MILES SOFTWARE SOLUTION P. LTD, MUMBAI v. DCIT CIR 4(2), MUMBAI

ITA 4968/MUM/2009 | 2006-2007
Pronouncement Date: 16-03-2011 | Result: Allowed

Appeal Details

RSA Number 496819914 RSA 2009
Assessee PAN AABCM5940R
Bench Mumbai
Appeal Number ITA 4968/MUM/2009
Duration Of Justice 1 year(s) 6 month(s) 15 day(s)
Appellant MILES SOFTWARE SOLUTION P. LTD, MUMBAI
Respondent DCIT CIR 4(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 16-03-2011
Date Of Final Hearing 16-03-2011
Next Hearing Date 16-03-2011
Assessment Year 2006-2007
Appeal Filed On 31-08-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH MUMBAI BEFORE SHRI RAJENDRA SINGH(AM) AND SHRI VIJAY PA L RAO (JM) ITA NO.4968/M/2009 ASSESSMENT YEAR 2006-07 M/S. MILES SOFTWARE SOLUTIONS P. LTD. THE DCIT CIR CLE 4(2) MUMBAI 311 BUSSA INDUSTRIAL ESTATE AHANKAR NARAIN PATH LOWER PAREL (W) MUMBAI 400 013. PAN : AABCM 5940 R APPELLANT RESPONDENT ASSESSEE BY : S/SHRI D.J.THAKKAR R.P.SH AH REVENUE BY : SHRI R.S.SRIVASTAV O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 4.6.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. THE ONLY DISPUTE RAISED IS REGARDING DISALLOWANCE OF PART OF THE KEYMAN INSURA NCE POLICY PREMIUM PAID BY THE ASSESSEE. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE HAD TAKEN KEYMAN INSURANCE POLICY IN THE NAME OF MILAN GANATR A DATED 28.3.2006. THE PREMIUM WAS PAYABLE FOR THREE YEARS @ RS.50 LACS PE R YEAR AND THE PERIOD COVERED WAS 40 YEARS. THE AO AGREED THAT THE PREMIU M PAYABLE ON KEYMAN INSURANCE PREMIUM WAS ALLOWABLE AS BUSINESS EXPENDI TURE BUT SINCE THE INSURANCE WAS ONLY FOR 3 DAYS DURING THE YEAR HE AL LOWED PROPORTIONATE 2 PREMIUM ONLY FOR 3 DAYS I.E. RS.41 096/- (3 /365 X 50 LAC) IN APPEAL CIT(A) OBSERVED THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE THE PREMIUM PAYABLE ONLY FOR THE 3 DAYS W AS ALLOWABLE. ACCORDINGLY HE UPHELD THE ORDER OF AO AGGRIEVED BY WHICH THE AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECO RDS AND CONSIDERED THE MATTER CAREFULLY. THE ASSESSEE HAD TAKEN A KEYMAN I NSURANCE POLICY FOR 40 YEARS PREMIUM IN RESPECT OF WHICH PREMIUM WAS PAYAB LE FOR THREE YEARS @ RS.50 LACS PER YEAR. DURING THE YEAR THE ASSESSEE H AD PAID THE FIRST INSTALLMENT OF RS.50 LACS ON 28.3.2006 AS THE SAME HAD BECOME D UE. THE AO HAD ALLOWED ONLY THE PROPORTIONATE PREMIUM FOR THE 3 DAYS FOR W HICH THE POLICY WAS IN FORCE DURING THE YEAR WHICH HAS BEEN UPHELD BY THE CIT(A) . THERE IS NO DISPUTE THAT THE PREMIUM PAYABLE IN RESPECT OF KEYMAN INSURANCE POLICY IS ALLOWABLE AS REVENUE EXPENDITURE. IN A MERCANTILE SYSTEM OF ACCO UNTING INCOME/ EXPENDITURE IS ACCOUNTED WHEN IT BECOMES RECEIVABLE / PAYABLE. IN THIS CASE THE FIRST INSTALLMENT OF PREMIUM OF RS.50 LACS BECAME P AYABLE DURING THE YEAR AND THEREFORE IN A MERCANTILE SYSTEM THE ENTIRE PAYMENT WHICH HAS BECOME DUE DURING THE YEAR HAS TO BE ALLOWED AS EXPENDITURE. W HEN THE ENTIRE SUM OF RS.50 LACS BECAME DUE FOR PAYMENT DURING THE YEAR I T COULD NOT BE SAID THAT THE EXPENDITURE WILL BE ALLOWABLE ONLY FOR 3 DAYS F OR WHICH THE INSURANCE POLICY WAS IN FORCE DURING THE YEAR. IN OUR VIEW ENTIRE EX PENDITURE OF RS.50 LACS HAS TO BE ALLOWED. WE THEREFORE SET ASIDE THE ORDER OF CIT(A) AND ALLOWED THE CLAIM OF THE ASSESSEE. 3 4. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. 5. THE ORDER WAS PRONOUNCED IN THE OPEN COURT TODAY I.E. 16.03.2011. SD/- SD/- ( VIJAY PAL RAO ) (RAJENDRA SING H) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 16.03.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) MUMBAI CONCERNED 4. THE CIT MUMBAI CITY CONCERNED 5. THE DR H BENCH ITAT MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ALK