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TMI Blog2013 (12) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... d provision for PACS Manager salary fund and the assessee submitted that this provision was made as per direction of the Registrar Cooperative Societies and the provision is made for business purpose. The Assessing Officer did not find merit in the above submissions of the assessee. He made the disallowance of Rs. 1.47 lacs being the provision for PAC Manager Fund. 2.3 The assessee carried the matter to the ld. CIT(A) who confirmed the addition made by the AO for the reasons stated in para 4.3 of the impugned order. 2.4 Being aggrieved the assessee is in appeal. 2.5 During the course of hearing, the ld. counsel for the assessee at the very outset stated that this issue is squarely covered in favour of the assessee vide order dated 22-07- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 ITR 101 has stated that it is to be seen as to whether the payment is compulsory for the assessee to make or not but whether it was expended out of consideration of commercial expediency. Any contribution made by the assessee to a fund which directly connected or related to carrying on assesee's business or which results in benefit to the assesee's business has to be regarded as deduction allowable u/s 37 of the Act. The decision of Hon'ble Apex Court in the case of Associated Power Co. Ltd. vs CIT (supra) is not applicable. The Hon'ble Apex Court held that application of the doctrine of diversion of income by reason of overriding title is not applicable in that case as the reserve is out of the revenues of the undertaking and reach the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the amount was paid to create a fund for the benefit of employees. The Assessing Officer, however, observed that the assessee could not prove the purpose of this expenditure with relation to the business and that any expenditure was allowable only when incurred for business purposes, otherwise also, expenditure in relation to the contribution towards such funds was not allowable. The Assessing Officer was of the view that the assessee has diverted the funds of business wrongly which otherwise could have been utilised for growth of business. Accordingly, the amount of Rs. 26,52,873/- paid for Leave Encashment Policy Premium was disallowed and added to the income of the assessee. 3.3 The assessee carried the matter to the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of premium paid towards the valid insurance policy, ensuring the satisfaction of liability for leave encashment by the insurer cannot be held to be erroneous and was not liable to be revised u/s 263 for the reason of being prejudicial to the revenue.'' 3.8 From the ratio laid down by the Hon'ble Kerala High Court in the aforesaid referred to case, it is clear that actual liability towards premium paid on insurance policy is an allowable deduction u/s 37 of the Act being the expenditure incurred for the purpose of business. In view of that, we set aside the impugned order of the ld. CIT(A) on this issue and direct the AO to allow the claim of the assessee. 4.0 In the result, the appeal filed by the assessee is allowed. (Order Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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