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TMI Blog2009 (10) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer disallowed a sum of Rs. 6,12,55,548 being a premium paid on Keyman Insurance Policies taken in the names of Dr. Naresh Trehan, Chief Cardiac Surgeon, Shri Rajan Nanda, Chairman and Smt. Ritu Nanda, Managing Director of the assessee-company. 3. The assessee is running a hospital particularly for cardiology and cardio vascular diseases. The assessee filed return declaring an income of Rs. 19.94 crore. The Assessing Officer noted the premium paid in respect of above referred 3 persons. The Assessing Officer held that in the preceding year as also in this year new policies were taken in their names. The policies have been assigned in their names at a value much less than the amount paid by the assessee in the very next year of takin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to departure of these persons. The learned CIT(A) held that when the assessee is engaged in providing healthcare services in the field of cardiology, Dr. Trehan can be considered as key person. However, the same cannot be said about Shri Rajan Nanda and Smt. Ritu Nanda. He held that they do not have any expertise in the medical field much less super specialization in heart care. Their departure from company has not affected the professional receipts to any extent. The professional receipts in the current year were Rs. 226.50 crore as against Rs. 188.85 crore in the immediately preceding year. In the subsequent year i.e., in the financial year 2005-06 the receipts are more than Rs. 233.01 crore despite the chairman and managing director l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly allowed the claim of Rs. 2,94,64,284 and disallowed the balance claim of Rs. 3,17,91,264. The assessee as well as revenue are in further appeal before us. 6. The learned counsel for the assessee Shri R.K. Kapoor submitted that a keyman is always a keyman and the Chairman and Managing Director are equally responsible for the functioning of the company. Though the assessee is super specialty hospital, only doctors are not sufficient to run such hospital but it equally requires business acumen and businessman like approach while conducting business. In all the earlier years the claim of the assessee was held allowable whether the policy is in the name of Dr. Trehan or in the case of Shri Rajan Nanda and Smt. Ritu Nanda. No policies are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium paid is allowed as business expenditure. He accordingly pleaded that the claim is entirely allowable. Learned DR relied upon assessment order. 7. We have considered the rival submissions. The Tribunal while upholding the deletion of disallowance for assessment years 2003-04 and 2004-05, held as under:- "3. Brief facts are that the assessee is a reputed heart care institute and consisted on its panel of directors consisted of eminent persons like Mr. Rajan Nanda, Mrs. Ritu Nanda and Dr. Naresh Trehan. In order to cover risk, assessee purchased keyman insurance policies on these persons and paid premiums thereon. The AO made queries in respect of payment of keyman insurance premium, assessee relied on Board's Circular no. 762 dated 18-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Board's circular was applicable and premium constituted business expenditure. Assessee had paid tax on the surrender value of keyman policies as its income when received. CIT(A) allowed the premium paid on these keyman policies as deduction. Aggrieved, the revenue is in appeal. 5. Learned DR relied on the order of AO and justified that the premium paid was to personally benefit the so called keymen (persons) and was not an allowable business expenditure. 6. Ld. counsel for the assessee on the other hand relied on successive orders of ITAT in assessee's own case for A.Ys. 1991-92, 1992-93, 1993-94 and 1997-98 where keyman insurance premium on the policies of such persons were held as allowable. The quotation from Tribunal's order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld." 7.1 From the above, it is clear that all along the premium paid of keyman insurance policy taken on the lives of Dr. Naresh Trehan, Shri Rajan Nanda and Smt. Ritu Nanda is always held to be allowable. As rightly contended by the learned AR, while judging the health of any company, it is not only the turnover that is relevant but also its profitability. Merely by achieving higher turnover, one does not gain anything unless the same is to result in profits. A surgeon is good at conducting operation or surgery but may not be competent to run the hospital as a businessman approach will always be lacking in a professional. In such a situation, only a sound businessman can make the organization profitable. Therefore, it is incorrect on p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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