TMI Blog2016 (5) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The only issue involved in this appeal is the action of learned CIT(A), by which he had upheld the addition of ₹ 3,00,000/- on account of payment of premium of Keyman s Insurance Policy. 3. At the outset, the learned AR submitted that learned CIT(A) had dismissed the appeal of assessee by following the earlier order of CIT(A), in the case of M/s Suri Sons in Appeal No.407/08-09/CIT(A)/Jalandhar. He further submitted that the Hon ble Tribunal in the case of Suri Sons vide its order dated 31st August, 2015 has reversed such order of learned CIT(A) and decided the issue in favour of assessee, therefore, the case of the assessee which was dismissed by following the case of Suri Sons also needs to be decided as per the Tribunal order dated 31st August, 2015. 4. The learned DR, however, relied upon the order of authorities below. 5. We have heard the rival parties and have gone through the material placed on record. We find that the only issue to be decided by us is regarding the allowability of Premium of Keyman Insurance Policy. We further find that this case was earlier decided by Hon ble Tribunal vide its order dated 13.05.2014 in favour of Revenue which was how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e premium under Keyman insurance cannot be allowed in the case of partnership firm, is not tenable in view of the decision of the Hon'ble Jurisdictional High Court in B.N. Exports (supra), wherein, it has been held that if the Keyman Insurance Policy is obtained on a life of a partner, to safeguard the firm against a disruption of business, then the payment for premium on such policy is liable for deduction as business expenditure. Thus, even if a Keyman insurance has been taken in the name of a partner by the partnership firm, then also the deduction has to be allowed on the payment of premium. The other main objections of the learned Commissioner (Appeals) has been that firstly, these are not insurance policy as such but are mainly for capital appreciation under the investment scheme and secondly, the assessee has not received the maturity sum but it has been assigned to the partners, therefore, the assessee cannot be given deduction for any premium paid. Insofar as the first objection of the learned Commissioner (Appeals) is concerned, we declined to agree with this conclusion, because once the assessee has bought a policy under a life insurance scheme, then whether the insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to depart from normal rule of construction according to which the intention of legislature is primarily to be gathered from the words used in the statute. It will be well to recall the words of Rowlatt. J. in Cape Brandy Syndicate vs. IRC (1921) 1 KB 64 (KB) at p. 71, that : ........... in a taxing Act one has to look at merely what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. Once it is shown that the case of the assessee comes within the letter of law, he must be taxed, however great the hardship may appear to the judicial mind to be. Even in the case of CIT vs. National Taj Traders (supra), relied upon by the assessee, Their Lordships of Hon ble Supreme Court have referred to, with approval, Maxwell on Interpretation of Statutes observation that A case not provided for in a statute is not to be dealt with merely because there seems no good reason why it should have been omitted, and that the omission appears in consequence to have been unintentional . Their Lordships then observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the authorities below have paid a lot of emphasis on the contention that the insurance policies in question were not termed as keyman insurance policies but nothing turns on that aspect, even if that be so, either. The keyman insurance policy is a defined concept and as long as it meets the requirements of this definition, the terminology given by the insurers have no relevance for the purposes of the Income Tax Act. All that is necessary is that it should be a life insurance policy, whether pure life insurance policy or not- as such criterion is not set out anywhere in the stature, and it should be taken on the life of a person who is, or has been, an employee of the assessee or any other person who is or was connected in any manner whatsoever with the business of the assessee. These conditions are clearly satisfied on the facts of the case before us. 16. A lot of emphasis has been placed by the authorities below on the circulars issued by the IRDA. It may, therefore, be appropriate to briefly deal with the IRDA and the impact of the circulars issued by the IRDA. IRDA, i.e. Insurance Regulatory and Development Authority, is set up under the Insurance Regulatory and De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supervising the functioning of the Tariff Advisory Committee; (o) specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f); (p) specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and (q) exercising such other powers as may be prescribed. 17. Clearly, therefore, IRDA is primarily to regulate, promote and ensure orderly growth of the insurance business and re-insurance business . In doing so, as evident from Section 14(2)(a) to (q) above, it regulates the conduct of the service providers in the business of the insurance. It does not, and cannot, regulate the conduct of the policy holders. As in Section 14(2)(b), if at all it has anything to do with the policyholders, it is protection of interest of the policyholders. It is in this background that we have to see the circulars issued by the IRDA. In the circular dated 27th April, 2005, the IRDA states as follows: The Authority is aware that some of the aberrations have taken place in the month of March 2005 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 10(10D) does not put any further tests, nor can we infer the same. 20. The Assessing Officer has questioned commercial expediency of taking the keyman insurance policies on the short grounds that (a) the fall in turnover, apparently according to the Assessing Officer, shows that there was no commercial benefit from taking the keyman insurance cover; (b) the insurance policy was taken for the benefit of the partner rather than the firm; and (c) no necessity or expediency of the person being keyman and the policy being taken for the benefit of the firm was established. When benefit of policy was assigned to the insured, the policy cannot be said to be for the benefit of the assessee firm. We see no merits in these objections to the commercial expediency. As for the fall in turnover, the benefit of an expenditure cannot be, by any stretch of logic, relevant to determine its commercial expediency, and, in any case. Such a benefit of hindsight cannot be available at the point of time when business decisions are made; more often than not, these are the tools of post mortem of events, rather than inputs for the decision making. As for the other issues raised by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n who is or was connected in any manner whatsoever with the business of the subscriber. The words is or was connected in any manner whatsoever with the business of the subscriber are wider than what would be subsumed under a contract of employment. The latter part makes it clear that a Keyman insurance policy for the purposes of Clause (10D) is not confined to a situation where there is a contract of employment. Clause (10D) relates to the treatment for the purpose of taxation of moneys received under an insurance policy. In this appeal, the court has to determine the question of expenditure incurred towards the payment of insurance premium on a Keyman insurance policy. The circular which has been issued by the Central Board of Direct Taxes clarifies the position by stipulating that the premium paid for a Keyman insurance policy is allowable as business expenditure. In the present case, on the question whether the premium which was paid by the firm could have been allowed as business expenditure, there is a finding of fact by the Tribunal that the firm had not taken insurance for the personal benefit of the partner, but for the benefit of the firm, in order to protect itself agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er law, the argument of colourable device cannot be advanced by the Revenue. When expenditure of this nature is treated ^business expenditure' per se by the Department itself, there cannot be any question of raising the issue of want of business expediency. The learned counsel for the respondent is right in his submission that the Department could not sit on the armchair of the assessee and decide as to whether it was appropriate on business expediency for the assessee to incur such an expenditure or not. If the transaction is otherwise valid in law and is a part of tax planning, merely because it has resulted in reduction of tax, such expenditure cannot be ignored raising the issue of underlying motive of entering into this type of transaction. Various judgments cited by the learned counsel for the respondents clearly get attracted to this Court. (Emphasis, by underlining, supplied by us) 21. Respectfully following the esteemed views of Hon ble Delhi High Court, we reject the stand of the authorities below on this aspect of the matter as well. As for the statement made by the employees of the insurance companies, nothing turns on these statements. What constitutes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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