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2014 (2) TMI 835 - AT - Income TaxDisallowance of payment of premium under "Keyman Insurance Policy – The decision in ITO Versus Ashoka Dyeing & Printing Mills [2010 (9) TMI 430 - ITAT, AHMEDABAD ] followed - Held that:- The existence of employer-employee relationship is a sine-qua-non for the deductibility of keyman insurance premia - CIT(A) held that maturity or surrender amount under the Keyman Insurance Policy was not exempted but taxable as "Salaries" u/s.17(3)(ii) of the Act or as "Profits and Gains of Business" u/s.28(vi) or as income from Other Sources" u/s.56(2)(iv) of the Act in the hands of the recipient - the legislature did not intend that such premium be allowed only where "employer employee relationship existed" - the disallowance made on account of premium paid towards Keyman Insurance Policy in respect of partner of the appellant firm is set aside. 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 – decided against Revenue.
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