2013 (7) TMI 955 - AT - Income Tax

Summary

Issues involved: Appeal against orders disallowing Keyman Insurance Policy Premium for assessment years 2004-05, 2005-06, and 2006-07.

Adjudication of Keyman Insurance Policy Premium Allowability:
The assessee appealed against disallowance of Keyman Insurance Policy Premium paid for the brother, claiming he was a deemed employee handling business activities. The AO rejected the claim citing eligibility norms for Keyman insurance policy. However, the Tribunal referred to a Bombay High Court decision stating that Keyman Insurance Policy isn't limited to employment contracts but includes individuals connected to the business. The CBDT circular clarified that such premiums are allowable business expenditures to protect against financial setbacks. The Tribunal found the premium expenditure wholly for business purposes, overturning the AO's disallowance for all three years.

Applicability of Bombay High Court Decision:
The Tribunal applied the Bombay High Court decision to the present case, emphasizing that the brother's involvement in business activities and the power of attorney supported the claim. The wider interpretation of "connected with the business" under section 10(10D) covered the premium paid for the brother's role in the business. As no adverse material contradicted the assessee's contentions, the disallowance was deemed unwarranted for all three years, leading to the allowance of the common issue.

Conclusion:
While other grounds were not pressed, the appeals were partly allowed based on the Tribunal's decision to permit the Keyman Insurance Policy Premium for all three years. The disallowance made by the AO was overturned, and the appeals were partly allowed accordingly.

Judgment Pronounced: 02/07/2013