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TMI Blog2024 (5) TMI 1257X X X X Extracts X X X X X X X X Extracts X X X X ..... on cannot be allowed on the payment of premium. It is also not in dispute that later on this policy was assigned to the firm and there is a due acknowledgement of endorsement on the policy document wherein the policy has been assigned to the firm and such endorsement has also been accepted by the insurance company and firm s name on the same policy has been assigned. There is another letter written to the insurance company by wife who has given an undertaking and a letter to the insurance company that any amount to be paid by the insurance company on account of unfortunate death of Shri Chetan K Desai, the same shall be paid to M/s Creation By Shanagar, i.e., the partnership firm. All these letters were filed before the ld. AO during the course of assessment proceedings in response to the notice issued by him. Ergo, Keyman Insurance policy is a life insurance policy taken by a person on the life of a person who was an employee and also imputed such policy which has been assigned to a person at any time during the term of policy with or without any consideration. Thus, even if the policy was taken in the name of key person and has been assigned to the firm, then also same falls in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) TMI 1384 - ITAT MUMBAI] A.Y. 2016-17 wherein as held there is no dispute that the assessee appointed commission agent outside India. The Assessing Officer failed to bring any material on record to show that the services provider has any business place in India or the services were not rendered outside India by those commission agents. As decided in Gujarat Reclaim and Rubber Products Ltd. [ 2015 (12) TMI 1078 - BOMBAY HIGH COURT] held that commission earned by non-resident agent who carried on the business of selling Indian goods outside India cannot be said to have deemed to be income which has accrued or arise in India. The Hon ble jurisdictional High Court followed the decision of Hon ble Supreme Court in CIT vs. Toshoku Ltd. ( 1980 (8) TMI 2 - SUPREME COURT] on identical facts held that commission earned by non-resident who carried business of selling Indian goods outside India cannot be said to have deemed income which has accrued or arising in India Thus, in view of the earlier precedents, in the case of the assessee by the Tribunal wherein the Tribunal has relied upon the decision in the case of Gujarat Reclaim and Rubber Products Ltd [ 2015 (12) TMI 1078 - BOMBAY HIGH CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow-cause notice assessee submitted that policy commencement date is 31/03/2017 and there are two policies of annual premium of Rs. 50,00,000/- each with similar terms and conditions taken with Edelweiss Tokio Life Insurance Co. Ltd. It was submitted that Shri Chetan K Desai in whose name Keyman Insurance policy has been issued is a working partner and he looks after day to day activities of the firm and plays a key role in the client relationships and functioning of the business. In order to protect the firm s business from untimely death of Shri Chetan Desai, the firm has taken two insurance policies with cover of Rs. 5,00,00,000/-. However, the ld. AO rejected the assessee s submissions after making following observations:- After considering assessee's submission, the policies are not found to be Keyman Insurance Policy as claimed by the assessee for the following reasons: 1 The two policies in the instant case nowhere mention that these are Keyman Insurance Policies. 2. The first and foremost condition to be fulfilled for Kayman insurance that in the insurance policy the proposer as well as the premium payer is the employer. However, in the Instant case the proposer is not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has submitted to the Insurance Company and hence its acknowledgement seal is there. The assessee has not provided any document from the side of Insurance Company in which the company has accepted the endorsement. Further, the receipt of premium paid is also addressed in the name of Chetan Desai by the Insurance Company Indicating that they have not accepted such endorsement. Without prejudice to this, such an acceptance would not have changed the allowability of expense for income tax purpose. 3. Further as per clause 'e' of the endorsement document-'any claim arising and paid during the minimum lock in period, my legal heir/ nominee will be entitled to receive the benefit of the policy. Clause 'e'- This long term reward program will be governed by the insurance policy provision at all times. 4. The terms stated above clearly indicate that the ultimate rights of the policy are with the partner or partner's nominee only. Here the nominee is Mrs. Sonal Desai. 5. The assessee has submitted a plain paper declaration of Sonal Desai which says that she is giving her rights as nominee to the assessee (the firm), This letter cannot be considered as documentary e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee (firm) through endorsement letter Hence, the assessee's contention of assigning the policy by Mr. Chetan K Desai to the assessee firm does not fit in the requisite conditions for keyman insurance policy The assessee's contention did not pass the conditions required for keyman insurance policy The insurance policy taken by the partner is taken for the benefit of the partners rather than the assessee (the Firm). This is just an investment plan whose ultimate beneficiary is the partner Mr. Chetan Desai or his nominee. This policy is no where wholly and exclusively for the business of the assessee Hence, in view of the above, it is being held that the said policy is not a keyman policy and the expenditure claimed is not allowable. As the expenditure is of personal nature, not incurred wholly and exclusively for the business of assessee, is not allowed. Accordingly, the expenses on keyman's insurance of Rs. 1,00,00,000/- is disallowed u/s. 37(1) and added to the total income. Disallowance u/s 37 Rs. 1,00,00,000/- 6. We have heard both the parties at length, perused the relevant finding given in the impugned orders as well as material referred to before us. Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no violation of Section 10(10d). Now it is a well settled law for Keyman Insurance policy obtained on the life of person who subscribed the term against a financial setback which may occur as a result of a premature death of a partner, the expenditure which is laid out for the payment of premium on such a policy is incurred wholly and exclusively for the purpose of business. This has been held so by the Hon ble Bombay High Court in the case of B.N. Exports in Income Tax Appeal No. 2714 of 2009 judgment and order dated 31/03/2010. 8. Further, ld. Counsel also drew our attention that after the endorsement and assignment of the policy in the name of the firm of the policy owner is a partnership firm, i.e., Creation By Shanagar which is evident from premium received, copy of which is placed at page 264 of the paper book. Thus, no disallowance could have been made. 9. On the other hand, ld. DR referred to various observations made by the ld. AO as incorporated above and strongly relied by the order of the ld. AO and ld. CIT (A). 10. First of all, there is no dispute that Shri Chetan K Desai was working partner of the firm and the insurance policy was taken in the name of Shri Chetan K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the policy documents it is clearly evident that was a life insurance policy and once the assessee has brought the policy under the life insurance scheme, then whether the insurance company is making investment in mutual funds for capital appreciation or under any other investment scheme will not make any difference. In so far as assessee is concerned, it has brought the life insurance policy under Keyman insurance policy on which premium has been paid. Further, even as per the Explanation 1 to Section 10(10d), there are only two conditions which has been mentioned to get deduction, firstly, it should be a life insurance policy; and secondly it should be taken by the assessee on the life of another person who is or was an employee of the assessee. Here in this case, both these conditions are fulfilled. Now, whether IRDA has issued any guidelines as to what should be termed as insurance policy is not relevant as long as policy which has been issued by the insurance company is a life insurance policy and whether the insurance company has invested that insurance money to any wealth plan does not change the colour of the policy. 13. In so far as other allegation made by the ld. AO that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomer relationship services. The assessee filed its reply and stated that none of the parties/agents to whom the assessee has remitted commission payment/paid commission payment had any Permanent Establishment [PE] in India and therefore, it pleaded that they were not liable to tax in India and so deduction of Tax at source was not necessary. The explanation furnished by assessee was not accepted by AO, who held that as per Explanation to section 9(2) of Finance Act, 2007, the income of non-resident shall be deemed to accrue in India and shall be included in total income whether or not the non-resident has a resident or place of business connection in India or non-resident has rendered services in India. The AO by referring to Circular No. 7 of 2009 dated 20.10.2009 disallowed the commission payment paid to non-resident, since no tax was deducted on it. 6. On appeal, the Ld. CIT(A) deleted the addition by relying on the decision of this Tribunal in assessee s own case for earlier years (supra). We note that there is no dispute that the services for which commission has given by assessee were rendered by non-resident agents outside India [i.e. for procuring export orders from cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia cannot be said to have deemed income which has accrued or arising in India. Considering the fact and the legal position as discussed above, we affirm the order of ld. CIT(A). Non contrary facts or law is brought to our notice to take other view. 9. In the result, appeal of Revenue for Assessment Year 2010-11 is dismissed. 7. Since the Ld. DR could not point out any change in facts or law, we relying on the decision of the Hon ble Bombay High Court in the case of Gujarat Reclaim and Rubber Products Ltd (ITA. No. 2116 of 2013 169 of 2014 dated 08.12.2015) and the Hon ble Supreme Court decision in the case of CIT Vs. Toshoku Ltd (158 ITR 525) uphold the impugned action of the Ld. CIT(A). It was also brought to our notice that the AO for AY. 2020-21 taking note of the fact that since department has not filed any appeal before the Hon ble High Court u/s 260A of the Act against the order of this Tribunal in assessee s own case for earlier years (supra) has allowed the commission payment made to foreign agents without deducting TDS by assessment order dated 19.09.2022 passed u/s 143(3) r.w. section 144B of the Act. Therefore, the revenue appeal stands dismissed. 15. We find that even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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