TMI Blog2011 (6) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy the assessee is not entitled to make such huge premium payment. Therefore, he allowed only ₹ 34,80,000/- against the claim of the assessee of ₹ 4,50,00,000/- and accordingly disallowed ₹ 4,15,20,000/-. It was noted that the assessee has taken policy during the previous assessment year for a sum assured of ₹ 22,50,00,000/- in the name of the directors Shri Abhay P. Shah for a sum assured of ₹ 11,25,00,000/- and the Managing Director Shri Pankaj P. Shah for a sum assured of ₹ 11,25,00,000/-. Therefore, the total sum assured was ₹ 22,50,00,000/-. It was submitted that the AO is not justified to disallow the above premium in view of the fact that M/s. Bajaj Allianze Life Insurance Company Ltd. has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as accordingly deleted. 3. The learned DR relied upon the order of the AO and referred to the Circular issued by I. R. D. A. dated 30-01-2006, filed copy of composition of authority and its duties and powers and submitted that since the policy was taken against guidelines issued by I. R.D. A., therefore, it was against public policy and was not allowable deduction u/s 37(1) of the IT Act. He has submitted that under proviso to section 10 (10D) of the IT Act, policy could be taken for one person only, therefore, the learned CIT(A) should not have allowed the claim of the assessee. 4. On other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the claim of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment for assessment year 2005-06 but the Hon ble Gujarat High Court quashed the same vide order dated 25-01-2011. Thus, the assessment order for 2005-06 has reached finality whereby similar claim of the assessee has been allowed by the revenue department, therefore, the findings of the learned CIT(A) cannot be said to be perverse or against the law. The Insurance Company has also clarified vide their letter (PB-24) that such policy was obtained after approval taken from the seniors; therefore, it was a valid contract between the parties which can not be taken adversely by the revenue department. Further, the learned DR filed copy of the Circular of the IRDA dated 30-01-2006 which was issued because despite circular some insurers were se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken as income from other sources and taxed accordingly. The premium paid on the Keyman Insurance Policy is allowed as business expenditure . The premium paid on KIP has been allowed as business expenditure. The amount received in KIP has been made taxable and according to section 28 (vi) of the IT Act with effect from 01-10-1996 which provides that a sum received under KIP including the sum allocated by way of bonus on such policy will be treated as income chargeable to income tax under the head profit and gains of business or profession. Explanation to section 10(10D) is reproduced above in the finding of the learned CIT(A) find mention the word is or was connected in any manner whatsoever with the business would have wider meaning. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly to a situation where the policy is in respect of the life of an employee. A keuman insurance policy is obtained on the life of a partner to safeguard the firm against a disruption of the business that may result due to the premature death of a partner. Therefore, the expenditure which is laid out for the payment of premium on such a policy is incurred wholly and exclusively for the purpose of business. Hence, the appeal by the Revenue does not raise any substantial question of law . 8. The learned Counsel for the assessee also filed copy of the Keyman Insurance Policy in the matter in respect of two of the partners in which payment of ₹ 10,00,000/- and ₹ 1,00,000/- have been paid. In this KIP, the assessee firm is a propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the business of the assessee firm except the sleeping partner. The partners are directly connected with the business of the assessee firm and are key persons to take decision in the business of the assessee. As noted above, the policy was taken for the benefit of the business of the assessee, therefore, the amount incurred for obtaining KIP policy shall have to be considered as revenue expenditure. The KIP is not confined to a situation where there is a contract of employment, premium of KIP of partners of the firm is wholly and exclusively for the purpose of business and is allowable as business expenditure. The same view is taken by the ITAT Ahmedabad Bench in the case of M/s. Gem Art (supra) in which departmental appeal has been di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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