Deputy Commissioner Of Income Tax vs Aggarwal And Modi Enterprises (Cinema ... on 31 October, 2002
7. We have heard the rival contentions and gone through the facts and
circumstances of the case. We find that the AO has disallowed the expenses claimed
by assessee in respect to Key Man Insurance Premium in respect of its directors
amounting to Rs. 21,17,900/-. The CIT (A) has also confirmed the action of the AO
on the same reasoning that the assessee is following mercantile system of accounting
and in the mercantile system of accounting the expenses attributable to current year is
to be allowed. Accordingly, he confirmed the action of the AO. Before us assessee
filed copy of Key Man Insurance Policy as page No. 14-16 of assessee's paper book
and also filed copy of renewal premium receipt at page 17. We find that this Key
Man Insurance was under LIC of India and policy taken by assessee was from LIC of
India which was approved institution. Before us learned Counsel for the assessee
relied on the decision of Hon'ble Bombay High Court in the case of CIT Vs. Agarwal
Enterprises (2015) 374 ITR 240 (Bom), wherein, on the issue of Premium on Key
Man Insurance Hon'ble High Court has allowed the claim of assessee as business
expenditure u/s 37 of the Act. We find that in the present case the premium on Key
Man insurance Policy amounting to Rs. 21,17,900/- was claimed as prepaid expenses
in earlier years but the same was disallowed. The assessee in this year has paid this
premium and claimed the same as expenses and treated it as an expense in the year of
payment and claimed the same. In view of the judicial pronouncements, we are of the
view that the assessee is entitled for deduction u/s 37 (1) of the Act and we order
accordingly. This issue of assessee appeal is allowed.