9911796707
TMI Blog2021 (4) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... their claim under Section 37(1) . On a reading of the orders passed by the Commissioner of Income Tax (Appeals) as well as the Income Tax Appellate Tribunal, we are convinced that the Commissioner of Income Tax (Appeals) and the Tribunal have not considered the case of the revenue in a proper manner. Therefore, agreeing with the submissions made by the learned Senior Standing Counsel for the appellant, in the interest of justice, we are of the considered view that the orders passed by the Commissioner of Income Tax (Appeals) and that of the Income Tax Appellate Tribunal are liable to be set aside and the matter should be remitted back to the Commissioner of Income Tax (Appeals) for fresh consideration. - Tax Case (Appeal) No.843 of 2013 - - - Dated:- 17-4-2021 - Hon'ble Mr.Justice M.Duraiswamy And Hon'ble Mrs.Justice T.V.Thamilselvi For the Appellant : Mr.J.Narayanaswamy Senior Standing counsel For the Respondent : Mr.V.S.JayaKumar JUDGMENT T.V.THAMILSELVI, J. This appeal has been filed by the Revenue under Section 260A of the Income Tax Act, 1961, against the order of the Income-Tax Appellate Tribunal, Chennai Bench C , dated 07.02.2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure is wholly and exclusively for the purpose of business. In order to claim deduction under Section 37(1) of the I.T.Act, 1961, the nexus between the business and the expense has to be proved. In the absence of any explanation, the Assessing Officer did not accept the contention of the assessee. In these circumstances, the Assessing Officer disallowed the expenditure and added the said amount to the total income of the assessee company. Aggrieved by the said order, the assessee has preferred an appeal in ITA No.525/09-10 before the Commissioner of Income Tax (Appeals) and the Commissioner of Income Tax, while disposing of the said appeal, relied upon the CBDT circular No.762, dated 18.02.1998 and also the provisions of Section 10(10D) of the Act to conclude that there is no stipulation as to the restriction of the premium paid and treated the premium paid for Keyman Insurance Company as business expenditure. 6. Accordingly the Commissioner for Income Tax, directed the Assessing officer to allow a sum of ₹ 1,89,08,394/- by treating the entire premium paid as business expenditure. Aggrieved over the order of the CIT (Appeals), the Revenue preferred an appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. It is relevant to refer at this stage to the legislative history of s.37 of the IT Act, 1961, which corresponds to s.10(2)(XV) of the Act. An attempt was made in the IT Bill of 1961 to lay down the necessity of the expenditure as a condition for claiming deduction under s.37. Sec.37(1) in the Bill read any expenditure.... laid out or expended wholly necessarily and exclusively for the purposes of the business or profession shall be allowed... The introduction of the word necessarily in the above section resulted in public protest. Consequently, when s.37 was finally enacted into law, the word necessarily came to be dropped. The fact that somebody other than the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under s.10(2) (XV) of the Act if it satisfies otherwise the tests laid down by law. This view is in accord with the following observations made by this Court in CIT vs. Chandulal Keshavlal Co: (1960) 38 ITR 601 (SC): TC16R.507: (ii) The Hon'ble Division Bench of the High Court of Punjab and Haryana in the case of Principal Commissioner of Income Tax Vs Ramesh Steels, report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy 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 of another person who is or was the employee of the person who subscribes to the policy of the insurance or is or was connected in any manner whatsoever with the business of the subscriber to the policy. In other words, a Keyman Insurance Policy for Clause (10D) is not confined to a policy taken by a person on the life of an employee, but also extends to an insurance policy taken with respect to the life of another who is connected in any manner whatsoever with the business of the subscriber. 6. The Central Board of Direct Taxes has issued a circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gorically stipulates that premium on keyman policy should be allowed as business expenses. The assessee would, naturally, take in to consideration such clarifications issued by the CBDT and would act on the basis thereof. When the assessee was given the impression, by means of the aforesaid Circular, that if expenditure is incurred on the keyman policy, it would be treated as business expenditure. There is no reason for the Department to deviate therefrom when it comes to the assessment. ......... (iv) The argument of Mr.N.P.Sahni, learned counsel for the Revenue that taking such keyman insurance policy every year and thereafter assigning the same to the beneficiaries may be treated as colourable device, may not be correct. Though this argument appears to be attractive when we look into the fact that the assessee had been taking the policies and thereafter assigning the same year after year in favour of the beneficiaries, what cannot be ignored that this course of action is permitted by the Department itself as stated in CBDT's Circular dated 18.02.1998. 9. Section 10(10D) of the Act deals with taxation of money received under the insurance policy. The issue that ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
