Income Tax Appellate Tribunal - Jaipur
Electrolites(Power) Pvt. Ltd., Jaipur vs Department Of Income Tax on 6 November, 2015
1 ITA No.78/JP/2014
ACIT, Circle- 3 vs. M/s. Electrolites (Power) (P) Ltd. , Jaipur
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 78/JP/2014
fu/kZkj.k o"kZ@Assessment Year : 2005-06
The ACIT cuke M/s. Electrolites (Power) (P) Ltd.
Circle- 3 Vs. 122, Navjeevan Complex
Jaipur 29, Station Road, Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACE 4080 B
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri Kailash Mangal, JCIT -DR
fu/kZkfjrh dh vksj ls@ Assessee by : Shri G.G. Mundra, CAa
lquokbZ dh rkjh[k@ Date of Hearing : 04/11/2015
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 06 /11/2015
vkns'k@ ORDER
PER VIKRAM SINGH YADAV:-
The Revenue has filed an appeal against the order of the ld. CIT(A) -
1, Jaipur dated 28-11-2013 for the assessment year 2005-06 wherein following grounds have been raised by the Revenue.
''1. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting the addition of Rs. 25.00 lacs on the ground that policy of Keyman Insurance Policy.
2. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) holding the policy as Keyman Insurance Policy is perverse on facts?' 2 ITA No.78/JP/2014 ACIT, Circle- 3 vs. M/s. Electrolites (Power) (P) Ltd. , Jaipur 2.1 Brief facts of the case are that original assessment u/s 143(3) of the Act was completed at total income of Rs. 15,66,550/- vide order dated 19- 10-2007 as against total income of Rs. 14,56,109/- declaring in the return of income filed on 30-10-2005. Subsequently, the AO, on perusal of the record, found that in the profit and loss account, the assessee company had debited Rs. 25.00 lacs on account of one time premium paid for Keyman Insurance Policy with sum assured of Rs. 1.25 crores. The AO further noticed that the claim of the assessee was actually made for a policy taken under unit gain plan plus SP from Bajaj Allianz Insurance Company. Maturity value is not fixed due to unit gain plan and AO was of the view that this is not a Keyman Insurance Policy and premium thereof was not allowable u/s 29 to 41 of I.T. Act. The omission on the part of assessee resulted under computation of income by Rs. 25.00 lacs. In view of these facts, notice u/s 148 was issued to the assessee on 30-03-2012 and thereafter the assessment was completed u/s 143(3) /148 vide order dated 5-03-2013 whereby addition of premium paid towards said policy was made to the income of the assessee.
2.2 The ld. CIT(A) allowed relief to the assessee by following observations.
3 ITA No.78/JP/2014
ACIT, Circle- 3 vs. M/s. Electrolites (Power) (P) Ltd. , Jaipur ''6.1 It is, therefore, noted that there is nothing in the assessment order to show that the said policy was not a Keyman Insurance Policy. It is noted from the details furnished by the appellant that the insurer has issued the policy as a Keyman Policy which includes "Keyman Clause". This clause reads as under:
"Notwithstanding anything within mentioned to the contrary"
It is hereby agreed and declared that in the event of the employee life assured leaving the employment of the employer, the within mentioned policy shall be:
(1) Either Surrendered to the company for its cash value, OR (2) Assigned absolutely in favour of the employee life assured."
This clearly indicates that the policy is in the nature of Keyman Poilcy. Not only is it clearly written in the policy itself that this is a Keyman Insurance Policy, the name of the policy holder itself has been mentioned as M/s Elektrolites (Power) Pvt. Ltd. These specific details clearly show that the policy was in the nature of Keyman Policy. The observation of the AO that the policy was issued by a private insurance company and is subject to NAV of the units etc. does not mean that the policy was not a Keyman Policy. These are only modes of investment of the money received from the policy holder and do not determine the nature of the policy. A perusal of the policy schedule shows that the policy holder is the appellant while the person whose life has been insured is Mr. Anil Kumar Saboo. It, therefore, cannot be said that the policy was not a Keyman Insurance Policy merely because it was a single premium and unit based policy.
6.2 So far as the issue regarding the claim of premium being allowable u/s 37 or not is concerned, it is seen that the Keyman Insurance Policy is taken to protect the interests of the business and, hence, as held by the Hon'ble Bombay High Court (323 ITR 178) (supra), it is allowable expenditure u/s 37. In the case of Rajan Nanda (205 Taxman 138), it was held by the Hon'ble Delhi High Court that even when such policies are assigned to the 4 ITA No.78/JP/2014 ACIT, Circle- 3 vs. M/s. Electrolites (Power) (P) Ltd. , Jaipur employee later on, the deduction claimed towards premium (less surrender value received back) could not be disallowed.'' 2.3 The ld. DR relied on the orders of the authorities below. 2.4 The ld. AR of the assessee during the course of hearing submitted that the said keyman insurance premium of Rs. 25.00 lacs paid by the assessee company is allowable business expenditure u/s 37 of the Act. The ld. AR of the assessee further submitted that the ld. CIT(A) had examined in detail all the facts of the case and position of law and by detailed order allowed the claim of the assessee for a sum of Rs. 25.00 lacs as premium paid by the assessee for Keyman Insurance Policy as revenue expenditure allowable u/s 37 of the Act. Thus the appeal of the Department has no merit which deserves to be deleted.
2.5 We have heard the rival contentions and perused the material available on record. It is clear from the order of the ld. CIT(A) that he has gone through the detailed terms and conditions of Keyman Insurance Policy issued by M/s. Bajaj Allianz Insurance Company and has also sought certain clarificatons from the assessee which had been duly replied. The ld. CIT(A) in his findings observed that the policy under consideration is a Keyman Insurance Policy which has been taken in the name of Electrolites (Power) (P) Ltd. to ensure life of its keyperson i.e. Managing Director of assessee 5 ITA No.78/JP/2014 ACIT, Circle- 3 vs. M/s. Electrolites (Power) (P) Ltd. , Jaipur company Shri A.K. Sahu. Further, regarding allowability of the premium paid by the company towards Keyman Insurance Policy, the ld. CIT(A) has relied on the decision of Hon'ble Mumbai High Court in the case of CIT vs. B.N. Exports, 323 ITR 178(Bom.) and Hon'ble Delhi High Court in the case of Rajan Nanda,205 Taxman 138. We have gone through the decisions of Hon'ble Mumbai High Court and Hon'ble Delhi High Court and we see no justification to interfere with the order of the ld. CIT(A). Hence, both the grounds taken by the Revenue are dismissed.
3.0 In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 06 /11/2015.
Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼ foØe flag ;kno ½ (R.P.Tolani) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@ Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 06/11/ 2015 *Mishra
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ACIT, Circle- 3, Jaipur
2. izR;FkhZ@ The Respondent- M/s. Electrolites (Power) (P) Ltd., Jaipur
3. vk;dj vk;qDr¼vihy½@ CIT(A).
4. vk;dj vk;qDr@ CIT,
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.78/JP/2014) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar