TaxTMI 
TaxTMI 
2015 (12) TMI 1752
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....f India under "Employment-Employee Scheme" or LIC for the following persons: Policy number Name of Life Assured Premium Paid (Rs. ) 765911607 Mr. Joseph Anthory John 20,00,000 765911608 Mr. Milton Ambrose John 15,00,000 Coming to the argument of the Assessing Officer that it is a close ended fund with a lock in period of 3 years, the Assessing Officer's arguments lack merit. It may be seen that even under Section 80C, contribution to ULlP Policies qualifies for deduction in the overall limit. When a particular policy is considered allowable for 80C deduction, it is not clear as to how the same policy may be barred from claiming deduction under section 37(1) of the Income Tax Act, 1961. The Assessing Officer has also failed to note that in case the policy is surrendered before the expiry of three years, then, whatever amount that is received by the assignee, it becomes taxable in his hands. Hence the arguments of the A.O. fails on this score. 3.1 With respect to the Assessing Officer's view that the premium paid for share holders, it is submitted that the said persons on whose behalf premium are paid come under the definition of "Of....
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....th life insurance policy to claim the expenditure as Keyman Insutrance. Accordingly, the CIT (Appeals), confirmed the addition made to the extent of Rs. 35,00,000/- in the hands of the assessee. Against this, the assessee is in appeal before us. 5. We have heard both the parties and perused the material on record. The main reason for disallowance by the CIT(Appeals) is that the premium paid in the name of the Directors are not covered under LIC and it cannot be allowed as they are Directors of the company. It is to be noted that Keyman Insurance Policy is an allowable deduction as per the provisions of sec.37(1) of the Act. In this regard, CBDT had also issued a Circular No.762 dated 18.2.1998. Further, it cannot be said that the Directors of the company are not employees of the company and the premium paid in the name of the Directors could be allowed under the said scheme. 6. We also find that while deciding the issue of allowability expenses of Keyman Insurance Policy Premium, ITAT Bilaspur Bench in the case of Sunita Finlease Ltd. Vs DCIT reported in [2008] 118 TTJ (Bilaspur) 263 has held as under: "The policy known as "Keyman Insurance Policy" provides for an in....
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....profitability of the business. The premium is paid by the employer." 7.1 In our opinion, the payment of premium made to the LIC in the name of Directors are covered by the above Circular and it is allowed u/s.37(1) of the Act. Further, we make it clear that the premium paid by the assessee company is to be considered as perquisite in the hands of the recipient. With these observations, the appeals of the assessee are allowed. 8. The ground raised by the Revenue in its appeal is that the CIT (Appeals) erred in deleting the disallowance of speculation loss of Rs. 1,06,61,901/- on account of cancellation of foreign currency forward contract by treating it as trading loss. 9. The facts are that the assessee company engaged in the business of manufacturing garments and generation of wind power filed its return of income for the assessment year 2008-09 on 10.9.2009 declaring an income of Rs. 2,57,51,585/-. The case was selected for scrutiny and the assessment was completed as under : "Returned income Rs. 2,57,51,585/- Add: 1. Disallowance of set off of loss in Speculation business loss In forward contract Rs. 2,04,96,437/- Less: Profit on forward ....
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....grieved, the assessee carried the matter in appeal to the CIT(A). The first appellate authority confirmed the assessment order. Being aggrieved, the assessee carried the matter in appeal to the Tribunal, which took the view that the assessee was an exporter of cotton; that the assessee was an export house; that it had entered into transactions for export of cotton; that the assessee was entitled to book foreign exchange against export orders received by it; that the transaction was done with the permission of the Reserve Bank of India; that such contracts were incidental to the assessee's business of export of cotton; and, therefore, they did not represent speculative transactions. Accordingly, the Tribunal allowed the appeal. Being aggrieved, the Department has come by way of appeal to this Court. Findings The assessee was not a dealer in foreign exchange. The assessee was a cotton exporter. The assessee was an export house. Therefore, foreign exchange contracts were booked only as incidental to the assessee's regular course of business. The Tribunal has recorded a categorical finding to this effect in its order. The AO has not considered these facts. Und....
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....was neither commodity nor shares. 33. The definition of "speculative transaction", will not apply to a situation where the purpose of entering a forward contract was to hedge/safeguard against any loss on account of repayment of principal amount of the loan: cancellation of the contract was identical to that object and consequently any loss/gain arising from such cancellation is directly related to repayment of the loan. 34. Further, attention is also drawn to proviso (c) to s.43(5) of the Act, which excludes a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing, etc.to guard against loss which may arise in the ordinary course of his business to such member from the definition of speculative transaction. Respectfully following the above decisions, we hold that Forex contracts entered into by the assessee will not fall under the definition of "speculative transaction". The grounds taken by the assessee on this issue are allowed." Following the aforesaid order of the Tribunal, the CIT (Appeals) held that the speculation loss of Rs. 1,06,61,901/- claimed by the assessee will b....
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....Therefore, both profit/loss from all the share delivery transactions and derivative transactions are having the same meaning, so far as sec.43(5) of the Act is concerned. Again, in view of the fact that both delivery transactions and derivative transactions are non-speculative as far as sec.43(5) is concerned, it follows that both will have the same treatment as far as application of Explanation to sec.73 is concerned. Therefore, aggregation of the share trading profit and loss from derivative transactions should be done before the Explanation to sec.73 is applied. The above view has been taken by Special Bench of this Tribunal, Mumbai Bench, in the case of CIT v. Concord Commercial Pvt. Ltd. (2005) 95 ITD 117 (Mum)(SB) . In this case, the Special Bench held that : "Before considering whether the assessee's case is hit by the deeming provision of Explanation to Sec. 73 of the Act, the aggregate of the business profit / loss has to be worked out based on the non-speculative profits; either it is from share delivery or from share derivative." 8. From the above, it is concluded that both trading of shares and derivative transactions are not coming under the purvi....
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.... and selling of shares. An answer to this question is to be found in the explanation appended to Section 73 which reads as follows: Explanation: where any part of the business of a company other than a company whose gross total income consists mainly of income which is chargeable under the heads "interest on securities", or a company the principal business of which is the bu9siness of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase. In order to resolve the issue before us, the section has to be read in the manner as follows: "Explanation : Where any part of the business of a company (... ... ... ... ... ... ... ... ... ... ... ... ... ... .... ... ... ... ... ... .... ... ... ... ... ... ... ... ... .... ... ... .. .. ... .. ... ... ... .. ... .. ... ... ... .. ... ... .. .... ... ... ... .. ... .. ... ... ... ... .... ... ... ...) consist in the purchase and sale of shares of other companies, such company shall, for the purposes of this s....
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....ed any single bill to any of the contract and had not provided any purchase order during the assessment or appellate proceedings. ITAT found that in the case under consideration assessee was not dealing in Foreign Exchange, therefore transactions entered into by it in Foreign Exchange cannot be held to be hedging transactions. As the assessee was dealing in diamonds and FC entered into only for diamonds would have been covered by the proviso (a) to the section 43(5)of the Act. As held by the Hon'ble High Court of Calcutta in the matter of Gourepore Co. Ltd ,onus was on the assessee to prove that the transactions in question were not of a speculative nature. ITAT was of the opinion that it had failed to discharge the onus cast upon him by the statute. It was also not able to contradict the finding of fact that booking and cancellation of FC of foreign exchange were not in respect of specified export or import. Besides, finding of fact given by the Revenue Authorities remained un-contravened that loss in question, shown by it pertained to those FC transactions, against which no actual delivery of foreign exchange was made. On appreciation of the facts surrounding the transaction ....