Bombay High Court
The Pr Commissioner Of Income Tax -4 vs N D Nissar on 21 January, 2019
Bench: Akil Kureshi, M.S. Sanklecha
12. os itxa 935-16.doc
R.M. AMBERKAR
(Private Secretary)
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O.O.C.J.
INCOME TAX APPEAL NO. 935 OF 2016
Pr. Commissioner of Income Tax -4 .. Appellant
Versus
M/s. N.D. Nissar .. Respondent
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Mr. A.R. Malhotra a/w Mr. N.A. Kazi for the Appellant
Mr. Rahul Hakani for the Respondent
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CORAM : AKIL KURESHI &
M.S. SANKLECHA, JJ.
DATE : JANUARY 21, 2019.
P.C.:
1. Revenue is in the appeal against the judgment of the Income Tax Appellate Tribunal ("the Tribunal" for short) dated 28.8.2015 raising following questions for our consideration :-
"(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition made on account of disallowance of Keyman Insurance Policy in spite of the fact that the said policy is personal insurance policy rather than Keyman Inusrance Policy?
(ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition made by the Assessing Officer u/S. 14A of the Income Tax Act in spite of the fact that no nexus has been 1 of 5 ::: Uploaded on - 23/01/2019 ::: Downloaded on - 23/01/2019 23:22:07 :::
12. os itxa 935-16.doc proved by the assessee in support of the claim that the borrowed funds have not been utilized for the purchase of shares?
(iii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in allowing the appeal of the assessee without appreciating the fact that the Tribunal Third Member Bench in the case of M/s. D.H. Securities Ltd clearly held that disallowance can be made even though the shares, which yielded exempt income have been kept as stock in trade?
2. Respondent - assessee is a partnership firm. The questions arise in relation to assessment year 2010-11. The first question arises out of Revenue's objection to the respondent - partnership firm claiming expenditure in relation to the payments made towards Keyman Insurance Policy. The Assessing Officer was of the opinion that the policy of insurance taken out by the partnership firm for the partners, cannot be categorized as Keyman Insurance Policy at all. The CIT(A), however, reversed this decision of the Assessing Officer holding as a fact that the policy was Keyman Insurance Policy and that the Assessing Officer did not have any material to hold to the contrary. The Revenue filed appeal against the decision of the CIT(A) before the Tribunal. As can be seen from the Tribunal's impugned 2 of 5 ::: Uploaded on - 23/01/2019 ::: Downloaded on - 23/01/2019 23:22:07 :::
12. os itxa 935-16.doc judgment, only contention that seems to have been raised was that the premium paid by the assessee as Keyman Insurance Premium would not qualify for expenditure.
3. The issue of allowance of expenditure toward Keyman Insurance Premium taken out by the partnership firm in case of its partners, is no longer res integra. This Court in the case of Commissioner of Income Tax Vs. B.N. Exports 1 has examined such an issue and held that the insurance policy taken out to protect the interest of the partnership firm against disruption in case of sudden death of partner, would be an allowable expenditure. The Tribunal had in fact relied on this decision while dismissing the Revenue's appeal. We, further, note that in view of the decisions of the various High Courts, the Central Board of Direct Taxes had also issued a Circular bearing No. 38/16 dated 22.11.2016 accepting such a view, making a particular reference to the decision of the Punjab & Haryana High Court in case of M/s. Ramesh Steels (ITA No. 437 of 2015) dated 2.2.2016. The Tribunal has also relied on this circular. 1 [2010] 323 ITR 178 (Bombay) 3 of 5 ::: Uploaded on - 23/01/2019 ::: Downloaded on - 23/01/2019 23:22:07 :::
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4. Essentially, therefore, the Revenue's objection in law is not sustainable. Even if we permit the Revenue to travel beyond what was argued before the Tribunal, the question whether the policy was a Keyman Policy or not has been held on facts against the Revenue by CIT(A). As noted, the CIT(A) in fact recorded that the Assessing Officer had no material to hold to the contrary. No question of law, therefore, arises.
5. Question Nos. 2 and 3 are overlapping and pertain to the Revenue's objection to the limited disallowance of an expenditure offered by the assessee for earning income exempt from tax which Tribunal accepted. Question No. 3 is an element of the same question where the Revenue argued that such disallowance cannot be discarded in relation to the shares held by the assessee by way of stock in trade. At the outset, we may record that this question does not arise out of the impugned order of the Tribunal since the Tribunal has not given any final finding on this aspect.
6. With respect to the sole surviving Question No. 2, we notice that CIT(A) had limited the disallowance to net interest 4 of 5 ::: Uploaded on - 23/01/2019 ::: Downloaded on - 23/01/2019 23:22:07 :::
12. os itxa 935-16.doc expenditure. The Tribunal while giving further relief to the assessee noted that the assessee had offered voluntary disallowance and that the assessee had otherwise also had sufficient interest free funds for making investment in tax exempt investments. Thus, this is an essential question of fact. No question of law arises.
7. In the result, the Tax Appeal is dismissed.
[ M.S. SANKLECHA, J. ] [ AKIL KURESHI, J ]
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