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TaxTMI 
TaxTMI 
TaxTMI 
2015 (9) TMI 798
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....sessing Officer noted that the assessee had taken "united linked endowment assurance plan" and that out of total premium paid by the assessee, only Rs. 3,26,293 is towards "risk premium on life" and the balance premium is invested by the insurance company in buying units. The main objective of the insurance policy, thus, was guaranteed returns on the insurance premium amounts, rather than life insurance, and this main objective was to be achieved by investing in units. The Assessing Officer was of the view that a unit linked endowment plan, under Kotak Safe Investment Plan, "cannot be keyman insurance policy as per definition of keyman insurance given in the Income Tax Act". The AO was of the view that keyman insurance policy can include only a 'life insurance policy' and "the scope of cover should not be wider than the term assurance". The AO concluded that "the policy that has been taken as united linked endowment assurance plan is investment plan, premium of which has been put into growth fund and it is not a pure life insurance policy on the life of another person (emphasis, by underlining, supplied by the Assessing Officer)". On a separate note, the Assessing Officer a....
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....sessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us. 3. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 4. During the course of this hearing, we asked the parties to address us on, inter alia, the following aspects: (a) Whether the disallowance under section 14A, in respect of expenses in relation to an income which does not form part of the total income, would come into play in this case and whether expense on keyman insurance policy, to the extent it relates to an income not chargeable to tax under section 10(10D), could fall in that category? (b) Whether, in order to deal with the question 'a' above, is it permissible to bifurcate the keyman insurance policy premium into the portion relatable to the risk premium and the investment component? (c) Whether even when none of the parties has raised that aspect of the matter before us, is it permissible for us, particularly in the light of the Special Bench decision in the case of Tata Communications Ltd. v. JCIT [(2009) 121 ITD....
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....nto play inn this case, as in the year when deduction is claimed, no income is claimed exempt and the proceeds of insurance policy is not exempt from tax as the same shall form part of income as per provisions of Section 28(iv) of the Income Tax Act, 1961. (b) Not applicable, in view of the above. (c) Not applicable, in view of the above. (d) The decision in the case of Shri Nidhi Coorporation v. ACIT (151 ITD 470) is not applicable on the facts of this case as, in the policy submitted by the assessee, the assessee was given the liberty to choose the investment plan, whereas no such option was available to the assessee in the case of Shri Nidhi Corporation (supra). The assessee being allowed an option to choose its investment divests the very policy of its being nature of keyman insurance policy as such the same, being not the keyman insurance policy, is no eligible for exemption. It is further submitted that the issue involved in the case of Emdee Apparel & Another v. ACIT, reported in 19 ITR Trib 623, is on different issue and I believe the same has no relevance to the subject matter of these appeals. (e) It is submitted that the Hon'ble bench has already decided the issu....
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....clusion, it is not open to another co-ordinate Bench to come to any other conclusion on that issue. This is so held by the Hon'ble Supreme Court in the case of Union of India v. Paras Laminates (P) Ltd. [1990] 87 CTR (SC) 180. To that extent, Tribunal's decision in the case of Prince SWR Systems (P) Ltd. (supra) appears to be in our humble understanding, per incuriam. In the case of Paras Laminates (P) Ltd. (supra), Hon'ble Supreme Court has, inter alia, observed as follows : "It is true that a Bench of two Members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a larger Bench. The rationale of this rule is the need for continuity, certainty and predictability in the administration of justice. Persons affected by decisions of Tribunals or Courts have a right to expect that those exercising judicial functions will follow the reason or ground of the judicial decision in the earlier cases on identical matters. Classification of particular goods adopted in earlier decisions must not be lightly disregarded in subsequent decisions, lest such judicial inc....
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....uctions [1993] 113 CTR (AP)(FB) 1 : [1993] 202 ITR 222 (AP)(FB). In his inimitable style, Justice S.S.M. Quadri (as he then was) has articulated the views of the Full Bench of Hon'ble Andhra Pradesh High Court as follows : "In a country like ours which is governed by rule of law, law has to be certain and uniform which is fundamental to the rule of law. In Mamleshwar v. Kanahaiya Lal AIR 1975 SC 907, Krishna Iyer, J., speaking for the Supreme Court, observed : 'Certainty of the law, consistency of rulings and comity of Courts all flowering from the same principle, converge to the conclusion that a decision once rendered must later bind like cases.' In this concurring judgment in State of U.P. v. Synthetics & Chemicals Ltd. [1991] 4 SCC 139, 163, the observation of Sahai, J. on this aspect is : 'Uniformity and consistency are the core of judicial discipline.' That is why the doctrine of stare decisis is part of our judicial system. This doctrine means 'to abide by former precedents'. Blackstone elucidated the doctrine thus : 'For it is an established rule to abide by former precedents, where the same points come again in litigation : as well as ....
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....uld be referred to a Full Bench. This procedure would avoid unnecessary conflict and confusion that otherwise would prevail.' The effect of binding precedents in India is that the decisions of the Supreme Court are binding on all the Courts. Indeed, Art. 141 of the Constitution embodies the rule of precedent. All the subordinate Courts are bound by the judgments of the High Court. A single Judge of a High Court is bound by the judgment of another single Judge and a fortiori judgments of Benches consisting of more Judges than one. So also, a Division Bench of a High Court is bound by judgments of another Division Bench and Full. A single Judge or Benches of High Courts cannot differ from the earlier judgments of co-ordinate jurisdiction merely because they hold a different view on the question of law for the reason that certainty and uniformity in the administration of justice are of paramount importance. But, if the earlier judgment is erroneous or adherence to the rule of precedents results in manifest injustice, differing from the earlier judgment will be permissible. When a Division Bench differs from the judgment of another Division Bench, it has to refer the case to a Ful....
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....e construction of a statute is as much binding as any other, and the fact that it was mistaken in its reasoning does not destroy its binding force.' In Choudhry Bros. v. CIT [1987] 60 CTR (AP) 151 : (1986) 158 ITR 224 (AP), as noticed above, the Division Bench treated the judgment in Ch. Atchaiah v. ITO [1979] 116 ITR 675 (AP), as per incuriam on the ground that the earlier Division Bench did not notice the significant changes the charging s. 3 has undergone by the omission of the words 'or the partners of the firm or the members of the association individually'. In our view, this cannot be a ground to treat an earlier judgment as per incuriam. The change in the provisions of the Act was present in the mind of the Court which decided Ch. Atchaiah's case (supra). Merely because the conclusion arrived at on construing the provisions of the charging section under the old Act as well as under the new Act did not have the concurrence of the latter Bench, the earlier judgment cannot be called per incuriam. Though a judgment rendered per incuriam can be ignored even by a lower Court, yet it appears that such a course of action was not approved by the House of Lords in Ca....
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....constitutes 'keyman insurance policy', we find guidance from the Explanation below Section 10(10D), as it stood at the relevant point of time, which defined the keyman insurance policy as follows: For the purposes of this clause, "Keyman insurance policy" 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 is or was connected in any manner whatsoever with the business of the first-mentioned person 9. Vide Finance Act 2013, the following words have been added to this definition- "and includes such policy which has been assigned to a person, at any time during the term of the policy, with or without any consideration". 10. All that is required for an insurance policy to meet the requirements of Section 10(10D), therefore, has to be - (a) it should be a life insurance policy; (b) it should be taken by the assessee on the life of another person who is, or was, an employee of the assessee or is related to the business of the assessee is any manner. 11. Dealing with both the limbs of the above requiremenst, a coordinate bench of this Tribunal, in the case of Shri Nidhi Corporation (supra), h....
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.... inference is desirable, as long as it does not emerge from the plain words of the statute, it cannot be open to supply the same. The concepts of term policy, pure life policy and the IRDA guidelines find no mention in the statutory provisions. But even if these concepts ought to be incorporated in this statutory provision of the Income Tax Act to make it more meaningful and workable, it cannot be open to any judicial forum to supply these omissions. Relying upon Hon'ble Supreme Court's judgment in the case of Tarulata Shyam v CIT [(1977) 108 ITR 245 (SC)], a coordinate bench of this Tribunal, in the case of Tata Tea Limited v JCIT [(2003) 87 ITD 351 (Cal)], has explained this principle as follows: 8. Casus omissus, which broadly refers to the principle that a matter which has not been provided in the statute but should have been there, cannot be supplied by us, as, to do so will be clearly beyond the call and scope of our duty which is only to interpret the law as it exists. Hon'ble Supreme Court, in the case of Smt. Tarulata Shyam v. CIT 1977 CTR (SC) 275 : [1977] 108 ITR 345 (SC) at p 356 has observed : "We have given anxious thought to the persuasive arguments .......
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.... role to play in the interpretation of the statutory provisions. IRDA is a body controlling the insurance companies and its guidance is relevant on how the insurance companies should conduct their business. Beyond this limited role, these guidelines do not affect how the provisions of the Income Tax Act are to be construed. Whenever the provisions of the other statututes are to be taken into account, for interpreting the provisions of the Income Tax Act, the Income Tax Act specifically provides so, such as in the case of Explanation 2 to Section 2 (42A) which provides that "the expression "security" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)]". It cannot, therefore, be open to us to turn to the guidelines of the IRDA to interpret the provisions of the Income tax Act, 1961. In this view of the matter, learned Assessing Officer's observations to the effect that, ""that the policy taken is keyman as per definition given in the Income Tax Act, i.e. policy taken by a person on the life of another person and also fulfilling the terms and conditions laid down by IRDA in this regard, necessity and exp....
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....tion; (b) protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; (c) specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents; (d) specifying the code of conduct for surveyors and loss assessors; (e) promoting efficiency in the conduct of insurance business; (f) promoting and regulating professional organisations connected with the insurance and re-insurance business; (g) levying fees and other charges for carrying out the purposes of this Act; (h) calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business; (i) control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 6....
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....ies as to what should be allowed to be marketed as keyman insurance cover. However, it does not alter the requirements of Section 10(10D) which is for 'life insurance policy'. What can be sold as a 'life insurance policy' taken by a business entity for its employee, former employee or any other person important for business of such an entity is between the insurance regulator and insurance service provider. However, once it has been sold as a life insurance policy on the keyman to the business, as long as it is in the nature of life insurance policy, whether pure life cover or term cover or a growth or guaranteed return policy, it is eligible for coverage of Section 10(10D). It is not open to us to infer the words which are not there on the statute and then proceed to give life and effect to the same. We had detailed discussions about this aspect of the matter in paragraph numbers 10 to 15 above, and, as we have held there, such an exercise is not permissible under the scheme of the Act. 18. What IRDA regulates is issuance of life insurance policies by the insurance companies to the policyholders on the lives of its employees, former employees and key personnel but....
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....owed. Though thereafter, the expenditure was disallowed, but again the claim was accepted for the Assessment Years 2001-02 and 2002-03. Principle of consistency would, therefore, by applicable in such a case. (ii) The Tribunal has rightly referred to and relied upon the CBDT's Circular dated 18.2.1998. This Circular is binding on the Income Tax Department, which categorically stipulates that premium on keyman policy should be allowed as business expenses. The assessee would, naturally, take into consideration such clarifications issued by the CBDT and would act on the basis thereof. When the assessee was given the impression, by means of the aforesaid Circular, that if expenditure is incurred on the keyman policy, it would be treated as business expenditure. There is no reason for the Department to deviate therefrom when it comes to the assessment. (iii) The nature of expenditure incurred on keyman insurance policy has even been judicially considered and Bombay High Court has held in B.N. Exports (supra) that this expenditure is to be allowed as business expenditure, in the following words: "The effect of Section 10(10D) is that monies which are received under a life i....
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....ess." (iv) The argument of Mr. N.P. Sahni, learned counsel for the Revenue that taking such keyman insurance policy every year and thereafter assigning the same to the beneficiaries may be treated as colourable device, may not be correct. Though this argument appears to be attractive when we look into the fact that the assessee had been taking the policies and thereafter assigning the same year after year in favour of the beneficiaries, what cannot be ignored that this course of action is permitted by the Department itself as stated in CBDT's Circular dated 18.2.1998. (v) The expenditure incurred has to be tested on the touchstone of Section 37 of the Act and to see as to whether such expenditure is permissible or not. No doubt, the object of a keyman insurance policy is to enable business organizations to insure the life of a keyman in order to protect the business against the financial loss which may occur in the likely eventuality of premature death. Such an expenditure is treated as business expenditure by the Department itself and recognized as such in Circular dated 18.2.1998. The expenditure is to be seen at the time it is incurred. Merely because the policy was assign....