2018 (4) TMI 1354 - AT - Income Tax

Disallowance of Keyman Insurance Premium paid - rule of consistency - Held that - When it is a fact on record that the Insurance policies are continuing from the year 2004 and in the preceding assessment years assessee s claim of deduction in respect of premium paid have been allowed by the Assessing Officer in scrutiny assessments, in the absence of any material change in facts the deduction claimed in respect of premium paid cannot be disallowed in the impugned assessment year, as the rule of consistency must be applied. Keyman Insurance policies were taken in the name of directors in pursuance to resolution dated 24th February 2004 of board of directors and it has also been submitted before us by the learned Counsel for the assessee that the sum assured under the insurance policy as per the terms and conditions will come back to the assessee on the death of policy holders. We allow assessee s claim of deduction of premium paid in both the assessment years. - Decided in favour of assessee

Summary

Issues:
Disallowance of Keyman Insurance Premium for assessment years 2011-12 and 2012-13.

Analysis:

1. Background and Common Issue:
The appeals by the assessee were against two separate orders concerning the disallowance of Keyman Insurance Premium paid for the assessment years 2011-12 and 2012-13. The Assessing Officer disallowed the deduction claimed by the assessee on the grounds that the premium paid was towards a Life Insurance policy and not a Keyman Insurance policy, hence not allowable as business expenditure.

2. Contentions of the Parties:
The assessee contended that the Keyman Insurance policy was taken in the name of two directors in 2004 based on a Board resolution. The assessee argued for consistency in allowing the deduction as in previous assessment years. The Departmental Representative insisted that the onus was on the assessee to prove the policies were Keyman Insurance and that no material was provided to support this claim.

3. Judgment and Reasoning:
The Tribunal noted that the Insurance policies were taken in 2004 and deductions were allowed in previous assessment years. The rule of consistency was applied, and since there was no material change in facts, the deduction claimed for premium paid could not be disallowed for the current assessment years. The Tribunal also considered that the policies were taken in the directors' names as per a board resolution, and the sum assured would return to the assessee upon the policyholders' death.

4. Decision and Conclusion:
The Tribunal allowed the assessee's appeals, overturning the disallowance of the Keyman Insurance Premium for both assessment years 2011-12 and 2012-13. The judgment emphasized the importance of consistency in tax assessments and the specific circumstances surrounding the Keyman Insurance policies taken in the name of the directors.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, the Tribunal's reasoning, and the ultimate decision rendered in favor of the assessee.