Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2010 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (9) TMI 430 - AT - Income TaxInsurance premium paid under "Keyman Insurance Policy - The existence of employer-employee relationship is a sine-qua-non for the deductibility of keyman insurance premia - Expenditure on premia of keyman insurance for a firm on life of partners bestows personal benefits to the partners -The amount on claim or maturity under a keyman insurance policy is not exempt under section 10(10D) of the Income Tax Act when the company pays the premia, because in such situation the benefits received acquire the nature of capital receipts – Gujarat High Court in the case of CIT v. Khodidas Motiram Panchal [1985 -TMI - 26497] has disallowed the claim of the assessee by treating the amount of premium paid in respect of Keyman's Insurance Policy as capital expenditure. However, in view of the subsequent position admitted by the Hon'ble C.B.D.T. which is the highest body for tax administration in the country that Keyman's Insurance premium can be treated as an allowable expenditure the benefit given by the Circular to the assessee cannot be taken away on the basis of earlier legal pronouncement. It is an established position of law that benevolent circular are binding and the department is expected to follow the same in the spirit in which the same is issued by the C.B.D.T. Hon'ble Bombay High Court in the case of B.N. Exports (2010 (3) TMI 186 - BOMBAY HIGH COURT) in similar facts and circumstances of the case held that where Keyman Insurance Policy was taken not 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 the partner, the insurance premium was deductible. - AO directed to reconsider the issue in light of the decision of the Hon'ble Bombay High Court in the case of B.N. Exports (2010 (3) TMI 186 - BOMBAY HIGH COURT) as per law
|