Keyman insurance deduction allowed where unit linked policy met statutory definition and no extra restrictions could be added.

Premium on a keyman insurance policy structured as a unit linked endowment plan was held deductible because the statutory definition under the Explanation to section 10(10D) requires only a life insurance policy taken on the life of a person connected with the business. The Tribunal rejected extra-statutory restrictions based on IRDA circulars, the policy's investment component, or the fact that the insured was a partner, and held that these features did not take the policy outside the definition. Section 14A was held inapplicable on the admitted facts, and the premium was treated as commercial expenditure incurred to protect the business against the death of a key person, so the disallowance was deleted.

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Issues: Whether premium paid on keyman insurance policies taken in the form of a unit linked endowment plan was allowable as a deduction, and whether the IRDA circular, the absence of a pure life insurance character, the insured being a partner, or section 14A could defeat the claim.

Analysis: The definition of keyman insurance policy under the Explanation to section 10(10D) required only that the policy be a life insurance policy taken by a person on the life of another person connected with the business. The statute did not add any requirement that the policy must be a pure term policy, and judicially supplied restrictions based on IRDA instructions or on the insurer's description of the product were held to be unwarranted. The policy remained within the statutory definition even if it contained an investment component, and the fact that the policy was taken on a partner's life did not by itself disqualify the claim. The Tribunal also held that section 14A had no application on the admitted facts, and that the premium was incurred for commercial purposes to protect the business against loss arising from the death of a key person.

Conclusion: The premium was held allowable, the disallowance was deleted, and the claim succeeded in favour of the assessee.

Ratio Decidendi: A policy satisfies the keyman insurance definition if it is a life insurance policy taken on the life of a person connected with the business, and courts cannot add extra statutory requirements such as a pure term cover or IRDA-based limitations.

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