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TMI Blog2012 (12) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is laid out for the payment of premium on such a policy is incurred wholly and exclusively for the purposes of business - Disallowance made by the AO is directed to be deleted - in favour of assessee. Foreign Traveling Expenditure - Held that:- Entire Expenditure on foreign traveling was on account of business exigencies and the countries traveled i.e. USA and Canada represent 80% of the turnover of the assessee firm and same countries have been visited on a continuous basis year after year to maintain the business relation and to expand the same. It was further submitted that the fringe benefit tax (FBT) @ 5% on entire expenditure on foreign traveling had been paid separately to take care of any possible personal use of the funds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person. 3. That the Ld CIT(A) erred in law and on facts in deleting the addition of Rs. 2,44,072/- made on account of disallowance of foreign travel expense as no details of expenses incurred on foreign travel were produced before AO. 3. The issue raised in ground No.1 and 2 raised by the Revenue is against the deletion of addition made on account of keym a insurancee premium paid by the assessee on the live soft he partners. The Assessing Officer had disallowed expenditure of Rs.11,80,685/- in respect of expenses claimed towards keyman insurance policy in view of the relationship between the firm and the partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and he ratio laid down by the Apex Court in Malabar Fisheries Company (supra). The CIT (Appeals) allowed the claim of the assessee in view of the ratio laid down by the Hon'ble Bombay High Court in CIT Vs . B.N. Exports [323 ITR 178 (Bom)] observing as under: 4. I have considered the facts of the case and the basis of disallowance made by the AO and also the arguments of the AR on the issue. The main logic behind AO's conclusion is that the partnership firm and the partners don't constitute two separate legal persons and therefore the provisions of Section 10(10D) were not applicable in the case of partnership firm taking keyman insurance policy. The AO's view gains strength from the judgement of Apex Court in the case of Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entirely different context can not be applied to the facts of the case under consideration as the issue is totally different in the sense that the survival of partners is critical to the efficient working of the firm and in the case of sudden demise of working partner. The business of the firm could suffer tremendously so as to make an attempt to ensure the losses by taking keyman insurance policy. Further the Hon'ble Bombay High Court has referred to the decision of Hon'ble Apex Court in the case Bist sons Vs. CIT 116 ITR 131 wherein it has been held that firm is a separate assessable entity distinct from its partner under the I.T.Act 1961. The observations of Hon'ble Bombay High Court on this issue are as under:- "For the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guard the firm against a disruption of the business that may result due to the premature death of a partner. Therefore, the expenditure which is laid out for the payment of premium on such a policy is incurred wholly and exclusively for the purposes of business. Hence, the appeal by the revenue does not raise any substantial question of law." In view of the detailed analysis of the facts of the case and direct judicial pronouncement on the issue, the disallowance made by the AO is directed to be deleted. 7. Following the ratio laid down by the Hon'ble Bombay High Court in CIT Vs . B.N. Exports (supra) we are in agreement with the order of CIT (Appeals) in allowing the claim of expenditure of keyman insurance premium paid by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t time so as to take the opportunity to go around sight seeing. The foreign business tours are a regular feature in the case of the assessee and the partners are not expected to while away their time on frivolous activities especially when there is no evidence to suggest the same. The AO's apprehension that the foreign currency purchased for the purposes of business tours may have been used for some personal expenses is well founded but the same gets taken care of by payment of stipulated fringe benefit tax. Any disallowance in addition to fringe benefit tax has to be based on concrete evidence available with the AO and in case of estimation specific reasons need to be brought on record like an unusual increase in foreign traveling expens ..... X X X X Extracts X X X X X X X X Extracts X X X X
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