2021 (2) TMI 272 - AT - Income Tax

Tribunal allows appeal, medical insurance premiums for employees' family members deductible as business expense

Loesche India Pvt. Ltd. Versus ACIT, Circle 15 (2), New Delhi

Loesche India Pvt. Ltd. Versus ACIT, Circle 15 (2), New Delhi - TMI Issues: Disallowance of medical insurance premium for family members of employees as a business expense.Analysis:1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2012-13, regarding the disallowance of medical insurance premium paid for employees' family members as a business expense.2. The Assessing Officer disallowed Rs. 12,44,970, stating it was not incurred wholly and exclusively for the business. The CIT(A) upheld this decision, leading to the appeal.3. The assessee argued that a similar claim was allowed in previous years based on a co-ordinate bench's decision. The issue was deemed in favor of the assessee for previous assessment years as well.4. The tribunal noted the nature of the assessee's business and the disallowed amount in dispute. The previous co-ordinate bench's decision favored the assessee's claim, emphasizing the nexus between the expenditure and business purpose.5. The tribunal found that the disallowance lacked justification based on the provisions of Section 37(1) of the Income Tax Act. It highlighted that the insurance premiums were paid as per employment rules, showing a clear business connection. The tribunal disagreed with the lower authorities' reasoning for disallowance.6. Referring to the decision of the co-ordinate bench for a subsequent assessment year, the tribunal directed the Assessing Officer to delete the disallowance of Rs. 12,44,970 related to medical insurance premiums for employees' family members.7. Consequently, the appeal was allowed in favor of the assessee, based on the precedent set by the co-ordinate bench and the lack of justification for disallowance.