2015 (8) TMI 1194 - AT - Income Tax

Premium paid on Keyman Insurance - disallowance of excess premium and added to the income - CIT(A) following his predecessors order in assessee s own case for A.Y. 06-07 decided the issue in favour of Assessee - Held that - CIT(A) while granting the relief has noted that the premium paid in the current financial year was the second installment and the first installment of premium paid in A.Y. 05-06 by the Assessee has been accepted and not disputed by Revenue. Before us, the Revenue could not controvert the findings of CIT(A), nor could he bring any decision of High Court in its support. We also find that the Hon. Bombay High Court in the case of CIT vs. B.N. Exports (2010 (3) TMI 186 - BOMBAY HIGH COURT) has held that premium on the Keyman Insurance Policy of partner of the firm is wholly and exclusively for the purposes of business and is allowable as business expenditure. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. - Decided in favour of assessee.

Summary

Issues:
- Appeal filed by Revenue against CIT(A) order for A.Y. 2007-08
- Disallowance of premium paid on Keyman Insurance

Analysis:
1. The appeal was filed by the Revenue against the order of CIT(A) for the assessment year 2007-08. The case involved the disallowance of premium paid on Keyman Insurance by the Assessee, a company engaged in manufacturing and trading. The Assessing Officer disallowed the excess premium amount claimed by the Assessee, leading to the dispute.

2. The Assessing Officer observed that the Assessee had paid a significant amount as Keyman Insurance Premium for key-persons, which was not accepted as deductible by the Assessing Officer. The Assessing Officer calculated the allowable premium using different methods and disallowed the excess amount, adding it to the Assessee's income. The Assessee, aggrieved by this decision, appealed to the CIT(A), who partly allowed the appeal in favor of the Assessee, relying on a previous order for A.Y. 06-07 in the Assessee's own case.

3. The Revenue, dissatisfied with the CIT(A)'s decision, appealed to the Appellate Tribunal. During the proceedings, the Tribunal noted that the premium paid in the current financial year was the second installment, with the first installment paid in A.Y. 05-06 being accepted and undisputed by the Revenue. The Tribunal also referred to a decision by the Hon. Bombay High Court, stating that the premium on Keyman Insurance Policy is allowable as a business expenditure. Consequently, the Tribunal found no reason to interfere with the CIT(A)'s order and dismissed the Revenue's appeal, upholding the decision in favor of the Assessee.

4. The Tribunal's decision was based on the findings that the premium paid on Keyman Insurance was wholly and exclusively for the purposes of business, as supported by legal precedents and the specific circumstances of the case. The Tribunal's analysis considered the relevant provisions of the Income Tax Act and previous judicial decisions, ultimately leading to the dismissal of the Revenue's appeal and upholding the order in favor of the Assessee.