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TMI Blog2014 (2) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... uch premium be allowed only where "employer employee relationship existed" - the disallowance made on account of premium paid towards Keyman Insurance Policy in respect of partner of the appellant firm is set aside. Expenditure on premia of keyman insurance for a firm on life of partners bestows personal benefits to the partners -The amount on claim or maturity under a keyman insurance policy is not exempt under section 10(10D) of the Income Tax Act when the company pays the premia, because in such situation the benefits received acquire the nature of capital receipts – decided against Revenue. - ITA No.3504/Ahd/2010 - - - Dated:- 15-11-2013 - N S Saini And Kul Bharat, JJ. For the Appellant : Shri J P Jhangid, Sr.DR For the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of payment of premium of keyman insurance policy on partner's life. 3. The assessee carried the matter before the ld.CIT(A) and the ld.CIT(A) has decided the matter in favour of assessee, by observing as under:- "4. I have gone through the reasons given by the A.O. for not admitting Insurance Premium in respect of Keyman Insurance Policy. I am not able to support his conclusion, in view of decision of Hon'ble ITAT, Mumbai bench in the case of Modi Motors [2009] 126 TTJ 405 (Mumbai) where identical issue was decided against the revenue. The Hon'ble Members observed that maturity or surrender amount under the Keyman Insurance Policy was not exempted but taxable as "Salaries" u/s.17(3)(ii) of the Act or as "Profits and Gains o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serving as under:- "17. We have heard the rival submissions and perused the materials available on record. In the instant case the A.O. has disallowed the claim of the assessee for deduction of premium of Rs.14,38,100/-under Keyman Insurance Policy for the reason that the expenses were incurred on the life of the partner and there was no employer-employee relationship and absence of distinct separation between the firm and the partners. In appeal, the CIT (A) confirmed the disallowance. We find that the Hon'ble Bombay High Court in the case of B.N. Exports (supra) in similar facts and circumstances of the case held that where Keyman Insurance Policy was taken not for the personal benefit of the partner but for the benefit of the firm i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 18. We find that both the parties before us has not brought any material which could show that the Keyman insurance policy was taken for the benefit of the business of the partnership firm to protect it from disruption of business on the death of the person on whose life Keyman's Insurance was taken or the same was taken for the benefit of the individual partner on whose life such insurance was taken. In the circumstances in our considered opinion it shall be in the interest of justice to restore this issue back to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph No.4, which reads as under: "4. I have carefully considered the submission of the assesses. The contention of the assessee is applicable in its case. Thus in view of the above facts, it is very clear that the Keyman Insurance Policy was not taken for the individual benefit of the partners but it was taken for the benefit of the firm as the involvement of ail the partners in running the day to day business was commendable and if anything happened to any of them, the business of the firm would have suffered. The partnership deed have also called for relevant for A.Y. 2008-09. Further, an amendment has been made in Section 2(24)(xi) w.e.f. 01-10-1996 that any sum received under a Keyman Insurance Policy is taxable inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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