Gujarat High Court
Commissioner vs Gem on 13 March, 2012
Author: Bhaskar Bhattacharya
Bench: Bhaskar Bhattacharya
Gujarat High Court Case Information System
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TAXAP/1739/2009 3/ 3 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 1739 of 2009
=========================================================
COMMISSIONER
OF INCOME TAX-II - Appellant(s)
Versus
GEM
ART - Opponent(s)
=========================================================
Appearance :
MR
MANISH R BHATT, Sr. Advocate with MRS MAUNA M BHATT
for Appellant(s) : 1,
None
for Opponent(s) :
1,
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CORAM
:
HONOURABLE
THE ACTING CHIEF JUSTICE MR.BHASKAR BHATTACHARYA
and
HONOURABLE
MR.JUSTICE J.B.PARDIWALA
Date
: 13/03/2012
ORAL ORDER
(Per : HONOURABLE THE ACTING CHIEF JUSTICE MR.BHASKAR BHATTACHARYA) This appeal under Section 260A of the Income Tax Act is at the instance of the Revenue and is directed against order dated March 6, 2009 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'D' in ITA No.1722/Ahd/2008 by which the Tribunal dismissed the appeal preferred by the Revenue.
2. Being dissatisfied, the Revenue has come up with the present appeal.
3. The only point raised by the Revenue in this appeal is whether the Tribunal below committed substantial error of law in holding the the premium paid for the partners under the Keyman Insurance Policy was a revenue expenditure deductible under Section 37 of the Income Tax Act.
4. In order to appreciate the aforesaid question, it would be profitable to refer to the provisions contained in Section 10(10D) of the Act, which are quoted below :-
"10.
In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included --(1)
to (10CC) .. ... ... ... ...
(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than -
(a) any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA; or
(b) any sum received under a Keyman insurance policy; or
(c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured:
Provided that the provisions of this sub-clause shall not apply to any sum received on the death of a person:
Provided further that for the purpose of calculating the actual capital sum assured under this sub-clause, effect shall be given to the Explanation to sub-section (3) of section 80C or the Explanation to sub-section (2A) of section 88, as the case may be.
Explanation.-
For the purposes of this clause, "Keyman insurance policy"
means a life insurance policy taken by a person on the life of another person who is or was the employee of the first-mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person."
5. After going through the explanation given in the said section, we are of the view that partner definitely comes within the purview of the person who is connected with in any manner whatsoever with the business of the firm.
6. Apart from the aforesaid fact, it appears that the Finance Act, 1996 indicates that sums received by organisation of Keyman Policy should be taxed as business profits, the surrender value of policy endorsed in favour of the employee (Keyman) or the sum received by him at the time of retirement be taken as "profits in lieu of salary"
for tax purposes; and in case of other persons having no employer-employee relationship, the surrender value of the policy of the sum received under the policy be taken as income from other sources and taxed accordingly. The premium paid on the Keyman Insurance Policy is allowed as business expenditure. The amendment had taken effect from October 1, 1996.
7. Thus, we are of the view that the Tribunal was quite justified in holding that the premium paid for a partner was deductible within the meaning of Section 37 of the Act. We thus find that no substantial question of law is involved in this appeal. The appeal is thus dismissed.
(BHASKAR BHATTACHARYA, ACTING CJ.) (J.B. PARDIWALA, J.) zgs/-
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