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The Principal Commissioner of Income-Tax-9 Versus Zircon Traders Ltd.

2015 (8) TMI 372 - DELHI HIGH COURT

Disallowance of business expenditure claimed in respect of 'keyman insurance policy' - ITAT deleted the addition - AO by the order treated the entire sum of ₹ 2.10 crores as business income in the hands of the Assessee. He also treated the sum of ₹ 50 lakhs as capital gains - Held that:- The AO by the order dated 24th December 2009 treated the entire sum of ₹ 2.10 crores as business income in the hands of the Assessee. He also treated the sum of ₹ 50 lakhs as capital gain .....

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2014, the Income Tax Appellate Tribunal ('ITAT') has erred in deleting the additions made by the Assessing Officer ('AO') by disallowing the business expenditure claimed in respect of 'keyman insurance policy'. 2. The plea sought to be advanced is that the policy taken by the Assessee in the name of Mr. Deepak Kothari who was the Director and major shareholder of the Assessee company did not qualify as a Keyman insurance policy holder in terms of the circular of the Insur .....

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surance policy is that "The key person should not be the sole proprietor of the company or should not own major of capital (sic)". The case of the Revenue is that since Mr. Deepak Kothari holds 44.90% of the shares of the Assessee and another 39.92% shares is also admittedly held by a close relative, the 'endowment policy' issued by Kotak Mahindra Life Insurance does not qualify as a keyman insurance and the premium paid in respect thereof ought not to be allowed to be deducted .....

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oned CBDT circulars did not restrict the deduction only in the case of the policies that satisfy the requirements of IRDA. 5. If the intention was to place any such restriction then there should be an appropriate amendment to the law. That would make the Assessee aware of the legal requirements that have to be satisfied before the deduction can be claimed. Having allowed a similar deduction in the previous years the Revenue cannot spring a surprise on the Assessee by seeking to rely on the IRDA .....

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