2016 (5) TMI 1167 - HC - Income Tax

Entitlement to deduction on account of premium paid on Keyman Insurance Policies of its partners - Held that - As decided in Pr. Commissioner of Income Tax-I, Ludhiana v. M/s Ramesh Steels, Ludhiana 2016 (5) TMI 1155 - PUNJAB & HARYANA HIGH COURT in the case of the assessee where it has been held that the Keyman insurance policy taken out in respect of partner of the firm would be admissible expenditure. Premium paid by the assessee related to period beyond 31.3.2005 - whether not allowable deduction for the assessment year 2005-06? - Held that - Learned counsel for the revenue was unable to show that the claim of deduction of premium on Keyman insurance policy amounting to Rs. 84,68,494/- was erroneously granted and the order of the Tribunal was unsustainable

Summary

Issues:
1. Whether the assessee is entitled to deduction on account of premium paid on Keyman Insurance Policies of its partners?
2. Whether the premium paid by the assessee related to period beyond 31.3.2005 and thus, not allowable deduction for the assessment year 2005-06?

Issue 1:
The High Court considered whether the assessee is entitled to deduction for the premium paid on Keyman Insurance Policies of its partners. Referring to a previous judgment, the Court held that such insurance policies would be admissible expenditure, ruling against the revenue's contention.

Issue 2:
Regarding the second issue, the revenue argued that the premium amount debited by the assessee for the insurance policy related to a period beyond 31.3.2005 and should not have been allowed as a deduction for the assessment year 2005-06. The assessee clarified that out of the total premium paid, a portion was allocated to the previous assessment year, and the remaining amount was for the current year. The Court examined the details provided by the assessee, including responses to the Assessing Officer's notice, and found that the deduction claimed was in accordance with the accounting system used. Consequently, the Court concluded that the revenue failed to demonstrate any error in allowing the deduction for the premium on Keyman insurance policies. As a result, the appeal was dismissed, and no substantial question of law was found to arise in this case.