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TMI Blog2017 (2) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed the appeal. The CIT(A) has deleted the addition of Rs. 49,75,054/- on account of Keyman Insurance Policy stating that the documents regarding expenses were produced before the CIT(A) and it was held that the amount of withdrawal / redemption will be the income of the Company. The CIT(A) also deleted the addition of Rs. 23,23,241/- on account of disallowance of commission expenses as expenses were incurred wholly and exclusively for business purpose and the expenses fulfilled two criteria of being fair market value and legitimate needs of the business. The CIT(A) also restricted the addition of Rs. 4,25,032/- to Rs. 2,12,515/- on account of expenses. The Department being aggrieved by the order passed by the CIT(A) preferred an appeal before the Income Tax appellate Tribunal and the ITAT has dismissed the appeal, meaning thereby, the relief in respect of Keyman Insurance Policy to the tune of Rs. 45,75,054/- has been granted to the assessee and further relief of allowance of Rs. 23,23,241/- on account of excess commission paid to the raided party has also been granted. The ITAT has held that Arpit Bangur and Shweta Jajoo who are Directors of the Company are highly qualified pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was connected in any manner whatsoever with the business of the first- mentioned person;. As per the Explanation, the only requirement is that "Keyman" should be an employee or a director and/or should be connected in some manner with the business of the firm. The Board's circular no. 762 has further clarified that the "keyman" would be an employee or a director, whose services are perceived to have a significant effect on the profitability of the business. It is noteworthy that the words used are "whose services are perceived to have a significant effect on theprofitability". This would imply that it is for the concern to identify the key person or the keyman, having regard to his contribution to the profitability etc. It is for the firm to decide who would or would not be is keyman. It is highly improbable that any firm would incur the expenditure of a substantial amount for insuring the life of a person who has no contribution to make to the affairs of the firm .... The premium under such policy has been categorically declared by the Board to be allowable as deduction, specifically in view of the fact that the maturity amount receivable under the policy is no longer exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commission agents were engaged for the sale of products of the Company. The ld. Authorized Representative further contended that the commission of Rs. 71,02,500/- was paid to M/s. Padma Polytex (India) Pvt. Ltd, @ 5.7 % on sale of Rs. 12,37,65,528/- made to M/s Lupin Limited. The said agent has registered sale of Rs. 12.38 Crore, which was far morethan sales effected by the other agents. Besides this there was a term of payment of 30 days from the date of invoice in respect of above party, which was also shorter period as compared to other parties which varied from 45 to 70 days. Therefore, agent M/s. Padma Polytex Pvt. Ltd. has been paid highest rate of commission for making efforts in collecting sales proceed within such shorter period and registering a handsome sales. Further, commission of Rs. 35,98,604/- was paid to M/s Arpit Plastics Pvt. Ltd @ 4.2 % on sale of Rs. 8,56,81,047/- made to M/s Dr. Reddy Lab. Ltd. The said agent had registered sale of Rs. 8.57 Crore which was second highest sales affected by them among the other agents. Besides this in this case also there was a term of payment of 40 to 45 days from the date of Invoice in respect of above party which was also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee or the benefit derived by or accruing to the assessee from such services was also to be kept in mind. The Hon'ble High Court also cited reference to the decision of the Calcutta High Court in the case of CIT v. Edward Keventer (P.) Ltd. [1972] 86 ITR 370, later affirmed by the Supreme Court in CIT v. EdwardKeventer P.) Ltd. [1978] 115 ITR 149. The ld. Authorized Representative further drew our attention to the following judgments :- (i) CIT v. Dhanrajgirji Raja Narsingirji (1973) 91 ITR 544 (SC) (ii) Hemraj Nebhomal Sons v. CIT (2005) 278 ITR 345 (MP) (iii) CIT vs. Indo Saudi Services (Travel) Pvt. Ltd. 310 ITR 306 (BOM) (iv) CIT v. V.S. Dempo & Co. (Pp.) Ltd. [2011J 196 Taxman 193 (Bom.) The ld. Authorized Representative concluded the arguments contending that the assessee has incurred bona fide expenses and it is not at all advice to reduce tax liability and submitted that the commission has in fact been paid to various agents for the services rendered by them in registering the sales and prayed that the addition of Rs. 23,23,241/- may be deleted. 13. We have heard the rival contentions of both the parties. We have gone through the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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