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2016 (4) TMI 1196 - AT - Income TaxPremium paid towards keyman insurance policy - whether Keyman falls within the definition laid down in the Explanation below section 10(10D) - Held that:- The premium paid on the keyman insurance policy is to be allowed as business expenditure. The only thing to be seen is whether the Keyman falls within the definition laid down in the Explanation below section 10(10D). The Explanation states that "Explanation: For the purposes of this clause, "Keyman insurance policy" means a life insurance policy taken by a person on the life of another person 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. As per the Explanation, the only requirement is that "Keyman" should be an employee or a director and/or should be connected in some manner with the business of the firm. The premium under such policy has been categorically declared by the Board to be allowable as deduction, specifically in view of the fact that the maturity amount receivable under the policy is no longer exempt from tax. It is a cardinal principle that where any income is subject to tax, the expenditure incurred on earning of such income would be allowable. The Board has merely reiterated this principle. We uphold the action of the ld. CIT(A) in holding that on redemption/withdrawal of the amount under the above policy will have to be taken as income in the hands of the company as business income u/s 28(vi) in the relevant year and as such there will be double taxation if the said amount is disallowed ACIT,2(1), Ujjain vs. M/s. Shriji Polymers Private Limited, Ujjain [2017 (2) TMI 1106 - MADHYA PRADESH HIGH COURT] and added to the income under present assessment year. Our interference is not required. Disallowance of commission u/s 40A(2)(a) and 40A(2)(b) - Held that:- AO has not given emphasis on the nature and scope of the work and the services rendered. Section 40A(2) itself makes it apparent that regard must be had to the 'fair market value' of the services, as well as to the 'legitimate needs of the business'. These two criteria are satisfied and hence no disallowance is warranted. Tribunal was not correct in law in upholding the disallowance out of the remuneration paid by the assessee to ACIT,2(1), Ujjain vs. M/s. Shriji Polymers Private Limited, Ujjain 'SP' by invoking the provisions of section 40A(2) of the Act. Accordingly, the High Court deleted the addition made, and allowed the appeal. We, therefore, uphold the action of the ld. CIT(A) in deleting the addition.
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