ITO, New Delhi V. M/s. Radha Raj Ispat Pvt. Ltd., Delhi

ITA 986/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3811 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 19-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 08-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Keywords: Business expenditure; Salary income; Corroborative evidences
• Section: 143(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F: NEW DELHI BEFORE SHRI C.L.SETHI, JM & SHRI K.G. BANSAL, AM I.T. A. NO.986/DEL OF 2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, M/S RADHA RAJ ISPAT (P) LTD. WARD 15(1), NEW DELHI. VS 5190, LAHORI GATE, DELHI. APPELLANT RESPONDENT APPELLANT BY: SHRI H.K. LAL, DR RESPONDENT BY: SHRI VINOD KUMAR BINDAL AND MS SWEETY KOTHARI ORDER PER C.L. SETHI, JM: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 17 .12.2009 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF AN ASSESSMENT M ADE U/S 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT) PERTAINING TO ASSTT. YEAR 2006-07. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.75,00,000/- MADE BY AO ON ACCOUNT OF EXPENDITURE TOWARDS KEYMAN INSURANCE POLICY IN THE NAME OF TWO WORKING DIRECTORS. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN APPRECIATING THE FACT THAT THE BUSINESS DECISIONS TAKEN BY SAID 2 EMPLOYEES REQUIRED APPROVAL OF THE OTHER DIRECTOR OF THE COMPANY, THEREFORE, IT CANNOT BE SAID THAT THESE EMPLOYEES ARE KEY PERSONS OF THE COMPANY AND THE SAID EXPENDITURE CANNOT BE ALLOWED. 3. FROM THE GROUNDS, IT EMERGES THAT THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WITH REGARD TO THE CLAIM OF RS.75 LACS MA DE BY THE ASSESSEE ON ACCOUNT OF DEDUCTION TOWARDS PAYMENT OF PREMIUM ON KEYMAN INSURANCE POLICY OF ITS TWO WORKING DIRECTORS/EMPLOYEES, NAME LY, MS. PRIYANKA MITTAL AND MRS. BINITA GUPTA. 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSEE VIDE ORDER SHEET DATED 12.11.2008 WAS ASKED TO JUSTIFY THE CLAIM OF KEYMAN INSURANCE POLICY OF RS.75 LACS ALONG WITH EVIDENCE IN SUPPORT. THE ASSESSEE VIDE LETTER DATED 21.11.08 FURNISHED THE EVIDENCE OF PAYMENT OF KEYMA N INSURANCE PREMIUM OF RS.75 LACS AS UNDER: PRIYANKA MITTAL RS.37.50 LACS BINITAL MITTAL RS.37.50 LACS 5. THE AO AGAIN VIDE ORDER SHEET DATED 26.11.2008 A SKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE KEYMAN INSURANCE PREMIUM P AID BE ALLOWED AS BUSINESS EXPENSES AS THE SAME IS NOT INCURRED FOR I NSURANCE OF ANY OF THE KEYMAN OF THE ASSESSEE, NAMELY, DIRECTORS, MD OR CE O OF THE COMPANY. THE ASSESSEE THEN VIDE LETTER DATED 5.12.2008 SUBMI TTED AS UNDER: 3 THE ASSESSEE PAID THE PREMIUM FOR KEYMAN INSURANCE POLICY FOR MS. PRIYANKA MITTAL AND MRS. BINITA GUPTA WHO ARE THE KEY MANAGERIAL PERSONNEL OF THE COMPANY. THEY ARE THE EMPLOYEES OF THE ASSESSEE COMPANY AND RECEIVING SALARY FROM THE ASSESSEE COMPANY, WHICH VERIFIABLE FROM THE COPY OF RETURN SUBMITTED AS PER ABOVE PARA FOR THE YEAR UNDER CONSIDERATION. THEREFORE, SAID EXPENSE IS FULLY ALLOWABLE. THE ASSESSEE WAS AGAIN ASKED TO EXPLAIN AS TO WHAT ARE THE SPECIFIC CONTRIBUTION OF THE PERSONS IN THE BUSINESS OF THE ASSESSEE COMPANY AND WHY THE SAME BE ALLOWED. THE ASSESSEE VIDE LETTER DATED 16.12.2008 SUBMITTED AS UNDER: IN REGARD TO YOUR QUERY RELATING TO MANAGERIAL FUNCTIONS PERFORMED BY THE ABOVE SAID EMPLOYEES OF THE COMPANY, IT IS STATED THAT MS PRIYANKA MITTAL AND MRS. BINITA GUPTA ARE INVOLVED IN DAY TO DAY FUNCTIONING OF THE ASSESSEE COMPANY. ALL THE BUSINESS DECISIONS OF THE ASSESSEE COMPANY TAKEN BY THEM AND SAID EXPENSE SHOULD BE ALLOWED. AO THEN EXAMINED AND CONSIDERED THE ASSESSEES EXPL ANATION AND CAME TO THE VIEW THAT ASSESSEES CLAIM WAS NOT ACCEPTABLE. THE REASON GIVEN BY THE AO MAY BE SUMMARIZED AS UNDER: (I) THAT THE EXPENSES CLAIMED UNDER KEYMAN INSURANCE PO LICY AS PER BOARDS CIRCULAR ON THE PREMIUM PAID ON LIVES OF PR IYANKA MITTAL AND BINITA GUPTA, COULD NOT BE ALLOWED INASMUCH AS PRIYANAKA 4 MITTAL AND BINITA GUPTA WERE NEITHER DIRECTOR NOR M ANAGING DIRECTOR NOR HELD ANY MANAGERIAL POST. (II) FROM THE CIRCULAR NO.762 DATED 18.2.98, IT WAS CLEA R THAT PREMIUM ON INSURANCE POLICY IS ALLOWABLE IN ORDER TO PROTEC T THE BUSINESS AGAINST THE FINANCIAL LOSS, WHICH MAY OCCUR THROUGH THE EMPLOYEES PRE-MATURE DEATH AND THE KEYMAN IS AN EMPLOYEE OR A DIRECTOR, WHOSE SERVICES ARE PERCEIVED TO HAVE A SIGNIFICANT EFFECT ON THE PROFITABILITY OF THE BUSINESS. THUS, THE PRIME FAC TOR WHICH DETERMINES THE ALLOWABILITY OR OTHERWISE IS TO PRO TECT BUSINESS AGAINST FINANCIAL LOSS AND SERVICE PERCEIVED TO HAV E A SIGNIFICANT EFFECT ON THE PROFITABILITY OF THE BUSINESS. HOWE VER, IN THE PRESENT CASE MS PRIYANKA MITTAL AND MRS. BINITA GUPTA CANNO T DEFINITELY BE TREATED AS KEYMAN OR KEY PERSON, INASMUCH AS, TH EY ARE INVOLVED ONLY IN DAY-TO-DAY FUNCTIONING OF THE ASSESSEE COMP ANY, BUT ON THE BUSINESS DECISIONS OF THE ASSESSEE COMPANY IS TAKEN BY THEM WITH THE APPROVAL OF THE DIRECTORS, AND IT MAKES IT CLEA R THAT THESE TWO LADIES ARE NOT KEY PERSON AS THEIR DECISIONS ARE AL WAYS SUBJECT TO THE APPROVAL OF THE DIRECTORS. 5 (III) THE EXPENSES ON ACCOUNT OF KEYMAN INSURANCE POLICY CANNOT BE SAID TO BE LAID OUT WHOLLY AND EXCLUSIVELY FOR ASSE SSEES BUSINESS AS PER MEMORANDUM OF ASSOCIATION. (IV) EXPENSES ON ACCOUNT OF KEYMAN INSURANCE CANNOT BE A LLOWED U/S 37(1) OF THE ACT AS THE MAIN BUSINESS OF THE ASSESS EE COMPANY IS NOT AS PER THE MAIN OBJECT MENTIONED IN MEMORANDUM OF ASSOCIATION, FOR WHICH THE COMPANY WAS INCORPORATED . (V) THERE WAS NO SUPPORTING EVIDENCE OF EMPLOYER OR EMP LOYEE RELATIONSHIP INASMUCH AS, THE SALARY PAID TO THESE TWO PERSONS WERE PAID IN LUMPSUM AS AGAINST NORMAL PERIODICAL PAYMEN T GENERALLY PAID TO EMPLOYEES. THE LUMPSUM PAYMENT TO THESE TW O PERSONS INDICATES THAT THERE WAS NO EMPLOYER-EMPLOYEE RELAT IONSHIP, AND ASSESSEES CLAIM IS AFTER-THOUGHT, AND PURPORTEDLY MADE ONLY TO SHOW IT LOOK LIKE THAT AFORESAID TWO PERSONS ARE TH E EMPLOYEES OF THE ASSESSEE COMPANY WHILE THE FACTS REMAIN OTHERWI SE. THE AO THEN SUMMARIZED THE REASONS FOR DISALLOWING THE ASSESSEES CLAIM AS UNDER: (I) PERSONS INSURED ARE NOT THE KEYPERSONS AS DISCUSSED ABOVE AND ALSO AS PER THE SPIRIT OF THE CBDT CIRCULAR. 6 (II) EXPENSES ON ACCOUNT OF KEYMAN INSURANCE POLICY OF RS.75 LACS CANNOT BE SET TO BE LAID OUT WHOLLY A ND EXCLUSIVELY FOR ASSESSEES BUSINESS AS PER MOA. (III) EXPENSES ON ACCOUNT OF KEYMAN INSURANCE POLICY CANNOT BE ALLOWED U/S 37(1) AS THE MAIN BUSINESS OF THE ASSESSEE COMPANY IS NOT AS PER THE MAIN OBJECT FOR WHICH THE COMPANY HAS BEEN INCORPORATED. (IV) THERE IS NO SUPPORTING EVIDENCE OF EMPLOYER AND EMPLOYEE RELATIONSHIP UNRELATED TO ASSESSEES BUSINESS IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 6. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LD. CIT(A). BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE AOS ASSERTIONS THAT THERE WAS NO EMPLOYER-EMPLOYEE RELATIONSHIP BE TWEEN THE ASSESSEE AND THE TWO PERSONS, ON WHOSE LIFE THE INSURANCE COVER WAS TAKEN, IS TOTALLY BASED ON SURMISES AND CONJECTURES. IT WAS FURTHER POINTED OUT THAT MS. PRIYANKA MITTAL, AGED 20 YEARS WAS AN MBA FROM USA QUALIFIED IN 1998 FROM UNIVERSITY OF SOUTHERN CALIFORNIA AND MRS. BIN ITA GUPTA AGED 38 YEARS HAD BA DEGREE FROM DELHI UNIVERSITY AND HAD BEEN MA NAGING THE BUSINESS OF THE ASSESSEE FROM EARLIER YEARS. HE HAS ALSO POI NTED OUT THAT BOTH THESE TWO PERSONS WERE DIRECTORS AS COULD BE VERIFIED FRO M FORM NO.32 FILED WITH REGISTRAR OF COMPANIES ON 134.1.2006. IT WAS, THUS , SUBMITTED THAT BOTH THE PERSONS WERE NOT ONLY THE DIRECTORS OF THE ASSESSEE COMPANY BUT WERE ALSO THE KEY DIRECTORS OF THE ASSESSEE COMPANY, AND, THU S, THE AMOUNT PAID FOR THE 7 KEYMANS INSURANCE POLICY ON THEIR LIVES IS FULLY A LLOWABLE AS PER THE DECISIONS GIVEN BELOW: (I) SUNITA FINLEASE LTD. VS DCIT (2008) 8 DTR(BILASPUR) (TRIB) 183; (II) P.G. ELECTRONICS VS ITO (2005) 98 TTJ(DEL) 896 7. AFTER CONSIDERING THE AOS ORDER AND ASSESSEES SUBMISSIONS AND THE POSITION OF LAW AS WELL AS THE CBDT CIRCULAR NO.762 DATED 18.8.98, THE CIT(A) ALLOWED THE ASSESSEES CLAIM AND REVERSED TH E AOS ORDER. THE ORDER OF CIT(A), THUS, RUNS AS UNDER: I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE LD. AR ON THE ABOVE ISSUE. IT IS ARGUED BY THE LD. AR THAT THE IMPUGNED AMOUNT OF RS.75 LACS WAS PAID BY THE APPELLANT COMPANY ON ACCOUNT OF KEYMAN INSURANCE POLICY OBTAINED ON THE LIFE OF MS PRIYANAK MITTAL AND MRS BINITA GUPTA. IT IS ARGUED THAT THE SAID PERSONS ARE EMPLOYED AS SALARIED DIRECTORS IN THE APPELLANT COMPANY. THE AR HAS FILED COPY OF FORM NO.32 FILED WITH THE ROC ON 13.1.2006 AS PER WHICH MS PRIYANKA MITTAL AND MRS. BINITA GUPTA WHO WERE EARLIER ADDL. DIRECTOR OF THE COMPANY SINCE 31.01.2005 WERE APPOINTED AS DIRECTORS AT THE AGM HELD ON 30.9.2005. IT IS SUBMITTED BY THE LD. AR THAT THE ABOVE COPY OF FORM NO.32 WAS ALSO SUBMITTED TO THE AO ON THE LAST DATE OF ASSESSMENT PROCEEDINGS. THE APPELLANT HAS ALSO FILED COPIES OF RETURNS OF INCOME ALONGWITH STATEMENTS OF INCOME FILED BY THE SAID MS MITTAL AND MRS. GUPTA FOR AY 2006-07 SHOWING SALARY INCOME OF RS.1,50,000/- EACH RECEIVED FROM THE APPELLANT 8 COMPANY ALONG WITH CERTIFICATES DATED 1.4.2006 ISSUED BY THE SAID COMPANY IN THIS REGARD. IT IS ALSO ARGUED THAT BOTH THE ABOVE DIRECTORS ARE QUALIFIED PERSONS, BEING MBA FROM THE UNIVERSITY OF SOUTH CALIFORNIA AND GRADUATE FROM UNIVERSITY OF DELHI RESPECTIVELY, AND HAVE BEEN MANAGING THE BUSINESS OF THE APPELLANT COMPANY AND AS SUCH QUALIFY AS KEY PERSONS OF THE COMPANY FOR THE PURPOSE OF KEYMAN INSURANCE POLICY AS ENVISAGED VIDE CBDT CIRCULAR NO.762 DATED 18.2.1998. IT IS ALSO ARGUED THAT THE BUSINESS OF THE APPELLANT AS PER MEMORANDUM OF ASSOCIATION INCLUDES BUYING, SELLING AND DEALING IN SHARES ETC AS PER CLAUSE 44 OF THE SAID MOA. A COPY OF THE SAID MOA IS ALSO FILED BY THE LD. AR. IT IS ARGUED THAT THE APPELLANT COMPANY HAS SIGNIFICANT TURNOVER RANGING FROM RS.9.90 CRORES IN AY 2006-07 AND RISING UPTO RS.19.37 CRORES IN AY 2008-09, WHICH WOULD NOT HAVE BEEN POSSIBLE BUT FOR THE SERVICES RENDERED BY THE ABOVE MENTIONED EMPLOYEE DIRECTORS. I HAVE GONE THROUGH THE CIRCULAR NO.762 DATED 18.2.1998 ISSUED BY THE CBDT CONTAINING EXPLANATORY NOTES TO FINANCE (NO.2) ACT, 1996. PARA 14 OF THE SAID CIRCULAR MAKES IT CLEAR THAT A KEYMAN INSURANCE POLICY OF THE LIC OF INDIAN PROVIDES FOR AN INSURANCE POLICY TAKEN BY A BUSINESS ORGANIZATION ON THE LIFE OF AN EMPLOYEE, IN ORDER TO PROTECT THE BUSINESS AGAINST THE FINANCIAL LOSS, WHICH MAY OCCUR FROM THE EMPLOYEES PREMATURE DEATH. THE KEYMAN IS DEFINED IN THE CIRCULAR AS AN EMPLOYEE OR A DIRECTOR, WHOSE SERVICES ARE PERCEIVED TO HAVE A SIGNIFICANT EFFECT ON THE PROFITABILITY OF THE BUSINESS. THE PREMIUM PAID BY THE EMPLOYER ON SUCH POLICY IS TO BE ALLOWED AS BUSINESS EXPENDITURE AS PER THE CIRCULAR. IT IS ALSO CLARIFIED THAT THE SUMS RECEIVED BY THE SAID ORGANIZATION ON SUCH POLICY SHALL BE TAXED AS BUSINESS PROFIT. THEREFORE, CONSIDERING THE FACTS OF THE CASE AS DISCUSSED ABOVE, I AM OF THE VIEW 9 THAT THE CLAIM OF THE APPELLANT IS SQUARELY COVERED BY THE AFORESAID CIRCULAR OF THE CBDT AND HENCE CANNOT BE REJECTED. THE CASE LAWS RELIED UPON BY THE APPELLANT ALSO SUPPORT THIS VIEW. FURTHER, I FIND THAT THE AO HAS NOT DISPUTED THE FACT THAT THE APPELLANT COMPANY HAS SUBSCRIBED TO KEYMAN INSURANCE POLICIES IN RESPECT OF THE ABOVE TWO EMPLOYEES AND HAS PAID THE IMPUGNED AMOUNT AS PREMIUM ON SUCH POLICIES AND THAT THE SAID EMPLOYEES ARE INVOLVED IN A DAY TO DAY FUNCTIONING OF THE APPELLANT COMPANY AND ALL THE BUSINESS DECISIONS ARE TAKEN BY THEM, ALTHOUGH SUBJECT TO APPROVE OF OTHER DIRECTORS. HAVING ACCEPTED THE ABOVE FACTS, DISALLOWANCE OF THE SAID AMOUNT OF EXPENDITURE BY THE AO ON VARIOUS IRRELEVANT AND FLIMSY GROUNDS CERTAINLY AMOUNTS TO DENIAL OF JUSTICE AND HENCE THE SAME CANNOT BE SUSTAINED. THE ADDITION OF RS.75 LACS ON THIS GROUND IS, THEREFORE, DELETED. 8. HENCE, THE DEPARTMENT IS IN APPEAL. 9. THE LEARNED DR SUBMITTED THAT THE INSURANCE POLI CY TAKEN ON THE LIVES OF MS PRIYANKA MITTAL AND MRS. BINITA GUPTA HAD NO SIGNIFICANT EFFECT ON THE PROFITABILITY OF THE ASSESSEES BUSINESS, THEY BEIN G MERELY AN ORDINARY EMPLOYEE DOING CERTAIN WORK AS PER THE DIRECTION OF THE BOARD OF DIRECTORS. HE, THEREFORE, SUPPORTED THE ORDER OF AO IN DISALLO WING THE ASSESSEES CLAIM OF PAYMENT OF KEYMANS INSURANCE POLICY ON THE LIVE S OF MS PRIYANKA MITTAL AND MRS. BINITA GUPTA. 10. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, REITERATED ALL THE FACTS AND CONTENTIONS THAT WERE PLACED BEFORE T HE AUTHORITIES BELOW. THE 10 LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT M S PRIYANKA MITTAL AND MRS. BINITA GUPTA WERE APPOINTED AS CONFIRMED DIREC TORS AT THE AGM HELD ON 30.9.2005. HE, THEREFORE, CONTENDED THAT BOTH T HE LADIES WERE KEYMAN HAVING A SIGNIFICANT ROLE IN THE CARRYING ON THE BU SINESS ACTIVITY OF THE ASSESSEE COMPANY. IT WAS FURTHER POINTED OUT THAT BOTH THE LADIES ARE QUALIFIED, CAPABLE OF UNDERTAKING THE VARIOUS FUNCT IONS AND ACTIVITIES NECESSARY FOR CARRYING ON THE ASSESSEES BUSINESS S MOOTHLY AND PROFITABLY. IT WAS FURTHER CONTENDED THAT BOTH THE LADIES WERE PAI D SALARY AMOUNTING TO RS.1,50,000/- EACH, WHICH HAS BEEN ASSESSED TO TAX AS INCOME UNDER THE HEAD SALARY. HE, THEREFORE, SUBMITTED THAT IN THE LIG HT OF THE SCOPE OF CIRCULAR NO.762 DATED 18.2.98, THE PREMIUM PAID ON KEYMAN IN SURANCE POLICY ON THE LIVES OF THESE TWO LADIES IS TO BE TREATED AS BUSIN ESS EXPENSES WITHIN THE MEANING OF SECTION 37 OF THE ACT. A FURTHER FACT W AS HIGHLIGHTED THAT AS AND WHEN THE ASSESSEE COMPANY RECEIVED THE MATURITY AMO UNT ALONG WITH THE PROFIT IN RESPECT OF THE AFORESAID TWO POLICIES TAK EN ON THE LIVES OF THESE TWO LADIES IN QUESTION, THE AMOUNT HAS BEEN INCLUDED IN THE INCOME OF THE ASSESSEE COMPANY IN THAT RELEVANT YEAR. THEREFORE, THE ORDER OF THE CIT(A) WAS SUPPORTED BY THE LEARNED COUNSEL FOR THE ASSESS EE. 11. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE PAI D PREMIUM ON KEYMAN 11 INSURANCE POLICY TAKEN IN THE NAME OF TWO LADIES AN D AN AMOUNT OF RS.75 LACS WAS CLAIMED AS BUSINESS DEDUCTION. THE AO HAS DISALLOWED THE SAME BY GIVING VARIOUS REASONS, AS ALREADY DISCUSSED ABO VE. HOWEVER, THE LEARNED CIT(A) HAS DELETED THE ADDITION. THE LEARNED CIT(A ) HAS TAKEN INTO ACCOUNT THE ADMITTED POSITION THAT THESE TWO LADIES WERE EA RLIER APPOINTED AS ADDITIONAL DIRECTORS OF THE COMPANY ON 31.1.2005, W HICH WAS SUBSEQUENTLY CONFIRMED AS DIRECTOR AT THE AGM HELD ON 31.9.2005. THIS FACT IS FULLY ESTABLISHED FROM THE COPY OF FORM NO.32 FILED WITH THE ROC ON 13.1.2006. BOTH THESE LADIES ARE QUALIFIED PERSONS, BEING MBA FROM THE UNIVERSITY OF SOUTH CALIFORNIA AND GRADUATE FROM UNIVERSITY OF DE LHI RESPECTIVELY. THEY HAVE BEEN PAID SALARY OF RS.1,50,000/- EACH IN THE RELEVANT FINANCIAL YEAR. THEY HAVE BEEN RENDERING SERVICES TO THE ASSESSEE C OMPANY IN THE COURSE OF CARRYING ON ITS BUSINESS ACTIVITIES. THEREFORE, TH E AOS FINDING THAT THEY ARE NOT EMPLOYEES OR THEY HAVE NO SIGNIFICANT ROLE TO P LAY IN THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY, IS NOT CORRECT. THE AO HAS NOT BROUGHT ANY MATERIAL EXCEPT BY DRAWING PRESUMPTION THAT THE RE WERE NO EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE COMP ANY, AND THESE TWO LADIES. THEREFORE, IN THE LIGHT OF BOARDS CIRCULA R NO.762 DATED 18.2.98, THESE TWO LADIES ARE TO BE TREATED AS AN EMPLOYEE O R A DIRECTOR, WHOSE SERVICES HAD SIGNIFICANT EFFECT ON THE SMOOTH FUNCT IONING AND PROFITABILITY OF 12 THE ASSESSEES BUSINESS. IT IS PERTINENT TO NOTE T HAT THE POLICIES, WHICH WERE TAKEN ON THE LIVES OF THESE TWO LADIES, WERE MATURE D ON 16.9.2008 HAVING TOTAL MATURITY/SURRENDER VALUE OF RS.3,07,07,846/-, WHICH HAD BEEN INCLUDED AS INCOME BY THE ASSESSEE IN THE FINANCIAL YEAR 200 8-09, AS WOULD BE EVIDENT FROM THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31 ST MARCH, 2009 WHERE THE INCOME OF RS.3,07,07,846/- HAS BEEN INCLUDED AS KEYMANS INSURANCE RECEIPTS. THEREFORE, IT IS NOT THE CASE WHERE THE ASSESSEE HAS TRIED TO EVADE ANY PAYMENT OF DUE TAXES SO AS TO DISBELIE VE THE ASSESSEES CLAIM AS BOGUS OR NOT MAINTAINABLE. IT IS NOT IN DISPUTE TH AT THE MATURITY AMOUNT OF RS.3,07,07,846/- HAS BEEN INCLUDED IN THE INCOME FO R THE PURPOSE OF ASSESSMENT UNDER THE INCOME-TAX ACT. FURTHER, THE B USINESS OF BUYING, SELLING AND DEALING IN SHARES IS ALSO A PART OF ASS ESSEES OBJECT AS WOULD BE CLEAR FROM CLAUSE 44 OF THE MEMORANDUM OF ASSOCIATI ON OF THE ASSESSEE COMPANY, AND, THEREFORE, AOS CONTENTION THAT THE B USINESS THAT IS CARRIED ON BY THE ASSESSEE IS NOT AS PER OBJECT OF THE ASSESSE E COMPANY, IS NOT CORRECT. THEREFORE, THERE IS NO REASON TO DISALLOW THE ASSES SEES CLAIM OF DEDUCTION TOWARDS PAYMENT OF PREMIUM ON KEYMANS INSURANCE PO LICY OF ITS TWO DIRECTORS, NAMELY, MS PRIYANKA MITTAL AND MRS. BINI TA GUPTA. THE LEARNED CIT(A) HAS RIGHTLY APPRECIATED THE FACTS OF THE CAS E AND ALLOWED THE 13 ASSESSEES CLAIM. IN THIS VIEW OF THE MATTER, WE, THEREFORE, UPHOLD THE ORDER OF CIT(A). 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 13. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2010. (K.G. BANSAL) (C.L . SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH JUNE, 2010 VIJAY COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A)-XVIII, NEW DELHI 5. DR ASSISTANT REGISTRAR