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Business Expenditure- The Income-tax Appellate Tribunal confirmed the findings of the Commissioner of Income-tax (Appeals). The Tribunal held that the expenditure incurred by the assessee, which is a partnership firm, in paying the premium for a Keyman insurance policy obtained by the firm on the life of its partner must be regarded as expenditure incurred wholly and exclusively for the business of the firm. In holding thus, the Tribunal relied upon a circular issued by the Central Board of Direct Taxes on February 18, 1998 (Circular 762 [1998] 230 ITR (St.) 12) and on its decision in the case of ITO v. Thakur Vaidyanath Aiyer and Co. [1984] 7 ITD 9 (Mum). Accordingly, the Tribunal deleted an addition of ₹ 31,68,775 towards the insurance premium paid by the firm on a Key- man insurance policy. The contention of the Revenue before the court is that in law a partnership firm has no separate existence from its partners since a partnership firm is not a juristic entity. Moreover, it has been urged before the court that there is nor relationship of employer and employee between a firm and its partners, there being no contract of service. Held that-dismissing the appeal, that there was a finding of fact by the Tribunal that the firm had not taken insurance for the personal benefit of the partner, but for the benefit of the firm, in order to protect itself against the setback that may be caused on account of the death of the partner. The insurance premium was deductable.


 

 

 

 

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