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TMI Blog2015 (8) TMI 1464X X X X Extracts X X X X X X X X Extracts X X X X ..... owance u/s 14A read with Rule-8D of the Rules, the Assessing Officer considered the payments to partners. The term ‘interest’ has been defined u/s 2(28A) which means, interest payable in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. The capital contributed by the partner is neither money borrowed nor debt incurred by the assessee, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals), resultantly. - Decided against revenue - ITA NO.5762/Mum/2013, ITA NO.6392/Mum/2013 - - - Dated:- 28-8-2015 - Shri Joginder Singh, Judicial Member And Shri Ashwani Taneja, Accountant Member For the Appellant : Shri Vijay Kothari For the Respondent : Shri Vijay Kumar Soni-DR ORDER Per Joginder Singh (Judicial Member) The assessee as well as Revenue are in cross appeal against the impugned order dated 12/08/2013 of the ld. First Appellate Authority, Mumbai, for Assessment Year 2010-11. 2. First, we shall t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of decisions for the allowance of the deduction on account of payment of Keyman Insurance Policies on the life of the partners. The list of decision relied upon by the assessee are as under: a) P. G. Electronics Vs. ITO [2005} 98 TTJ (Del) 896 b) ACIT Vs. Art Glass Industries (ITA No.4863/Mum/2006 2495/Mum/2007) C) Chemical Corporation Vs. DCIT (ITA. No.2224/Mum/2003) d) A. Rajabali Vs. Addl CIT (ITA No.6031/Mum/2006) e) ACIT Vs. Mrs. Jasmine Industrial Corp. (ITA .Vo.3611/Mum/2006) The learned OR placed reliance on the order of Assessing Officer. 6. We have heard the rival submissions and perused the records. The only issue arising in the present appeal is in respect of Insurance Premia paid under Keyman Insurance Policies on the life of Partners. The assessee had taken insurance policies on the life of two partners as detailed in para 2 of the order of the CIT (A). The said amount was claimed as an allowable deduction from the profits of the business on the basis that the firm was a separate assessable entity and the premia paid could not be treated as a personal expenditure of partners as on the maturity of the policy the total sum was goes to the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided that if the sum received under the Keyman policy is not taxed under the head salaries or profits and gains of business or profession , then it will be taxed under the head income from other sources 5. The above amendments, all w.e.f. 1ST Oct, 1996, were explained by Circular No. 762, dt 18th Feb., 1998, issued by the CBDT as follows: 'Taxation of a sum received under the Keyman Insurance Policy 14.1 A Keyman Insurance Policy of the Life Insurance Corporation of India, etc., provides for an insurance policy taken by a business organization or a professional organization on the life of an employee, in order to protect the business against the financial loss, which may occur from the employee's premature death. The Keyman is an employee or a director, whose services are perceived to have a significant effect on the profitability of the business The premium is paid by the employer. 14.2 There were some doubts on the taxability of the income including bonus, etc., from such policy and also regarding the treatment of the premium paid -Whether itshould be allowed as a capital expenditure or as a revenue expenditure. The finance (No.2) Act, 1996, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued by the Board. He could not have considered the assessment erroneous since the allowance of the premium as a deduction as business expenditure was in conformity which the circular of the Board which was binding on the AO. Even on merits, his view that the premium paid on Keyman Insurance Policy should be disallowed is not tenable, also because of the circular cited above. 5. In view of the above decision of the Delhi Bench of the Tribunal we hold that the premium paid on the Keyman Insurance Policy on the life of the senior partner is a business expenditure. We uphold the order of the CIT(A) on this issue This ground of the Revenue fails 7. In view of the decision of the co-ordinate Benches of the Tribunal on the issue, we find no infirmity in the order of CIT CA) and we confirm the order of CIT (A) in holding that the assessee is entitled to the deduction in the hands of the assessee's partnership firm on account of Insurance Premia paid on account of Keyman Insurance Policy taken on the life of two partners. Thus, the grounds of appeal raised by the Revenue are rejected. 8. In the result, the appeal filed by the Revenue is dismissed. 2.2. If the observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 292 (SC) (Para-9). Thus, respectfully following the decisions from Hon ble jurisdictional High Court, we affirm the stand of the ld. Commissioner of Income Tax (Appeals), on the issue in hand. 3. The next ground raised by the Revenue pertains to holding that disallowance of interest should be made u/s 14A with reference to net interest only. The arguments on behalf of the assessee is that, while making the disallowance, the ld. Assessing Officer neither discussed the facts nor recorded any satisfaction with respect to correctness of claim of expenses made by the assessee and further, the assumption of jurisdiction by the Assessing Officer to re-determine the disallowance, as per the provisions of Rule-8D(2) of the Rules, is wrong, by contending that the Assessing Officer nowhere doubted the correctness of claim of the assessee having regard to the accounts so maintained. It was pleaded that dividend income was earned only on shares securities, which were held as stock in trade, thus, section 14A of the Act is not attracted. The ld. counsel place reliance on following judicial pronouncements:- a) CCI Ltd v JCIT (250 CTR 291(Kar), b) Ganjam Trading Company Pvt. Ltd. v D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted fact that the assessee earned dividend income on shares and securities, which were held as stock in trade. During hearing of this appeal, on the impugned issue, the Bench directed the ld. counsel for the assessee, to establish whether the shares and stocks were held as stock-in-trade, the assessee produced the documents/paper-book, (running into 19 pages) such as computation of income and annual income for the year ending 31st March, 2010, (Pages 1 to 11) and ending 31st March, 2009 (Pages 12 to 19). More specifically, page-3 containing balance sheet as on 31/03/2010 and schedule F (Page-8) containing current assets. Meaning thereby, the assessee duly explained its version with the help of the documentary evidence. It is noted that while computing the disallowance u/s 14A read with Rule-8D of the Rules, the Assessing Officer considered the payments to partners. The term interest has been defined u/s 2(28A) of the Act, which means, interest payable in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of moneys borrowed or debt incurred or in respect of any cr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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