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2016 (5) TMI 1155 - HC - Income TaxPremium paid for securing “Keyman Insurance Policy” - Addition of premium paid on the life of partners and debited to the profit and loss account as Keyman Insurance Premium of the assessee firm - Held that:- The Bombay High Court delving into identical issue in Commissioner of Income Tax v. B.N. Exports [2010 (3) TMI 186 - BOMBAY HIGH COURT ] 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 confine the allowability of the expenditure incurred on the premium paid towards such a policy only to a situation where the policy is in respect of the life of an employee. The said policy when obtained to secure the life of a partner against a disruption of the business is equally for the benefit of the partnership business which may be affected as a result of premature death of a partner. Thus, the premium on the 'Keyman Insurance Policy' of partner of the firm is wholly and exclusively for the purposes of business and is allowable as business expenditure - Decided in favour of assessee
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