TMI Blog2014 (6) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be remitted back to the CIT(A) for examination – Decided in favour of Assessee. Disallowance of transport charges – Relevant details not properly appreciated – Held that:- The AO has disallowed 20% of the expenses made in cash to one party namely M/s Anil Bulk Mover India Pvt. Ltd. - the assessee has placed the details of transport expenses paid to M/s M/s Anil Bulk Mover India Pvt. Ltd and no such cash payment was made to this party - All the payments were made to the party after deduction of TDS - the AO has disallowed 20% of the expenses under wrong assumption of facts, whereas these expenses pertains to the payment made to various parties in small amounts ranging from few hundreds to thousands – thus, the addition of transport charges is to be set aside – Decided in favour of Assessee. Disallowance made u/s 36(1)(iii) of the Act - Interest on vehicle loan – Held that:- Interest expenditure on loan for purchase of car is an allowable business expenses - The interest expenses on loan is relating to the purchase of car and not actual use of car - The expenses which are for the purpose of acquiring a business asset and not incurred for actual use of the asset as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 36 (1) (iii), and was not hit by the rigor or provisions of section 38 (2) of the Income-tax Act 1961. 2. Ground no. 1 is regarding disallowance of premium paid on keymen insurance policy. The AO noted that the assessee has debited an amount of Rs. 23,00,000/- towards insurance premium paid under Keymen Insurance premium. The AO found that assessee has paid premium to the various insurance companies under Keymen insurance policy taken in the name of two major partners of the firm. The AO was of the view that the policy in question are Unit Linked Insurance plans and not Term plan, therefore, these are not life insurance policy on the life of Keymen. The AO was of the opinion that the premium was payable on the Keymen policy out of the profit of the firms only, whereas in the case of the assesse the firm is in loss even after reducing the premium of Keymen insurance. Accordingly the AO disallowed the claim of Rs. 23,00,000/- towards premium of Keymen Insurance policy. 3. On appeal, CIT(A) has confirmed the disallowance made by AO on similar reasoning. 4. Before us, the Ld. AR of the assessee has submitted that the insurance has been taken only in respect of two partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 3,00,000 6. LIC Jeevan Plus Rs. 2,00,000 Total Rs. 23,00,000/- 7. The AO has doubted the very nature of the policy taken by the assessee and denied the claim on the ground that these are unit linked policy and not term policy on the life of Keymen. Similar view was taken by the CIT(A) while confirming the disallowance made by the AO. Before us, the Ld. AR of the assessee vehemently contended that these are the Keymen policy and the premium paid towards the policy is an allowable clima u/s 37(1). There is no quarrel on this issue that the premium paid by a partnership firm on account of Keymen policy taken on the partners who are inevitable to the business of the assessee s firm. Thus the object and purpose of the Keymen insurance policy is to protect the business of the assessee against the financial set back due to premature death of the Keymen/partners of the assessee s firm. This issue has been considered and decided by the Hon ble Jurisdictional High Court in the case of CIT Vs. B.N. Exports (Supra) and held in para 9 as under:- 9. The effect of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s incurred wholly and exclusively for the purposes of business. 8. Thus there is no ambiguity on the issue of allowability of the claim, so far as the premium paid towards the Keymen insurance policy by firm on the life of the partners. The disallowance made in the case in hand by the authorities below on the ground that the policies in question are not Keymen policies but these are unit linked policies taken by the firm in the name of the partners and the benefit of the policy will go to the partners and not to the firm. It is pertinent to note that neither the AO nor the CIT(A) has duly examined the terms and conditions of the policy in question and particularly the benefit clause under which the benefit of the policy is available whether to the assessee firm or to the partners. Before us, the assessee has filed only the receipt of premium paid towards these policies and in the absence of policy documents it is not possible to give a conclusive finding whether the policies in question are truly Keymen policies or not. It makes no difference if the policies are Keymen policy at the time when it was taken and subsequently if the policies are assigned in the name of Keymen/partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pvt. Ltd. On careful examination of records, we find that the assessee has placed the details of transport expenses paid to M/s M/s Anil Bulk Mover India Pvt. Ltd and no such cash payment was made to this party. All the payments were made to this party after deduction of TDS. Therefore, the AO has disallowed 20% of these expenses under wrong assumption of facts, whereas these expenses pertains to the payment made to various parties in small amounts ranging from few hundreds to thousand. In view of the fact and circumstances as discussed above, we delete the addition of Rs. 38,078/- on account of transport expenses. 14. Ground no. 3 is regarding disallowance of interest on vehicle loan of Rs. 15,040/-. The AO noted that the assessee has paid interest of Rs. 75,206/- on the loan taken for car. The assessee itself has disallowed 20% of the running expenses of the car on account of personal use. The AO has accordingly disallowed 20% of the interest expenses on account of personal use amounting to Rs. 7,282/-. 15. On appeal, the CIT(A) noted that the disallowance made by the AO is incorrect as the correct amount of loan was not taken into consideration and accordingly the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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