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TMI Blog2014 (6) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... es. 2. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in disallowing transport charges amounting to RS. 38,078 being @ 20% of RS. 190,391 without appreciating that the relevant details were submitted at the time of assessment as well as appellate proceedings. 3. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in disallowing interest on vehicle loan amounting to RS. 15,040 without giving enhancement notice and without appreciating that interest on vehicle loan was allowed under section 36 (1) (iii), and was not hit by the rigor or provisions of section 38 (2) of the Income-tax Act 1961. 2. Ground no. 1 is regarding disallowance of premium paid on keymen insurance policy. The AO noted that the assessee has debited an amount of Rs. 23,00,000/- towards insurance premium paid under Keymen Insurance premium. The AO found that assessee has paid premium to the various insurance companies under Keymen insurance policy taken in the name of two major partners of the firm. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of its two partners namely Mr. Nilesh K. Patel and Mrs. Jigna N. Patel. The details of premium paid by the assessee are given in para 2.3 of the assessment order as under:- Sl. No Name of the insurance Company Amount of premium 1. Bajaj Allianz Rs. 4,00,000 2. Bajal Allianz Rs. 4,00,000 3. ICICI Prudential Rs. 5,00,000 4. ICICI Prudential Rs. 5,00,000 5. LIC Jeevan Plus Rs. 3,00,000 6. LIC Jeevan Plus Rs. 2,00,000 Total Rs. 23,00,000/- 7. The AO has doubted the very nature of the policy taken by the assessee and denied the claim on the ground that these are unit linked policy and not term policy on the life of Keymen. Similar view was taken by the CIT(A) while confirming the disallowance made by the AO. Before us, the Ld. AR of the assessee vehemently contended that these are the Keymen policy and the premium paid towards the policy is an allowable clima u/s 37(1). There is no quarrel on this issue that the premium paid by a partnership firm on account of Keymen policy taken on the partners who are inevitable to the business of the assessee's firm. Thus the object and purpose of the Keymen insurance policy is to protect the business of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n employee. A Keyman Insurance Policy is obtained on the life of a partner to safeguard 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." 8. Thus there is no ambiguity on the issue of allowability of the claim, so far as the premium paid towards the Keymen insurance policy by firm on the life of the partners. The disallowance made in the case in hand by the authorities below on the ground that the policies in question are not Keymen policies but these are unit linked policies taken by the firm in the name of the partners and the benefit of the policy will go to the partners and not to the firm. It is pertinent to note that neither the AO nor the CIT(A) has duly examined the terms and conditions of the policy in question and particularly the benefit clause under which the benefit of the policy is available whether to the assessee firm or to the partners. Before us, the assessee has filed only the receipt of premium paid towards these policies and in the absence of policy docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g evidence the AO is justified in disallowing 20% of the such expenses. 13. Having considered the rival submissions as well as relevant material on record, we find that the AO has disallowed 20% of the expenses made in cash to one party namely M/s Anil Bulk Mover India Pvt. Ltd. On careful examination of records, we find that the assessee has placed the details of transport expenses paid to M/s M/s Anil Bulk Mover India Pvt. Ltd and no such cash payment was made to this party. All the payments were made to this party after deduction of TDS. Therefore, the AO has disallowed 20% of these expenses under wrong assumption of facts, whereas these expenses pertains to the payment made to various parties in small amounts ranging from few hundreds to thousand. In view of the fact and circumstances as discussed above, we delete the addition of Rs. 38,078/- on account of transport expenses. 14. Ground no. 3 is regarding disallowance of interest on vehicle loan of Rs. 15,040/-. The AO noted that the assessee has paid interest of Rs. 75,206/- on the loan taken for car. The assessee itself has disallowed 20% of the running expenses of the car on account of personal use. The AO has accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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