TaxTMI 
TaxTMI 
2015 (9) TMI 1099
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....ngs of the Hon'ble Bench are contained in para no.6 of the impugned order starting from page no.29 of the said order. The basic issue in appeal was as to whether the premium paid by us on the policy purchased by us which was issued as "Keyman Insurance Policy" from Insurance Companies including the Life Insurance Corporation of India was an allowable expenditure. The authorities below had mainly relied upon the circular issued by IRDA as well as the fact that the policies were "non term assurance policies". To clarify the issue, it was important to understand the meaning of the word "term insurance" and for this purpose the meaning of the work was mentioned in the first para at page no.2 of the synopsis filed and even the printout of definition of this term was provided at the time of the hearing of the appeal. This line of argument/contention has not been considered in the finding given at para no.6 of the impugned order. This by itself constitutes a mistake apparent from record. Term insurance means that no amount is to be received back after the expiry of the tem of the policy but this meaning does not fit into the scheme of the Income Tax Act which has clearly provides that the....
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....applicable for determining the correct nature of "Keyman Insurance Policies" you have ignored the ratio of decision of the Supreme Court in the case of Southern Technologies Ltd. (Supra) without giving any reasoning. It has also been observed that the assessee has himself admitted through letter dated 12/11/2008 that the policies are not in the nature of life insurance policies exactly. At the outset, it is submitted that this aspect was never discussed during the hearing at the ITAT nor this issue was raised by the department representative. In any case why this observation was made by the already stands explained and this is appearing in the first para at page no.7 of the paper book. This explanation has not been considered at all. The selective reference to the issue without appreciating the explanation given to the authorities below was totality unjustified and also constitutes a mistake apparent from record. The reliance placed by CIT(A) on the circular of IRDA has been approved without appreciating that it was pointed out during the hearing....
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.... clarified the legal position in an order passed copy of which is annexed to page 146 of the petition paper book. We have noted that such a power is possessed by the Court or Tribunal and even after it disposes of the main matter and application of the nature made and to seek rectification or correction of an apparent mistake can be entertained. The legal provision before us is plain and clear. Sub-section (2) of section 254 enables the Tribunal to entertain the application of the above nature but what orders ought to be passed on such an application depends upon the facts and circumstances of each case. No general rule can be laid down in that behalf. The Tribunal can rectify any mistake apparent from the record and amend its order passed under section (1) of section 254. If the amendment has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, then, such an amendment shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard. We are not confronted with such a situation. What we are ....
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....order. We clarify that beyond the issue of maintainability and jurisdiction of the Tribunal to deal with the application of the above nature, we have observed nothing on the merits or demerits of this application. All contention of both sides on the merits of the rectification application are kept open. They can be raised before the Tribunal." 4. We were thus urged to take up the rectification petition on merits and deal with the same in accordance with the law. 5. In order to adjudicate on this petition, a few material facts will have to be taken note of. During the course of assessment proceedings, the Assessing Officer noted that the assessee has claimed deduction of Rs. 59,96,365/- in respect of premium for Keyman Insurance Policies on the life of Shri Rajeev Anurag Sondhi, Managing Director. He disallowed the same, on the basis of, as he himself set out at page nos.12 & 13 of the Assessment Order, the following reasoning:- "(i) The assessee firm has taken policy, the type of which is Unit Linked Insurance Plan an Investment Plan. The purpose is Guaranteed Returns on the premium amount through investment in Units. It was claimed as Keyman Policy and amount of premium of Rs. ....
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....bsp; (v) The assessee claims that the Insurance Company has said that it has issued under 'Keyman Policy'. The policy may be termed as "Keyman" by the Insurance Company for its own purpose and guidelines might have been issued by IRDA subsequently, these guidelines and term as "Keyman" by Insurance Company cannot override the provision of "Keyman Insurance Policy" as per I.T. Act which are applicable and in place at the time of policy being taken by the assessee. Even the brochure of the Insurance Company says regarding tax benefit under 80C only and section 10(10D) of the I.T. Act for receipts to be exempted if conditions fulfilled. Thus, the claim of deduction of such expenditure on account of payment of this premium of Rs. 59,96,365/- which has been invested in "Unit" as per assessee's option in ICICI Prudential Fund and Jeevan Shree-I policy of guaranteed addition could not be said to have incurred for the purpose of the business and is thus not allowable as business expenditure of the assessee firm. The assessee....
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....mining the allowability of the premium, paid. But at the same time, the assessee has admitted vide letter dated 12.11.2008 and on perusal of record, it is found that these policies are not in the nature of Life Insurance Policies exactly. 6.1 On perusal of facts on record and arguments of both the parties and legal position and interpretation of the Act, we are of the view that the arguments made by the Ld. DR are found to be convincing and findings of the Ld. CIT(A), who has rightly confirmed the action of the A.O. that the assessee-firm has taken policy, which is, in fact, Unit Linked Insurance Plan, an Investment Plan, the purpose of which is guaranteed returns on the premium amount through investment in Unit and Unit Linked Insurance Plan for which the premium is paid through wrongly claimed as an expenditure, which is not allowable as an expenditure. The Circular of IRDA has clarified the position and the arguments made by the ld. Counsel that it is prospective in nature, cannot be accepted since the circular is clarificatory in nature. In the facts and circumstances of the case, it is not a 'term Assurance Policy Plan' as per IRDA guidelines. A nominal amount is being charge....
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.... in the garb of rectifying a mistake apparent on record, such a decision cannot be revisited. He submits that even if there are some minor omissions in the order of the Tribunal, as long as these orders donot affect the outcome of the appeal, the order cannot be recalled for the reason of these mistakes. As for the stand taken by the Tribunal that only term insurance policies are eligible for deduction under section 10 (10D), learned Departmental Representative submits that even if it be a mistake, though it is not, it cannot be termed as a mistake apparent on records which alone can be rectified at present. He submits that the policy premium paid by the assesse being ineligible for deduction under section 10(10D) is the main point decided by the Tribunal, and that decision, being a conscious and considered decision, cannot at all be termed as a mistake apparent on record. Learned Departmental Representative then invites our attention to the inherently limited scope of the rectification proceedings under section 254(2) which is the same as in the course of proceedings under section 154 and which must remain confined to the patent and glaring mistakes, even if any, on which no two v....
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....der s. 254(2). The rectifiable mistakes are the mistakes which are obvious, patent, and glaring mistakes on which no two views are possible. Once a mistake fits in this category, as is the case before us, it is immaterial whether it is a conscious mistake or unconscious mistake. If a judicial body like this Tribunal applies its mind to a situation but reaches a wrong conclusion because of a simple mistake committed in the process on reasoning, on which no two views are possible, it will indeed be unreasonable to suggest that only because this mistake is committed after application of mind on a situation, this is not a mistake apparent from record. It cannot be termed as an error of judgment, but, in our humble understanding, it has to be termed as a mistake apparent from record resulting in a vitiated judgment. The difference between an error of judgment vis-à-vis an error apparent from record leading to an erroneous judgment may be thin but is too subtle to be ignored by a judicial body. The question of error of judgment can only arise when two views are possible and one of the views is adopted. That is not the case before us. It is a simple case of omission to take note of....
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....red by Section 10(10D), was a mistake apparent on record or nor. Explanation to Section 10 (10D), as it stood at the relevant point of time, simply provided that "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". 11. All that entitles a policy to be covered by Section 10(10D) therefore is that it should be a life insurance policy on the life of an eligible person. 12. The concept of term policy, pure life policy and IRDA guidelines find no mention in the statutory provisions. Even if these concepts ought to be incorporated in this statutory provision 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 Vs CIT [(1977) 108 ITR 245 (SC)], a coordinate bench of this Tribunal, in the case of Tata Tea Limited Vs JCIT [(2003) 87 ITD 351 (Cal)], has explained this principle as follows: 8. Casus omissus, which broadly ref....
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.... and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute". 13. The very fact that the Tribunal leaned over material outside the statute, without adjudicating upon the core question as to whether it is permissible to lean upon the same- as in this case, in our considered view, is a mistake apparent on record which should be rectified under section 254(2) of the Act. 14. As we have noted earlier in this order, the Tribunal has, at one place, observed that, "As per definition of "Keyman Insurance Policy", a person purchasing life insurance can only do so to the extent of his insurable interest in the assured" but then, in our considered view, this observation is clearly a mistake apparent on record. The Explanation below Section 10(10D), which is the only relevant factor for deciding as to what is "keyman insurance policy", has no mention about this condition. Apparently, this expression has been taken from the IRDA circular but then there....
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....levant section of the Income Tax Act itself. Some examples are as under: -Section 2(25A): Refers to Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act 1976 -Section 2(29D): Refers to National Tax Tribunal Act, 2005 -Section 2 (38): Refers to Employees Provident Fund Acct, 1952 -Section 2(42A)-Expl 2 : Refers to Securities Contracts (Regulations) Act 1956 -Section 2(47): Refers to Transfer of Property Act, 1882 Since IRDA 1999 has not been referred to in defining Keyman Policy or Life Insurance, its circulars cannot be relied upon for income tax purposes (Page 3 of written submission) 17. These submissions were, however, not dealt with at all while passing the order which is subjected to this rectification petition. 18. In view of the above discussions, as also bearing in mind entirety of the case, we are of the considered view that the order passed by the Tribunal did suffer from mistake apparent from record inasmuch as, without adjudicating upon the specific submissions of the assesse, the Tribunal proceeded to decide the matter on the basis of the IRDA circulars. The Tribunal has held that these circulars are clarificatory a....