DCIT 14(2), MUMBAI v. RISHAB IMPEX, MUMBAI

ITA 3661/MUM/2009 | 2006-2007
Pronouncement Date: 21-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 366119914 RSA 2009
Assessee PAN AAAFR5747B
Bench Mumbai
Appeal Number ITA 3661/MUM/2009
Duration Of Justice 11 month(s) 17 day(s)
Appellant DCIT 14(2), MUMBAI
Respondent RISHAB IMPEX, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 21-05-2010
Date Of Final Hearing 12-04-2010
Next Hearing Date 12-04-2010
Assessment Year 2006-2007
Appeal Filed On 04-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI. BEFORE S/SHRI N.V.VASUDEVAN JM & T.R.SOOD AM I.T.A NO.3661/ MUM/2009 ASSESSMENT YEAR: 2006-06 THE DCIT 14(2) V. RISHAB IMPEX EARNEST HOUSE 3 RD FLOOR NARIMAN POINT BEHRAM MAHAL 2 ND FLOOR NEXT TO MUMBAI-21. EDWARD CINEMA 534 KALBADEVI RD MUMBAI-02. PA NO.AAAFR 5747 B C.O.NO.67/M/2010 (ARISING OUT OF ITA NO.3661/M/2009) RISHAN IMPEX V. THE DCIT 14(2) MUMBAI. MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AARSI PRASAD CROSS OBJECTOR BY : SHRI MANISH SANGHAVI O R D E R PER T.R.SOOD AM THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 26 TH MARCH 2009 OF LD CIT (A)-XIV MUMBAI FOR THE ASSESSMENT YEAR 2006-06. I.T.A NO.3661/ MUM/2009 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS:- 1.THE ORDER OF CIT (A) IS OPPOSED TO LAW AND FACT S OF THE CASE. 2. THE CIT (A) ERRED IN DIRECTING THE AO TO ALLOW THE PREMIA PAID IN RESPECT OF THE KEYMAN INSURANCE IN RESPECT OF THE MALE PARTNER S AT RS.37 22 445/-. 3. THE CIT (A) OUGHT TO HAVE NOTED THAT THE ABOVE C LAIM WAS NOT ADMISSIBLE BECAUSE THE KEYMAN INSURANCE POLICY AS PER THE SECT ION 10(10D) DID NOT COVER PARTNERS OF FIRMS OR DIRECTOR OF COMPANIES BUT ONLY THE EMPLOYEES OF THOSE CONCERNS. SINCE IN THE INSTANCE THE MALE PARTNERS HAD NO EMPLOYER-EMPLOYEE RELATIONSHIP WITH THE FIRM THE ALLEGED CLAIM OUGHT TO HAVE BEEN DISALLOWED. ITA NO.3661/M/09 C.O.NO.67/M/2010 M/S. RISHABH IMPEX 2 4. THE CIT (A) ERRED IN DIRECTING THE AO TO ALLOW T HE EXCHANGE RATE DIFFERENCE OF RS.4 89 995/-. 3. GROUND NO.1 IS GENERAL THEREFORE THERE IS NO N EED OF ANY ADJUDICATION. 4. APROPOS GROUND NOS.2 & 3 AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSEE FIRM HAD PAID PREMIUM FOR TAKING KEYMAN IN SURANCE AND THIS PREMIUM WAS DISALLOWED BY THE AO. ON APPEAL THE PREMIUM IN RE SPECT OF MALE PARTNERS WAS ALLOWED WHEREAS THE DISALLOWANCE IN RESPECT OF PREMIUM PAID FOR FEMALE PARTNERS WAS UPHELD BY THE CIT (A). 5. BOTH THE PARTIES WERE HEARD. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2005-06 IN ITA NO.6885/M/2008 AND ITA NO.6352/M/2008 IN ASSESSEES OWN CASE AND THE TRIBUNAL HAS ALLOWED THE PREMIUM PAID FOR KEYMAN INSURANCE POLIC Y IN RESPECT OF MALE AS WELL AS FEMALE PARTNERS. THE TRIBUNAL HAS ADJUDICATED THIS ISSUE VIDE PARAS 4 TO 9 WHICH READ AS UNDER:- 4 AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD WE FIND THAT THE ASSESSEE DESERVES TO SUCCEED IN IT S APPEAL WHEREAS THE APPEAL OF THE DEPARTMENT IS LIABLE TO BE DISMISSED. THE PA RTNERSHIP FIRM HAS AN INSURABLE INTEREST IN THE LIFE OF EACH OF THE PARTNERS IN RES PECT OF THE SHARE OF EACH PARTNER. THUS THE INSURANCE PREMIUM PAID BY A PARTNERSHIP F IRM IN RESPECT OF PREMIUM ON POLICIES ON THE LIFE OF THE PARTNERS IS A PERMIS SIBLE DEDUCTION IN COMPUTING THE INCOME OF THE FIRM. AS PER SECTION 37(1) ANY EXPEND ITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER TH E HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. 4.1 KEYMAN POLICY ACCORDING TO EXPLANATION TO SECT ION 10(10D) 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 I S OR WAS CONNECTED IN ANY MANNER WHATSOEVER WITH THE BUSINESS OF THE FIRST ME NTIONED PERSON. IT MEANS LIFE INSURANCE TAKEN BY THE BUSINESS ORGANISATION O N THE LIFE OF SOME IMPORTANT PERSON IN THE ORGANIZATION GENERALLY CALLED AS KEY MAN IN THE INSURANCE NOMENCLATURE AND SUCH IMPORTANT PERSON COULD BE PAR TNER ALSO IN CASE OF ASSESSEE. 4.2 ACCORDING TO SECTION 10(10D) ANY PERSON CAN TAK E POLICY ON THE LIFE OF ANOTHER PERSON IF THAT OTHER PERSON IS EITHER EMPLO YEE OR IN ANY MANNER CONNECTED WITH THE BUSINESS OR PROFESSION. THE PART NERS OF THE ASSESSEE FIRM ARE DEFINITELY THE KEYMAN OF THE ASSESSEE FIRM WHOSE SE RVICES ARE PERCEIVED TO HAVE A SIGNIFICANT EFFECT ON THE PROFITABILITY OF THE BU SINESS. THIS IS NOT THE CASE OF THE DEPARTMENT THAT THE PARTNERS ARE NOT WORKING FOR TH E ASSESSEE FIRM AND MERELY BECAUSE THERE IS NO SUCH MENTION IN THE PARTNERSHIP DEED THE KEYMAN INSURANCE PREMIUM SHOULD NOT BE ALLOWED ON TECHNICAL GROUND. IT WAS EXPLAINED BEFORE THE ITA NO.3661/M/09 C.O.NO.67/M/2010 M/S. RISHABH IMPEX 3 AO AS WELL AS BEFORE THE CIT(A) THAT ALL THE PERSON S ARE WORKING PARTNERS AND DOING THE BUSINESS FOR THE FIRM. 4.3 VARIOUS DECISIONS WERE RELIED UPON BEFORE THE C IT(A) I.E. IN THE CASE OF SIDDHO MAL & SONS REPORTED N 122 ITR 839; IN THE CA SE OF AMRITLAL & CO P LTD REPORTED IN 108 ITR 719; IN THE CASE OF SASSON J DA VID &C P LTD REPORTED IN 118 ITR 261 AND ALSO IN THE CASE OF RAGHUBIR SINGH REPO RTED IN 178 ITR 548 (SC). 5 AFTER CONSIDERING THESE DECISIONS THE CIT(A) WAS OF THE VIEW THAT INSURANCE PREMIUM PAID ON BEHALF OF THE MALE PARTNE RS IS ALLOWABLE; HOWEVER HE DISALLOWED THE PREMIUM PAID ON BEHALF OF THE FEMALE PARTNERS. 6 WITHOUT ANY MATERIAL A DISTINCTION CANNOT BE DRAW N THAT MALE PARTNERS IS WORKING PARTNERS AND FEMALE PARTNERS ARE NOT WORKIN G PARTNERS. IT MAY BE POSSIBLE THAT FEMALE PARTNERS ARE WORKING PARTNERS AND MALE PARTNERS MAY BE SLEEPING PARTNERS. THE EXPLANATION OF THE ASSESSEE THAT ALL THE PARTNERS ARE WORKING PARTNERS WAS NOT FOUND INCORRECT OR OTHERWI SE. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT THE ENTIRE AMOUNT PAID ON BEHA LF OF THE PARTNERS IN THE SHAPE OF INSURANCE PREMIUM IS ALLOWABLE AS DEDUCTIO N. 7 SIMILAR ISSUE CAME BEFORE THE TRIBUNAL IN THE CAS E OF BRIGHT ENGINEERING WORKS IN WHICH ONE OF US WAS THE PARTY AND THE TRI BUNAL ALLOWED THE CLAIM OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE DEPART MENT IN ITA NO.3029/MUM/08 FOR AY 2005-06 VIDE ORDER DATED 11.9 .2009. 8 IN THE CASE OF MODI MOTORS IN 27 SOT 476 (MUM) T HE MUMBAI B BENCH OF THE TRIBUNAL HAS ALLOWED SIMILAR CLAIM OF THE ASSES SEE. 9 IN VIEW OF THESE FACTS AND CIRCUMSTANCES AND IN V IEW OF THE DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUNAL WE DIRECT THE AO TO ALLOW THE DEDUCTION FOR THE ENTIRE AMOUNT OF PREMIUM PAID AS KEYMAN INS URANCE PREMIUM ON BEHALF OF PARTNERS. ACCORDINGLY THE GROUND OF THE ASSESSE E IS ALLOWED WHEREAS THE GROUND OF THE DEPARTMENT FAILS. FOLLOWING THE ABOVE DECISION WE HOLD THAT THE PREM IUM PAID IN RESPECT OF KEYMAN POLICY FOR MALE AND FEMALE PARTNERS ARE ALLOWABLE E XPENDITURE. GROUND NOS.2 & 3 ARE DISMISSED. 7. APROPOS GROUND NO.4 AFTER HEARING BOTH THE PART IES WE FIND SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN TH E ASSESSMENT YEAR 2005-06 (SUPRA) AND THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE PARA 11.1 OF THE ORDER WHICH IS AS UNDER:- 11.1 THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY ASCERTAINING THE FACT THAT THE AO SHRI T T JACOB PRESENTED HIMSELF ALONG WITH THE ASSESSMENT RECORDS AND ADMITTED THAT THERE WAS NO NEED OF ADDITION ON ACCOUNT OF EXCHANGE RATE DIFFERENCE AMOUNTING TO RS. 13 65 001/- AS DURING T HE YEAR THERE WAS IN FACT A CREDIT ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. THE AO HAS HIMSELF ADMITTED THAT THE DISALLOWANCE MADE ON THIS ACCOUNT WAS NOT JUSTIFIED; ACCORDINGLY THE ADDITION WAS DELETED. THIS FINDINGS OF THE LD CIT(A) DO NOT REQUIRE ANY INTERFERENCE; THEREFORE THE SAME ARE CONFIRMED. ITA NO.3661/M/09 C.O.NO.67/M/2010 M/S. RISHABH IMPEX 4 CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY THIS GROUND OF THE REVEN UE IS REJECTED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. C.O.NO.67/M/2010 9. BY THIS CROSS OBJECTION VARIOUS GROUNDS HAVE BE EN RAISED. BUT AT THE TIME OF HEARING ONLY THREE ISSUES WERE RAISED NAMELY I) C ONFIRMATION OF DISALLOWANCE IN RESPECT OF PREMIUM PAID FOR KEYMAN INSURANCE POLICY IN RESP ECT OF FEMALE PARTNERS; II) LEVY OF INTEREST U/S.234A 234B & 234C AND III) DIRECTION FOR LEVY OF PENALTY. 10. AFTER HEARING BOTH THE PARTIES WE FIND THAT TH E ISSUE REGARDING PAYMENT OF INSURANCE PREMIUM FOR KEYMAN INSURANCE POLICY HAS A LREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING ORDER OF EARLIER YEAR TRI BUNALS ORDER AS NOTED ABOVE AND THEREFORE WE DECIDE THIS ISSUE IN FAVOUR OF THE AS SESSEE. THE LEVY OF INTEREST IS OF CONSEQUENTIAL NATURE. THE AO IS DIRECTED TO LEVY TH E INTEREST IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. IN RESPECT OF INITIATION OF PENALTY PROCEEDINGS WE FIND THAT THE CIT (A) HAS CORRECTLY OBSERVED THAT THIS GROUND IS PREMATURE AND DOES NOT REQUIRED ADJUDICATION AND THEREFORE THE SAME IS DISMISSED. 11 IN THE RESULT CROSS OBJECTION FILED BY THE ASSE SSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 21 ST MAY 2010 SD/- (N.V.VASUDEVAN) (JUDICIAL MEMBER) SD/- (T.R.SOOD) (ACCOUNTANT MEMBER) MUMBAI DATED 21 ST MAY 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XIV MUMBA I 4. COMMISSIONER OF INCOME TAX-14 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH D MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.3661/M/09 C.O.NO.67/M/2010 M/S. RISHABH IMPEX 5 DATE INITIALS 1. DRAFT DICTATED ON 19.5.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 19.5.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER ITA NO.3661/M/09 C.O.NO.67/M/2010 M/S. RISHABH IMPEX 6