COMMISSIONER OF INCOME TAX-I, LDH. V. M/S BIG BEN EXPORTS

ITA/628/2010

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax-II, Ludhiana, against M/s Big Ben Exports concerning the deductions claimed under Section 36(1)(ib) of the Income Tax Act, 1961. The deductions were for premiums paid on a Keyman Insurance policy for a partner in the firm, which the assessing officer initially allowed. The Tribunal and the Commissioner affirmed this decision, leading to the revenue's appeal in the High Court. The core legal issues pertained to the interpretation of 'employee' under the Act and the applicability of deductions for insurance premiums paid for partners. The court's decision emphasized that partners can be considered employees if they manage the firm's affairs and receive a salary, thus upholding the deductions claimed by the respondent.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 679501 (HC-PUNJAB HARYANA)
• Appeal Type: Others
• Pronouncement Date: 26-09-2011
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: SAVITA SAXENA
• Keywords: Deduction; Employee; Insurance premium; Keyman insurance; Partner
• Section: 80HHC; 37(1); 260A; 10(10D); 36(1)(ib)

Judgement Text

"Income Tax Appeal No.628 of 2010 #1# IN THE HIGH COURT OF PUNJAB & HAR YANA AT CHANDIGARH . Income Tax Appeal No.628 of 2010 Date of Decision:-26.09.2011 The Commissioner of Income Tax-II, Ludhiana. ......Appellant. Versus M/s Big Ben Exports. ......Respondent. CORAM:- HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE JASWANT SINGH Present:- Ms. Savita Saxena, Advocate for the Appellant. *** HEMANT GUPTA, J.(ORAL) The Revenue is in appeal under Section 260A of the Income Tax Act, 1961(for short the Act) claiming the following substantial questions of law:- 1. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in dismissing the appeal of the department though the said disallowance was made by the assessing officer under Section 36(ib) of the Income Tax Act, 1961? 2. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in dismissing the appeal of the department by holding that the partner is an employee for the purpose of Keyman Insurance? 3. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in dismissing the appeal of the department regarding computation of deduction under Section 80HHC of the Income Tax Act 1961 and confirming the order of the CIT(A) directing the A.O. to consider the cost of trading goods exported attributable to export turnover excluding the turnover of Rs.15,71,637/-, the sale proceeds in respect of which payments were not realized in stipulated time? During the course of arguments learned Counsel for the revenue pressed questions no.1 & 2 as arising out of the order of the Tribunal. The assessee firm is engaged in exports and declared income of Income Tax Appeal No.628 of 2010 #2# Rs.57,63,520/- in its return filed on 30.10.2004. The assessee debited Rs.10,00,000/- as Keyman Insurance and claimed expenditure in terms of Section 37(1) of the Act. The Keyman Insurance Policy in terms of Section 10(10D) of the Act means a Life Insurance Policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person. The assessing officer allowed such deductions. The said finding has been affirmed by the Commissioner and later by the Income Tax Appellate Tribunal. Learned Counsel for the revenue has argued that the insurance premium was paid not in respect of the employee but in respect of a partner, therefore, the deduction under Section 36(ib) is not available as the amount of premium paid by an assessee as an employer to avail or get insurance for the health of his employees alone is allowable deduction. Having heard learned Counsel for the revenue we do not find any substantial question arises for consideration. Section 36(1)(ib) of the Act contemplates deduction of the amount of premium paid on the insurance policy of an employee by the employer. A partner can also be an employee when he manages the affairs of the firm on whole time basis and get salary. It is not a case of the revenue that such partner on whose life premium is being paid was not a whole time employee of the firm. In view of the said fact we do not find any substantial question of law arises for consideration. Dismissed. ( HEMANT GUPTA ) JUDGE ( JASWANT SINGH ) JUDGE September 26, 2011 Vinay "