICATONS FROM THE ASSESSEE WHICH HAD BEEN DULY REPLIED. THE LD. CIT(A) IN HIS FINDINGS OBSERVED THAT THE POLICY UNDER CONS IDERATION IS A KEYMAN INSURANCE POLICY WHICH HAS BEEN TAKEN IN THE NAME O F ELECTROLITES (POWER) (P) LTD. TO ENSURE LIFE OF ITS KEYPERSON I.E. MANA GING DIRECTOR OF ASSESSEE ITA NO.78/JP/2014 ACIT, CI RCLE- 3 VS. M/S. ELECTROLITES (POWER) (P) LTD. , J AIPUR 5 COMPANY SHRI A.K. SAHU. FURTHER, REGARDING ALLOWA BILITY OF THE PREMIUM PAID BY THE COMPANY TOWARDS KEYMAN INSURANCE POLICY , THE LD. CIT(A) HAS RELIED ON THE DECISION OF HON'BLE MUMBAI HIGH COUR T IN THE CASE OF CIT VS. B.N. EXPORTS, 323 ITR 178(BOM.) AND HON'BLE DELHI H IGH COURT IN THE CASE OF RAJAN NANDA,205 TAXMAN 138. WE HAVE GONE THROUGH THE DECISIONS OF HON'BLE MUMBAI HIGH COURT AND HON'BLE DELHI HIGH C OURT AND WE SEE NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD . CIT(A). HENCE, BOTH THE GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 /11/201 5. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06/11/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE- 3, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. ELECTROLITES (POWER) (P) LT D., JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.78/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR