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TMI Blog2016 (3) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... pies of relevant insurance policies available on record nowhere indicates the type of policy. Not being Keyman Insurance, no deduction of Rs. 14,99,998/- is admissible in law. (2) Without prejudice to the para (1) above, it may be pointed out that as per the copies of both the insurance policies under reference, policy on the life of Sh. Sachin Singal commenced on 26.02.2004 while policy on the life of Sh. Rakesh Gupta commenced on 11.03.2004. Therefore, in view of the accrual system of accountancy being followed by you, expenditure of Rs. 1,10,959/- only was required to be allowed relatable to the year under reference while balance amount of expenditure of Rs. 13,89,039/- was required to be disallowed and added back being inadmissible. (3) In the light of aforesaid facts, it is considered that order passed u/s 143(3) on 26.08.2008 by Assistant Commissioner of Income Tax, Range-I, Ludhiana is prima facie erroneous in so far as it is prejudicial to the interest of revenue. You are, therefore, requested to show cause as to why the aforesaid assessment order dated 26.08.2008 passed u/s 143(3) should not be cancelled or modified or enhanced as the circumstances of the case justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby has erred in setting aside the assessment order as earlier passed by the Assessing Officer. 2. That the learned CIT-1, Ludhiana has erred in passing the order U/s 263 despite the fact that on same issue, the proceedings U/s 263 were dropped by the earlier CIT. 3. That the order U/s 263 is bad in law being based on change of opinion. 4. Without prejudice to Ground Nos.1, 2 and 3 above, the learned CIT-1, Ludhiana has erred in holding that the premium paid by the appellant is not in respect of Keyman Insurance Policy, which is against the facts and circumstances of the case. 5. That the findings of the learned CIT-1, Ludhiana in his order in Paras 2.6 and 2.7 are based on assumptions and against the facts and circumstances of the case. 6. That the learned CIT-I, Ludhiana has erred in concluding that the allowing of deduction on account of premium paid for Keyman Insurance Policy by the Assessing Officer is erroneous and prejudicial to the interest of income. 7. That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off." 6. The counsel of the assessee reiterated the submissions which were raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Assessing Officer to be erroneous and prejudicial to the interest of revenue. This act of the CIT is based on two circulars issued by the IRDA. The CIT has reproduced the contents of these circulars in his order. On perusal of these circulars we observe that the insurance regulatory authority being apprehensive of certain aberrations in the matter of sale of Keyman insurance policies by the insurer has issued certain guidelines as to what can be considered as a proper Keyman insurance policy and what cannot be. One of the guidelines are that the Keyman insurance policy are supposed to be only of term insurance. Any unit linked insurance product is not coverable under the guidelines of the IRDA. On this basis, the CIT held that the insurance premium paid by the assessee on the Keyman insurance policies are outside the scope of the IRDA instructions and therefore do not qualify deduction as per circular No. 762 dated 18/02/1998 because they no more satisfied the condition of a key man insurance policy. 10. For this we would like to refer to the amendment made by the Finance (No. 2) Act 1996, in section 10(10D) of the Act. This section relates to the sum received unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium paid - whether it should be allowed as a capital expenditure or a revenue expenditure. The circular clarifies that the premium paid on Keyman insurance policy is a business expenditure i.e. a revenue expenditure allowable to an assessee. The contention of the CIT that the Keyman insurance policy taken by the assessee on its partners is in contravention of the provisions of the IRDA, in our view cannot be the basis for disallowing the premium paid by the assessee. There is no doubt to the fact that Keyman insurance policy premium paid by an employer is an allowable expenditure in the hands of the employer. This is also been clarified by the above said circular. Whether the insurance policy taken by the assessee on the life of its partners is a valid policy or not cannot be a matter to be decided by the CIT. The Income Tax Act is an independent Act and a code in itself. The allowability of any expenditure depends on the provisions of the Act in this regard. If the Act provides certain conditions, non fulfillment of the same may lead to disallowance of the expenditure. Disallowance can be done only on that basis. The revenue cannot go to Acts, regulations or rules other than ..... X X X X Extracts X X X X X X X X Extracts X X X X
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