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TMI Blog2015 (9) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in mind entirety of the case, we uphold the grievance of the assessee and delete the impugned disallowance. See case of Suri Sons vs. Addl. CIT [2015 (9) TMI 798 - ITAT AMRITSAR ] - Decided in favour of assessee. - I.T. A. Nos.35, 36 & 408/Asr/2010 - - - Dated:- 31-8-2015 - Pramod Kumar and A.D. Jain, JJ. For The Appellant : Y.K. Sud For The Respondent : Tarsem Lal Per Pramod Kumar : 1. By way of these three appeals, the assessee appellant has called into question correctness of ld. CIT(A) s separate orders dated 29.10.2009, 29.10.2009 30.07.2010 29.10.2009, in the matter of assessment under section 143(3) of the Income Tax Act, 1961 ( the Act hereinafter), for the Assessment Years 2006-07 2007-08, and in the matter of assessment under section 143(3) r.w.s. 147 of the Act for the Assessment Year 2005-06. Although the assessee has raised several grounds of appeal, the short common grievance of the assessee is that, on the facts and circumstances of the case, learned CIT(A) erred in upholding the disallowance of ₹ 1,99,99,941/- (for A.Y. 2006-07), ₹ 1,99,99,941/- (for A.Y. 2007-08) and ₹ 2,00,00,000/-(for the A.Y. 2005-06) towards prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel has submitted that the provisions of Section 14 A do not come into play in this case as the receipts in question are not exempt under section 10(10D) and, therefore, all other related questions are academic. He, however, hastens to add that the decisions in the case of Shri Nidhi Corporation (supra) and Emdee Apparel (supra) are directly on the issue that the insurance policy premium even on the policy which are not pure life insurance policies or term policies, are to be allowed as deduction as premium on keyman insurance policies. That precisely is the issue in this appeal, and, therefore, these decisions must be followed. As for the reference being made for special bench, learned counsel submits that the decision in the case of F C Sondhi Co Vs DCIT [(2014) 49 taxmann.com 180 (Amritsar - Trib.)], is per incurium inasmuch as it does not follow earlier decisions on the same issue in the cases of Shri Nidhi Corporation (supra) and Emdee Apparel (supra), and, following decisions of this Tribunal in the case of JKT Fabrics Vs DCIT (4 SOT 84), it is not a binding judicial precedent. It is also pointed out that a rectification petition has already been filed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium results in a tax exempt income. In this view of the matter, the coordinate bench decision in the case of Agarwal Packaging Pvt Ltd Vs CIT [(2008) 112 ITD 240 (Pune)] has no application in the matter. As regards the F C Sondhi decision, relied upon by the learned Departmental Representative, we may point out that, while delivering this decision, an earlier decision on the same issue in the case of Shri Nidhi Corporation (supra), which decides the issue in favour of the assesse inasmuch as it holds that even non- pure life insurance policies are eligible for being treated as keyman insurance policies and that the IRDA circulars cannot, in any case, have a retrospective effect, was not taken note of by the Tribunal. Such a mistake may have been inadvertent but as to what is the consequence of such a mistake, we find guidance from a coordinate bench decision in the case of J K T Fabrics (supra), wherein, the coordinate bench has inter alia observed as follows: 5. As far as Tribunal s decision in the case of Prince SWR Systems (P) Ltd. (supra) is concerned, we have noted that the Tribunal has not followed the co-ordinate Bench decision in Plastiblends India Ltd. s case (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court s judgment in the case of Indian Rayon Corpn. Ltd. (supra) and on the basis of the Hon ble Rajasthan High Court s judgment in the case of Vijay Industries vs. CIT (2004) 190 CTR (Raj) 90 : (2004) 270 ITR 175 (Raj). What is held in Vijay Industries case (supra) is the same thing as held in Indian Rayon Corpn. Ltd. s case (supra) but then Plastiblends India Ltd. s case (supra) having considered the school of thought emerging from these materially similar decisions, has come to the conclusion that where the assessee has not claimed the depreciation in its books of account, the same cannot be thrust upon the assessee for the purpose of computing the deduction under s. 80-IA. Following the Hon ble Supreme Court s judgment in Paras Laminates (P) Ltd. s case (supra) it was not open to the Bench to take any other view of the matter than the view taken by the co-ordinate Bench. The decision in Venus Jewels case (supra) also appears to be per incurium. 7. No doubt that when a co-ordinate Bench doubts the correctness of decision of another co-ordinate Bench, a reference can be made to the Hon ble President for constitution of a larger Bench. However, as far as the issue be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than itself. A High Court Judge cannot question a decision of the Court of Appeal, nor can the Court of Appeal refuse to follow judgments of the House of Lords. A corollary of the rule is that the Courts are bound only by decisions of higher Courts and not by those of lower or equal rank. A High Court Judge is not bound by a previous High Court decision, though he will normally follow it on the principle of judicial comity, in order to avoid conflict of authority and to secure certainty and uniformity in the administration of justice. If he refuses to follow it, he cannot overrule it; both decisions stand and the resulting antimony must wait for a higher Court to settle. The principles applicable to Courts in India were laid down by Subba Rao, J. (as he then was) in Dr. K. C. Nambiar vs. State of Madras AIR 1953 Mad 351, which were approved by a Full Bench of our High Court in Subbarayudu vs. State AIR 1955 AP 87 (FB) : (1955) 11 ALT (Cri.) 53. They are as follows : A single Judge is bound by a decision of a Division Bench exercising appellate jurisdiction. If there is a conflict of Bench decisions, he should refer the case to a Bench of two Judges who may refer it to a Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws of England, Fourth Edition, the rule of per incuriam is stated as follows : A decision is given per incuriam when the Court has acted in ignorance of a previous decision of its own or of a Court of co-ordinate jurisdiction which covered the case before it, in which case it must be decided which case to follow; or when it has acted in ignorance of a House of Lords decision, in which case it must follow that decision; or when the decision is given in ignorance of the terms of a statute or rule having statutory force. In Punjab Land Development Reclamation Corpn. Ltd. vs. Presiding Officer, Labour Court (1990) 3 SCC 682 : (1990) 77 FJR 17 (SC), the Supreme Court explained the expression per incuriam thus : The Latin expression per incuriam means through inadvertence. A decision can be said generally to be given per incuriam when the Supreme Court has acted in ignorance of a previous decision of its own or when a High Court has acted in ignorance of a decision of the Supreme Court. As has been noticed above, a judgment can be said to be per incuriam if it is rendered in ignorance or forgetfulness of the provisions of a statute or a rule having sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case to a Division Bench or Full Bench, as the case may be, for an authoritative pronouncement on the question involved as indicated above. The abovesaid two questions are answered as indicated above. 9. It is thus beyond dispute that a decision which is per incuriam is not a binding judicial precedent. It is also well-settled that when it is not open to a High Court Bench to differ from the decision of a Bench of equal strength, it cannot also be open to a Bench of this Tribunal to differ from the view taken by a co-ordinate Bench of equal strength. The only option in case one doubts the correctness of such a decision is to refer the matter for constitution of a larger Bench. A decision ignoring this rule of precedent, which is duly approved by the Hon ble Courts from time to time, cannot but be viewed as per incuriam. Therefore, following the Hon ble Andhra Pradesh High Court Full Bench decision in the case of B.R. Constructions (supra), such a decision of the co-ordinate Bench has no precedence value 7. The coordinate bench decision in the case of F C Sondhi Co (supra), for the reasons set out above, does not constitute a binding judicial precedent. That ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable in view of the decision of the Hon ble Jurisdictional High Court in B.N. Exports (supra), wherein, it has been held that if the Keyman Insurance Policy is obtained on a life of a partner, to safeguard the firm against a disruption of business, then the payment for premium on such policy is liable for deduction as business expenditure. Thus, even if a Keyman insurance has been taken in the name of a partner by the partnership firm, then also the deduction has to be allowed on the payment of premium. The other main objections of the learned Commissioner (Appeals) has been that firstly, these are not insurance policy as such but are mainly for capital appreciation under the investment scheme and secondly, the assessee has not received the maturity sum but it has been assigned to the partners, therefore, the assessee cannot be given deduction for any premium paid. Insofar as the first objection of the learned Commissioner (Appeals) is concerned, we declined to agree with this conclusion, because once the assessee has bought a policy under a life insurance scheme, then whether the insurance company is making investment in mutual funds for capital appreciation or under any other in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be gathered from the words used in the statute. It will be well to recall the words of Rowlatt. J. in Cape Brandy Syndicate vs. IRC (1921) 1 KB 64 (KB) at p. 71, that : ........... in a taxing Act one has to look at merely what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. Once it is shown that the case of the assessee comes within the letter of law, he must be taxed, however great the hardship may appear to the judicial mind to be. Even in the case of CIT vs. National Taj Traders (supra), relied upon by the assessee, Their Lordships of Hon ble Supreme Court have referred to, with approval, Maxwell on Interpretation of Statutes observation that A case not provided for in a statute is not to be dealt with merely because there seems no good reason why it should have been omitted, and that the omission appears in consequence to have been unintentional . Their Lordships then observed that In other words, under the first principle, a casus omissus cannot be supplied by the Court except when reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion were not termed as keyman insurance policies but nothing turns on that aspect, even if that be so, either. The keyman insurance policy is a defined concept and as long as it meets the requirements of this definition, the terminology given by the insurers have no relevance for the purposes of the Income Tax Act. All that is necessary is that it should be a life insurance policy, whether pure life insurance policy or not- as such criterion is not set out anywhere in the stature, and it should be taken on the life of a person who is, or has been, an employee of the assessee or any other person who is or was connected in any manner whatsoever with the business of the assessee. These conditions are clearly satisfied on the facts of the case before us. 16. A lot of emphasis has been placed by the authorities below on the circulars issued by the IRDA. It may, therefore, be appropriate to briefly deal with the IRDA and the impact of the circulars issued by the IRDA. IRDA, i.e. Insurance Regulatory and Development Authority, is set up under the Insurance Regulatory and Development Act 1999. Section 14 of the Insurance Regulatory and Development Act, 1999, describes the duties, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f); (p) specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and (q) exercising such other powers as may be prescribed. 17. Clearly, therefore, IRDA is primarily to regulate, promote and ensure orderly growth of the insurance business and re-insurance business . In doing so, as evident from Section 14(2)(a) to (q) above, it regulates the conduct of the service providers in the business of the insurance. It does not, and cannot, regulate the conduct of the policy holders. As in Section 14(2)(b), if at all it has anything to do with the policyholders, it is protection of interest of the policyholders. It is in this background that we have to see the circulars issued by the IRDA. In the circular dated 27th April, 2005, the IRDA states as follows: The Authority is aware that some of the aberrations have taken place in the month of March 2005 in the matter of sale of keyman insurance. We shall conduct a detailed examination of the policies marketed in March 2005 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pediency of taking the keyman insurance policies on the short grounds that (a) the fall in turnover, apparently according to the Assessing Officer, shows that there was no commercial benefit from taking the keyman insurance cover; (b) the insurance policy was taken for the benefit of the partner rather than the firm; and (c) no necessity or expediency of the person being keyman and the policy being taken for the benefit of the firm was established. When benefit of policy was assigned to the insured, the policy cannot be said to be for the benefit of the assessee firm. We see no merits in these objections to the commercial expediency. As for the fall in turnover, the benefit of an expenditure cannot be, by any stretch of logic, relevant to determine its commercial expediency, and, in any case. Such a benefit of hindsight cannot be available at the point of time when business decisions are made; more often than not, these are the tools of post mortem of events, rather than inputs for the decision making. As for the other issues raised by the Assessing Officer as such, we may refer to the following observations made, in this context, by Hon ble Delhi High Court in the case of CIT Vs R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soever with the business of the subscriber are wider than what would be subsumed under a contract of employment. The latter part makes it clear that a Keyman insurance policy for the purposes of Clause (10D) is not confined to a situation where there is a contract of employment. Clause (10D) relates to the treatment for the purpose of taxation of moneys received under an insurance policy. In this appeal, the court has to determine the question of expenditure incurred towards the payment of insurance premium on a Keyman insurance policy. The circular which has been issued by the Central Board of Direct Taxes clarifies the position by stipulating that the premium paid for a Keyman insurance policy is allowable as business expenditure. In the present case, on the question whether the premium which was paid by the firm could have been allowed as business expenditure, there is a finding of fact by the Tribunal that the firm had not taken insurance for the personal benefit of the partner, but for the benefit of the firm, in order to protect itself against the set back that may be caused on account of the death of a partner. The object and purpose of a Keyman insurance policy is to prote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Department itself, there cannot be any question of raising the issue of want of business expediency. The learned counsel for the respondent is right in his submission that the Department could not sit on the armchair of the assessee and decide as to whether it was appropriate on business expediency for the assessee to incur such an expenditure or not. If the transaction is otherwise valid in law and is a part of tax planning, merely because it has resulted in reduction of tax, such expenditure cannot be ignored raising the issue of underlying motive of entering into this type of transaction. Various judgments cited by the learned counsel for the respondents clearly get attracted to this Court. (Emphasis, by underlining, supplied by us) 20. Respectfully following the esteemed views of Hon ble Delhi High Court, we reject the stand of the authorities below on this aspect of the matter as well. As for the statement made by the employees of the insurance companies, nothing turns on these statements. What constitutes a keyman insurance policy under section 10(10D) is not dependent on what is it treated even by the insurer; as long as the assessee is allowed to take lif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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