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TMI Blog2006 (6) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... Policy. It was represented before the Assessing Officer that the impugned amount was not liable to be taxed under the Income-tax Act. In this connection, a reference was made to the amendment made in section 10(10D) of the Act by Finance (No. 2) Act, 1996, with effect from 1-10-1996, by which the words "or under a Keyman Insurance Policy" were inserted after the end of the aforesaid clause. An Explanation was also appended in which the expression. "Keyman Insurance Policy" was defined. It was further represented before him that the impugned amount was not taxable under the provisions of section 41(1). The Assessing Officer came to the conclusion that in view of insertion of the aforesaid words in section 10(10D), with effect from 1-10-1996, the amount received by the assessee was not taxable under section 28(vi) of the Act. However, he was of the view that the impugned amount was taxable under section 41(1). Accordingly, the amount was included in the income of the assessee. 2.2 Aggrieved by this order, the assessee filed an appeal before the CIT(A). The learned CIT(A) came to the conclusion that in view of the operating date of the amendment being 1-10-1996, the impugned amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1980, applicable to assessment year 1980-81, it could have made the amended rules effective from 1-4-1980, instead of bringing them into force at once. Therefore, the decision of the Hon'ble Court was that such amendment will not be applicable to assessment year 1980-81. 3.3 The learned counsel also relied on the decision of Hon'ble Supreme Court in the case of Polyflex (India) (P.) Ltd. v. CIT [2002] 257 ITR 343. This case dealt with the interpretation of words "benefit by way of remission or cessation" used in section 41 (1) of the Act. The Hon'ble Court pointed out that where a statutory levy is discharged by the assessee and subsequently the amount is refunded to the assessee, it will be a case where the assessee has obtained the refunded amount in respect of such expenditure within the meaning of section 41 (1) of the Act. However, it will not be a case of benefit by way of remission or cessation of the trading liability. The Hon'ble Court further pointed out that in a case where the assessee is liable to disgorge that benefit as and when obtained, then, the fact that the refund may be set aside at a future date is not a relevant consideration for deciding the issue. The cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3.5 As against the aforesaid, the learned DR did not enter into controversy about the taxation of the amount received on surrender of Keyman Insurance Policy. He merely pointed out that since expenditure was incurred in the past, the amount may be taxable under section 28 read with section 41(1). It was further pointed out that provisions of section 14A are clearly applicable to the facts of the case as the income received in respect of Keyman Insurance Policy has not been included in the total income and, therefore, it follows that expenditure incurred in keeping this policy subsisting cannot be allowed as expenditure. 3.6 In the rejoinder, the learned counsel emphasized on the word "received" used in section 28(vi) of the Act. 4.1 We have considered the facts of the case and rival submissions. It may be clarified at the outset that the issue of taxation of the sum received by the assessee on surrender of Keyman Insurance Policy is not before us. This matter was decided in favour of the assessee by the learned CIT(A) and the revenue has not filed any appeal in this behalf. In spite of that, the learned counsel vehemently argued on this issue in support of the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s known as subordinate legislation and, therefore, interpretation in regard to the date of applicability of the circulars will also be applicable equally to the rules, which deal with the substantive law. In that decision, the Hon'ble Court, on page 27, pointed out that the uncontroverted factual position in the present case is that it was on the basis of the above permission of the Board contained in Circular dated 4-10-1969, which was in operation during the entire accounting year corresponding to the assessment year 1972-73 and on the first date of the said assessment year, that the entire cost of acquiring the distribution rights in the accounting year corresponding to the assessment year 1972-73 in which the pictures were released had been written-off in the books of account. The deduction was also claimed for the entire cost of the said films in the said year. On these facts, the Hon'ble Court at page 31 held that "now, it is well-settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only issue in this case is whether the learned CIT(A) was right in denying deduction of a sum of Rs. 12,70,838 in computation of income of the assessee, under the provisions of section 14A, on the ground that the sum received on surrender of the policy in this year has not been included in the total income of the assessee. The learned counsel relied on the decision of Hon'ble ITAT, Mumbai Bench "SMC", in the case of Dakshesh S. Shah. Unfortunately for him, this decision is also against the assessee. The Hon'ble Tribunal opined that the assessee is not entitled to claim deduction of interest referable to the amount borrowed for the purpose of investment in shares. It was also the decision of the Hon'ble Tribunal that provisions of section 14A, contained in Chapter IV, are applicable in computation of income under any head, referred to in section 14 of the Act. It is a matter of fact that income from Keyman Insurance Policy has not been included in the total income of the assessee by dint of the provisions contained in section 10(10D). Such a decision may be wrong, but it has become final in the sense that the revenue has not filed appeal against the decision of the learned CIT(A) i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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