Astt. Commissioner of Income Tax-5, Kanpur V. M/s Trade Stone Ltd., Kanpur

MA 9/LKW/2016

• Counselvise Citation: [2016] 124 COUNSELVISE.COM (IT) 4575 (ITAT-LUCKNOW)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER MA NO. 09 & 10/LKW/2016 [IN ITA NOS.523 & 524/LKW/2012 ASSESSMENT YEARS 2008-09 & 2009-10 M/S TREAD STONE LTD., 39, FACTORY AREA FAZALGANJ, KANPUR PAN AAACL 2544 H VS DCIT - 4, KANPUR (RESPONDENT) (APPELLANT) SHRI AMIT NIGAM, DR APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY 27 /0 5 /2016 DATE OF HEARING 26 / 07 /2016 DATE OF PRONOUNCEMENT ORDER PER MAHAVIR PRASAD, JM: THESE MAS HAVE BEEN PREFERRED AGAINST THE ORDER OF THE TRIBUNAL IN ITA NO. 523 & 524/LKW/2012 CONTAINING THEREIN THAT THE TRIBUNAL HAS NOT ACCEPTED THE ADDITIONAL GROUND OF APPEAL RAISED BEF ORE IT ON THE ISSUE OF KEY MAN POLICY VIDE LETTER DATED 11.12.2014. THEREFORE THE ORDER OF THE TRIBUNAL SHOULD BE RECALLED AND SPECIFIC FINDING SHOULD BE G IVEN ON THIS GROUND. 2. LD. DR OF THE REVENUE PER CONTRA HAS INVITED OUR ATTENTION THAT THE REVENUE HAS ALREADY TAKEN GROUND NO.1 RELATING TO D ELETION OF THE DISALLOWANCE OF RS.50.00 LAKH MADE BY THE ASSESSING OFFICER ON ACCOUNT OF KEY MAN INSURANCE POLICY PREMIUM PAID. IN THE LIGHT OF ORIGINAL GROUND TAKEN 2 BY THE REVENUE, THE TRIBUNAL DID NOT FIND IT NECESS ARY TO DEAL WITH THE ADDITIONAL GROUND RAISED BEFORE US DURING THE COURS E OF HEARING. THEREFORE, NO PURPOSE WOULD BE SERVED FOR GIVING A SPECIFIC FI NDING ON THE ADDITIONAL GROUND AND TRIBUNAL HAS ALREADY ADJUDICATED THE ISS UE WHILE PASSING THE REASONED ORDER. 3. HAVING CAREFULLY EXAMINED THE MISCELLANEOUS PETI TION AS WELL AS THE TRIBUNALS ORDER, WE FIND THAT IN APPEAL NO. 524/LK W/2012 RELATING TO ASSESSMENT YEAR 2009-10, THE REVENUE RAISED THE GRO UND NO.1 RELATING TO DISALLOWANCE ON ACCOUNT OF KEY MAN INSURANCE POLICY WHICH READS AS UNDER:- 1. THAT THE ID. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS .50,00,000/- MADE BY AO OH ACCOUNT OF KEY MAN INSURANCE POLICY P REMIUM PAID FOR TWO DAUGHTERS OF MD WHO ARE ALSO EMPLOYEES OF THE ASSESSEE COMPANY WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AS ENUMERATED IN THE ASSESSMENT ORDER. 4. THE REVENUE HAS ALSO RAISED ADDITIONAL GROUND WH ICH IS AS UNDER:- THAT THE ID. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN FAILING TO APPRECIATE THAT THE ASSESSEE HAS CLAIMED KEY MAN IN SURANCE EXPENSES PERTAINING TO HIS DAUGHTERS WHILE ON THE O THER HAND THE ASSESSEE HAS CLAIMED EXPENSES INCURRED ON HIS DAUGH TERS STUDYING ABROAD AND AS SUCH THE DAUGHTERS WOULD NOT HAVE BEE N THE KEYMAN DURING THE SAID PERIOD. 5. THE TRIBUNAL VIDE ITS ORDER DATED 25.03.2015 HAS ADJUDICATED THE GROUND RELATING TO KEY MAN INSURANCE POLICY IN ITS PARA NO.20 OF THE ORDER OF THE TRIBUNAL FOR THE SAKE OF REFERENCE WE EXTRACT T HE RELEVANT PORTION OF THE TRIBUNALS ORDER IS AS UNDER:- 20. APROPOS GROUND NO.2, IT IS NOTICED THAT THE AS SESSEE HAS CLAIMED DEBIT OF RS.50,00,000/- AS KEY MAN INSURANC E PREMIUM ON 3 THE LIVES OF KM. NIDHI WADHWA AND MRS PRIYANKA WADHWA (RS.25 LAKHS EACH). BOTH THESE INSURERS ARE DAUGHTERS OF T HE MANAGING DIRECTOR, SHRI. K. K. WADHWA AND ARE EMPLOYED IN THE ASSESSEE- COMPANY. THE ASSESSING OFFICER HAS ALSO NOTED THAT THEY ARE GETTING SALARY AT RS.3.60 LAKHS EACH FROM THE ASSESSEE COMP ANY. RELYING UPON THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006- 07, IN WHICH DETAILED DISCUSSIONS WERE MADE WITH REGARD TO THE C LAIM OF KAYMAN INSURANCE PREMIUM ON THE LIVES OF KM. NIDHI WADHWA A ND MRS PRIYANKA WADHWA, THE ASSESSING OFFICER HAS MADE DIS ALLOWANCE OF THE PAYMENT OF RS.50 LAKHS AS KEY MAN INSURANCE PRE MIUM, AS THERE WAS NO CHANGE IN THE CIRCUMSTANCES OF THE CASE. FOR THE SAKE OF REFERENCE, THE OBSERVATIONS OF THE ASSESSING OFFICE R ARE EXTRACTED HEREUNDER IN ORDER TO UNDERSTAND THE NATURE OF DISA LLOWANCE:- 'THE ASSESSEE HAS CLAIMED DEBIT OF RS. 5000000 AS K EY MAN INSURANCE PREMIUM ON THE LIVES OF KM. NIDHI WADHWA AND MRS. PRIYANKA WADHWA (25 LACS EACH) BOTH THESE INSU RERS ARE DAUGHTER OF MANAGING DIRECTOR SHRI.K.K. WADHWA B OTH IS EMPLOYED IN THE ASSESSEE COMPANY AND ARE GETTING A SALARY OF RS. 360000 EACH FROM THE ASSESSEE'S COMPANY. IT IS ALSO REPORTED THAT KM. NIDHI WADHWA IS STUDYING AT UK AN D RS. 1409552 HAS BEEN INCURRED ON HER TRAINING AND STUDI ES AT UK BY THE ASSESSES COMPANY. ON THIS ISSUE OF THE KEY MAN INSURANCE PREMIUM, THE ASSESSEE COMPANIES VIDE ITS SUBMISSION DATED 21/06/ 2011 AND DATED 23/06/2011 SUBMITTED THAT THE POLICIES WE RE ISSUED IN ACCORDANCE WITH IRDA CIRCULAR NO. IRDAL LIFE/006/2005-06 DATED 27-04-2005.THE COUNSEL FOR T HE ASSESSEE ALSO SUBMITTED THAT THIS ISSUE IS COVERED BY MUMBAI TRIBUNAL ORDER IN CASE OF ITO VS. MODI MOTOR S (2010) 1 ITR (TRIB) MUMBAI AND ACCORDINGLY, SUBNITT ED THAT THE EXPENDITURE MADE BY THE COMPANY AS KEY MAN INSU RANCE PREMIUM ON THE LIVES OF KM NIDHI WADHWA AND MRS PRI YANKA WADHWA SHOULD ALLOWED. ABOUT THE APPLICABILITY OF THE REFERRED CIRCULAR OF IRDA, DETAILED DISCUSSION HAD BEEN MADE IN ASSESSMENT ORD ER FOR A.Y 2006-2007 AND THEREAFTER THE ISSUE WAS CONSIDER ED IN THE LIGHT OF APPLICABILITY OF PROVISION OF SECTION 40A OF THE I.T 4 ACT, 1961 BASED ON THE CONCLUSION DRAWN VIDE THE ASSESSMENT ORDER FOR A.Y 2006-07 & 2007-2008, THE A MOUNT OF RS 50,00,00/-. FACTS OF THE CASE ARE SIMILAR. TH ERE IS NO CHANGE IN THE CIRCUMSTANCES OF THE CASE EITHER. THE KAY MAN INSURANCE ARE SUPPOSED TO BE ALLOWED TO THE KEY MAN OF THE BODY CORPORATE WHILE PRESENTLY BOTH THESE DAUGHTERS ARE NOT KEY MAN OF THE COMPANY AND ONE OF THE DAUGHTERS IS STILL CONTINUING WITH HER STUDIES IN ABROAD, HENCE THE EX PENDITURE INCURRED ON MRS. PRIYANKA WADHWA WILL NOT BE ALLOWE D TO THE ASSESSEE COMPANY AND THE SAME WILL BE ADDED TO THE INCOME OF THE ASSESSEE. THE CASE REFERRED TO BY THE COUNSEL OF THE ASSESSEE IS ALSO NOT MUCH HELP TO THE ASSESS EE AS THE CASE CITED BY THE COUNSEL TO THE ASSESSEE IS REGARD ING THE ALLOWABILITY OF THE EXPENDITURE INCURRED ON THE KEY MAN INSURANCE W.R.T. THE CASES OF MANAGING DIRECTOR AND DIRECTOR AND NOT FOR THE DEPENDENT SON OR DAUGHTER OF MD/DIR ECTOR THE PAYMENT MADE ARE EXCESSIVE WITH REFERENCES REND ERED BY HIS DAUGHTERS HENCE ALSO THE SUM OF 50,00,000 IS LIABLE TO BE DISALLOW AND ADDED TO THE INCOME OF THE ASSESSEE COMPANY. THE EXPENDITURE INCURRED ON ACCOUNT OF STU DIES OF KM. NIDHI WADHWA IN UK TO THE EXTENT OF RS.1409552 I S ALSO DISALLOWED BEING IN THE NATURE OF PERSONAL EXPENSES . I AM ALSO FORTIFIED IN THIS REGARD BY THE RATIO IN THE C ASE OF K SUBRAMANIIUM BROS VS CIT (MAD) 250 ITR 769; S.N. NA IK VS CIT (ITAT), PUNE 104 ITD 516 AND ENKAY (INDIA) RUBB ER CO. PVT. LTD. VS CIT (DEL) 263 ITR 521 IN WHICH INTER A LIA IT WAS HELD THAT ON EDUCATION ABROAD OF SON (WHO IS ALSO P ARTNER) IS NOT ALLOWABLE EXPENDITURE. ACCORDINGLY THE EXPENSES ON ACCOUNT OF FOREIGN EDUCATION OF THE DAUGHTER OF MAN AGING DIRECTOR WILL BE ADDED TO THE INCOME OF THE ASSESSE E COMPANY OTHER EXPENSES AS REPORTED BY THE SPECIAL A UDITOR ON ACCOUNT OF EXPENDITURE INCURRED ON KM. NIDHI WADH WA AND PRIIYANKA WADHWA ARE BEING ALLOWED AS THEY ARE EMPLOYEES OF THE ASSESSEE COMPANY. 21. THE MATTER WAS BROUGHT BEFORE THE LD. CIT(A). T HE LD. CIT(A) FOLLOWED THE ORDER OF HIS PREDECESSOR FOR ASSESSMEN T YEARS 2007- 08 AND 2006-07 AND DELETED THE ADDITION. 5 22. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. THE LD. D.R., DURING THE COURSE OF HEARING OF THE APPEAL, HAS INVITED OUR ATTENTION TO THE ORDER OF THE TRIBU NAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 WIT H THE SUBMISSION THAT UNDISPUTEDLY DURING THE ASSESSMENT YEAR 2006-07 THE ADDITION MADE ON ACCOUNT OF KEY MAN INSURANCE P REMIUM FOR KM. NIDHI WADHWA AND MRS PRIYANKA WADHWA WAS DELETED BY THE LD. CIT(A) AND BEFORE THE TRIBUNAL THE REVENUE HAS NOT CHALLENGED THE ORDER OF THE LD. CIT(A) ON THIS COUNT. THEREFOR E, THE REVENUE HAS ACCEPTED THE FINDINGS OF THE LD. CIT(A) WITH RE GARD TO THE PAYMENT OF KEY MAN INSURANCE PREMIUM FOR KM. NIDHI WADHWA AND MRS PRIYANKA WADHWA. SIMILAR IS THE POSITION IN ASSESSMENT YEAR 2007-08, IN WHICH THE ADDITION MADE ON ACCOUNT OF PAYMENT OF KEY MAN INSURANCE PREMIUM WAS DELETED BY THE LD. CIT(A) AND THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIB UNAL, BUT THE ORDER OF THE LD. CIT(A) IN THIS REGARD WAS NOT CHAL LENGED. THE APPEAL FOR ASSESSMENT YEAR 2007-08 HAS BEEN ADJUDIC ATED BY US IN THE FOREGOING PARAS. THEREFORE, WHERE THE REVENUE H AS ACCEPTED THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION M ADE ON ACCOUNT OF DISALLOWANCE OF PAYMENT OF KEY MAN INSURANCE PRE MIUM IN THE IMMEDIATELY PRECEDING YEAR, WE FIND NO JUSTIFICATIO N IN THE DISALLOWANCE MADE IN THE IMPUGNED ASSESSMENT YEAR I .E. ASSESSMENT YEAR 2008-09. THE REVENUE CANNOT BLOW HO T AND COLD IN THE SAME BREATH. IN ONE ASSESSMENT YEAR IT HAD A CCEPTED THE CLAIM OF THE ASSESSEE AND IN OTHER ASSESSMENT YEAR THEY WANT TO MAKE DISALLOWANCE. FOLLOWING THE RULE OF CONSISTENC Y, THE REVENUE IS NOT PERMITTED TO TAKE CONTRARY VIEW IN DIFFERENT ASSESSMENT YEARS. SINCE THE ORDER OF THE LD. CIT(A) FOR ASSESS MENT YEARS 2006- 07 AND 2007-08 DELETING THE ADDITION MADE ON ACCOUN T OF DISALLOWANCE OF PAYMENT OF KEY MAN INSURANCE PREMIU M HAS ATTAINED FINALITY, WE DECIDE THIS ISSUE FOLLOWING T HE VIEW TAKEN IN THE IMMEDIATELY PRECEDING YEAR BY THE FIRST APPELLA TE AUTHORITY, AS THE REVENUE HAS NO MORAL TO CHALLENGE THIS ADDITION IN SUCCEEDING YEARS HAVING ACCEPTED THE DELETION OF THE SAID ADDI TION IN EARLIER YEARS. SINCE THE LD. CIT(A) HAS DECIDED THE ISSUE F OLLOWING THE ORDER OF HIS PREDECESSOR IN EARLIER YEAR, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE CON FIRM THE SAME. 6 6. SINCE THE TRIBUNAL HAS ALREADY ADJUDICATED THE ISSUE RELATING TO KEY MAN INSURANCE POLICY RAISED IN THE ORIGINAL GROUND THERE WAS NO NECESSITY TO ADJUDICATE THE ADDITIONAL GROUND AGAIN. 7. HAVING CAREFULLY EXAMINED THE ORDER OF THE TRIBUNAL , WE ARE OF THE CONSIDERED VIEW THAT THE PRESENT MISCELLANEOUS APPL ICATIONS ARE DE VOID OF MERIT AS THE TRIBUNAL HAS ALREADY GIVEN A FINDING I N ITS ORDER ON THE ADDITIONAL GROUND RAISED BY THE REVENUE DURING THE COURSE OF HEARING OF THE APPEAL. WE, THEREFORE, FIND NO MERIT IN THE MISCELLA NEOUS APPLICATIONS AND DISMISS THE SAME. 8. IN THE RESULT MAS OF THE REVENUE STAND DISMISSED . (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (P.K. BANSAL) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26/07/2016 AKS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR