TaxTMI 
TaxTMI 
2015 (9) TMI 1114
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....fairly agreed that the material facts and circumstances with regard to these appeals are the same as in the case of assessee's own case (i.e. Hansa Export Corporation vs. Addl. CIT in ITA No.35/Asr/2010) for Assessment Year 2006-07 and, therefore, whatever we decide in the said appeal will be equally applicable for the other two assessment years as well. 3. On identical set of facts, vide our order of even date, we have upheld the grievance of the assessee in ITA No.37/Asr/2010 for A.Y. 2006-07 in the case of Suri Sons vs. Add. CIT, and, while doing so, vide paragraph nos.3 to 20, we have observed as follows :-. 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),....
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.... Tribunal on 2nd June 2015. In these circumstances, there being no conflict in the binding judicial precedents, there is no occasion for reference to the special bench. We are thus urged to follow the Shri Nidhi Corp decision and uphold the grievance of the assesse. On the other hand, however, in response to our query, learned Departmental Representative has submitted the following written note: (a) It is submitted that section 14A would not come into 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 Vs 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 dive....
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....n Rayon Corpn. Ltd. vs. CIT (2003) 182 CTR (Bom) 247 : (2003) 261 ITR 98 (Bom). What is missed out, however, is the fact that in Plastiblends India Ltd.'s case (supra), the co-ordinate Bench had duly considered Indian Rayon Corpn. Ltd.'s case (supra) and then came to the conclusion that Indian Rayon Corpn. Ltd.'s case (supra) decision has no bearing on the question before the Tribunal. Once a co-ordinate Bench comes to this conclusion, 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 vs. 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, cer....
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....her request considering that Hon'ble President has, in a considered decision, turned down earlier request to that effect. In our opinion, the issue does not call for a reconsideration at this stage. 8. As to what should be the binding effect of a per incurium decision, we can do no better than to quote the Hon'ble Andhra High Court in the case of CIT vs. B.R. Constructions (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 vs. 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. vs. Synthetics & Chemicals Ltd. (1991) 4 SCC 139, 163, the observation of Sahai, J. on this aspect is : 'Uniformity an....
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....oint. But he cannot ignore a Bench decision, as I am asked to do on the ground that some observations of the Supreme Court made in different context might indicate a different line of reasoning. A Division Bench must ordinarily respect another Divisional Bench of co-ordinate jurisdiction but if it differs, the case should 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 ....
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.... per incuriam. In Salmond on Jurisprudence, Twelfth Edition, at p. 151, the rule is stated as follows : 'The mere fact that (as is contended) the earlier Court misconstrued a statute, or ignored a rule of construction, is no ground for impugning the authority of the precedent. A precedent on the 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. vs. CIT (1987) 60 CTR (AP) 151 : (1986) 158 ITR 224 (AP), as noticed above, the Division Bench treated the judgment in Ch. Atchaiah vs. 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 un....
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....ally turns on this precedent. 8. Let us now come back to the core issue before us. The short question that we have to really adjudicate is as to whether the premium of Rs. 1,49,99,922 paid on the keyman insurance policies can be allowed on the facts of this case. As to what 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 firstmentioned 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 ....
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....any other investment scheme, it meets the tests laid down under section 10(10D). 13. The requirement of pure insurance policy is something which is not laid down by the statute. Yet, it is this which has been inferred by the authorities below. 14. Even if such an 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 judgmen t 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 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 ....
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....reof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute". 15. It is also important to bear in mind the fact that the IRDA guidelines, no matter how relevant as these guidelines may be, have no 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 e....
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....hout prejudice to the generality of the provisions contained in subsection (1), the powers and functions of the Authority shall include, - (a) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; (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 conn....
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.... aberrations in sale of keyman insurance policies and it is was a direction to the insurance companies that effect 27th April 2005 only term insurance policies should be issued as keyman insurance cover. That is between the regulatory authority and the insurance companies 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 ....
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....ncurred on the premium paid for keyman insurance policies in previous years as business expenditure under Section 37 of the Act. Right from 1991-92 upto 1993-94 and thereafter even in respect of Assessment Year 1997-98, the expenditure was allowed. 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....
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.... a disruption of the business that may result due to the premature death of a partner. Therefore, the expenditure which is laid out for the payment of premium on such a policy is incurred wholly and exclusively for the purposes of business." (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 d....