9911796707
TMI Blog2016 (5) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2008-09, claiming the following substantial question of law:- Whether upon facts and circumstances of the case, the Hon'ble ITAT was right in law, in upholding the decision of the Ld. CIT(A) in deleting the addition of Rs. 1,27,49,983/- made by the Assessing Officer on account of premium paid on the life of partners and debited to the profit and loss account as Keyman Insurance Premium of the assessee firm? 2. Put shortly, the facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee filed its return of income on 21.10.2008 for the assessment year 2008-09 at nil income. The said return was processed under Section 143(1) of the Act on 13.3.2010. Subsequently, the case was selected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure under Section 37 of the Act. 5. The issue is no longer res integra. The Bombay High Court delving into identical issue in Commissioner of Income Tax v. B.N. Exports (2010) 323 ITR 178 after noticing the relevant statutory provisions and the Board Circular No. 762 dated 18th February, 1998 issued by the Central Board of Direct Taxes on the issue had held that the premium paid for a 'Keyman Insurance Policy' is allowable as business expenditure under Section 37(1) of the Act. It was further noted that the object and purpose of the said policy is to protect the business against a financial set back which may occur as a result of a premature death, to the business or professional organization. There is no rational basis to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy". The Explanation to Clause (10D) defines what is meant by a Keyman Insurance Policy thus : "Keyman Insurance Policy" means a life insurance policy taken by a person on the life of another person who is or was the employee of the first-mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person." 5. The effect of Clause (10D) is that a sum received under a life insurance policy is not to be included in computing the total income of any person. However, a sum received under a Keyman Insurance Policy forms a part of the total income and is liable to be offered to tax. For the purposes of Clause (10D), a Keyman Insurance Policy is a life insurance policy taken by a person on the life ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax treatment for a Keyman Insurance Policy. The circular clarifies that the premium paid on a Keyman Insurance Policy is allowable as business expenditure." 6. The conclusion recorded in para 9 is quoted as under:- 9. The effect of Section 10(10D) is that monies which are received under a life insurance policy are not included in the computation of the total income of a person for a previous year. However, any sum received under a Keyman Insurance Policy is to be reckoned while computing total income. For that purpose, a Keyman Insurance Policy means a life insurance policy taken by a person on the life of another person who is or was in employment as well as on a person on who is or was connected in any manner whatsoever with the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the premium paid towards such a policy only to a situation where the policy is in respect of the life of an 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." 7. Further, the Gujarat High Court has expressed the similar view in Commissioner of Income Tax v. Gem Art (2012) 252 CTR 451 and also this Court in Commissioner of Income Tax-I, Ludhiana v. M/s Laj Exports, Ludhiana, ITA No. 251 of 2012 decided on 8.11.2013. 8. In view of the above, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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