TaxTMI 
TaxTMI 
2014 (2) TMI 1022
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the learned CIT(A) erred in confirming the disallowance of Rs. 10,00,481 being the premium paid by the appellant on the Keyman Insurance Policies. The learned CIT(A) erred in holding that the concerned policies were not Keyman Insurance Policies and failed to appreciate the definition of Keyman insurance Policy as given in the Explanation to section 10(10D) of the Act. Your appellant, therefore, prays that the aforesaid disallowance be deleted." 2. Facts in brief, qua the aforesaid issue, are that the assessee is a partnership firm which has claimed Keyman insurance of Rs. 10,00,481. The Assessing Officer noted that as per LIC circular no. 1729/4, dated 24th July 2000, "the Keyman insurance to partnership firm is not being allowed because....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... employee is paid by the employer or where the premium on the life of a partner is paid by another partner or by partnership firm, only term insurance covers can be offered in such cases". This circular is issued to convey the view point of IRDA and to clarify he doubts in respect of Keyman/Partnership insurances". 3. Thus he held that none of the conditions as per the aforesaid circular has been satisfied by the partners and the firm. Moreover, the CBDT circular no.762 dated 18th February 1998, states that "Keyman" is an employee or a director and there is no reference of a partner. The assessee has taken two polices, one from Bajaj Allianz and the other from Tata AIG life insurance in the name of two partners. With regard to these two p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is charged and policy holder or life insurer is provided mainly capital appreciation by investing the majority of the premium in mutual fund units, therefore, the scheme cannot be regarded as insurance policy rather it is an investment scheme in the garb of insurance. He further held that the policy has been assigned in favour of the partners and this policy is in contravention of IRDA guidelines. Moreover, the beneficiary is not a employee or director but is a partner. It has also not been explained as to how the maturity value of the policy has been treated by the assessee has assigned in their books and whether maturity sums have been offered for taxation or not. He further held that the assessee has not received the maturity sums but i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....v/s B.N. Exports, [2010] 323 ITR 178 (Bom.) held that even if the Keyman Insurance Policy is obtained on a life of a partner to safeguard the firm, then the payment of premium of such policy by firm is allowable as business expenditure. As regards the observations of the learned Commissioner (Appeals) that these policies are only capital appreciation scheme for the purpose of investment under the grab of insurance, he submitted that first of all the Tata AIG life insurance policy was purely a LIC policy, which is evident from the policy document and so is the Bajaj Allianz policy which was also a life insurance policy. All this is evident from the policy document itself placed in the paper book. Thus, such an objection of the learned Commis....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... If such a Keyman insurance has not been authorized by IRDA, it cannot be held to be Keyman insurance at all. The CBDT circular no. 762 as referred to by the Assessing Officer deliberately not considered the partners of the partnership firm. The primary onus to establish that the partners are Keyman has not been satisfied in this case. In any case, the maturity amount is receivable in the hands of the policy holder which is in the present case is a partner, therefore, the premium paid by the firm cannot be allowed as deduction. He thus, strongly relied upon the conclusion drawn by the learned Commissioner (Appeals). 7. We have heard the rival contentions, perused the findings of the authorities below as well as the material available on r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e partnership firm, then also the deduction has to be allowed on the payment of premium. The other main objections of the learned Commissioner (Appeals) has been that firstly, these are not insurance policy as such but are mainly for capital appreciation under the investment scheme and secondly, the assessee has not received the maturity sum but it has been assigned to the partners, therefore, the assessee cannot be given deduction for any premium paid. Insofar as the first objection of the learned Commissioner (Appeals) is concerned, we declined to agree with this conclusion, because once the assessee has bought a policy under a life insurance scheme, then whether the insurance company is making investment in mutual funds for capital appre....