TMI Blog2015 (3) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2006-07 vide order dated 25.11.2008. 2. The only issue, raised by the assessee per its two grounds, is the maintainability of the disallowance of expenditure incurred and claimed by the assessee as keyman insurance premium, in the facts and circumstances of the case. 3. We shall begin by stating the facts of the case. The assessee is an individual engaged in the business of manufacturing of cloth in his proprietary concern by the name 'Habib Textiles'. His brother, Mujeebur Raheman F. Ansari, likewise, runs his proprietary business in the same trade from the same business premises, i.e., 1130, Lucky Compound, V. P. Naka, Nasik Road, Bhiwandi, Thane. Both the brothers executed a (common) power of attorney in favour of the other on 01.02.2001, mutually authorizing the other to, in his absence, take care of the business activity, including acts incidental thereto (PB pgs.1-4). Keyman Insurance ('KMI' for short) policy stood taken by each on the life of the other, treating him as an invaluable resource (person) for and a 'deemed employee' of his business, cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business or professional organization. There is no rational basis to confine allowability of the expenditure incurred on the premium paid towards such a policy only to a situation where the policy is in respect of the life of the employees. Therefore, the expenditure which is laid out for the payment of premium on such policy is incurred wholly and exclusively for the purpose of business. 4. Though the aforementioned decision of Hon'ble Bombay High Court has been rendered in the case of a partner who was also not considered as an employee by the department but the principle laid down by the Hon'ble Bombay High Court will equally applicable to the present case as according to submissions made by the assessee before AO, the brother of the assessee for whom such premium has been paid was assisting the assessee in the sale, collection production of the factory of the assessee. The assessee has also executed a power of attorney in his favour, wherein it has been specified that the said brother of the assessee will take care of business activities carried on by the assessee. As mentioned earlier, the words found in section 10(10D) i.e. is or was connected in any manner what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the POA holder, the assessee's brother. He would advert to the copies of the various purchase bills and expense vouchers as received, as well as the sales bills issued, by the assessee, which had been 'passed' by the latter, i.e., the power of attorney holder. On being asked of any evidence that the assessee was not available on the relevant dates, as it may well be that the assessee had, likewise, authorized or passed the purchase and sale bills in respect of the business of the assessee's brother, for which he holds a power of attorney, for the same dates, the ld. AR would submit that it may not be the case that the assessee is not available on that date/s, as on account of indisposition or under travel, but was so at the relevant time, i.e., at the time the 'purchase' or 'sale' transaction was made or the expenditure incurred. To a query by the Bench that that would be only acting on behalf of the other - which arrangement is even otherwise mutually beneficial, for the brief period that one is away from his office, i.e., assuming so, and which would though not make the other person a valuable resource, particularly when the arrangement is to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to attend to his business at the relevant times is not at all evidenced. On the contrary, as it appears, the two brothers have regularly, as a matter of routine, passed the vouchers in respect of the transactions of the other's business, creating thus 'documentary' or paper evidence of having taken care of each other's business. The primary condition of 'absence', only whereupon the POA would become operative, is conspicuous by its absence. The arrangement is clearly collusive; the insurance premium paid by one brother on the life of the other being a quid pro quo for the other Genuineness of an expense is a primary condition for its allowance inasmuch as it impugns its very existence as such, i.e., questions it being considered as an expenditure, much less being incurred for the purposes of the business. Case law in the matter is legion, though we may for ready reference advert to the decision by the hon'ble jurisdictional high court in the case of DIT(IT) vs. Oman International Bank SAOG [2009] 313 ITR 128 (Bom), whereat, speaking in the context of a bad debt written off as irrecoverable, it underlined the aspect of genuineness of the write off i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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