2011 (7) TMI 1363

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....king the fact that the payment made to contractor is falling within the ambit of sec. 194C and it can not be considered for redistribution amongst the labourers.  [2] On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the additions of Rs. 4,00,000/- overlooking the fact that the evidence regarding the surrender value of Keyman Insurance Policy endorsed / assigned in favour of Shri Mitesh R Patel was not substantiated. Relief claim in appeal. The order of the CIT(A) on the issues raised in the aforesaid Grounds be set aside and that of the AO be restored." 2. Adverting first to ground no.1 in the appeal, facts, in brief, as per relevant orders are that e-retur....

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....uery by the AO, proposing to disallow the aforesaid amount u/s 40(a)(ia) of the Act, the assessee replied vide their letter dated 08-12-2008 that there was no contractor involved in the payments to labourers so as to attract the provisions of section 194C of the Act. The payment was made directly to the workers, coming from nearby villages and did not exceed Rs. 20,000/- each. However, the AO did not accept the submissions of the assessee in view of the aforesaid order dated 15-05-2007 of the ITO, TDS and accordingly, disallowed the amount of Rs. 33,77,874/- u/s 40(a)(ia) of the Act. 3. On appeal, the learned CIT(A) deleted the disallowance while relying upon the order dated 22-05-2008 in appeal no.CAB/IV- A-88, 89 & 90/07-08 for AYs 200....

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....of the case as also the aforesaid decision of the ITAT . We find that the ITAT in the aforesaid order dated 11-02-2010 concluded that the payments having been made to representatives of the labourers through their Mukadam, who were employees of the assessee and did not exceed the prescribed limits, these payments did not fall within the ambit of section 194C of the Act. The ITAT, accordingly, held as under:  "8 We have heard the rival contentions and gone through the facts and circumstances of the case. As we have noted above that the assessee has filed complete details vide letter dated 08-05-2007 and it is noted that the assessee instead made payments to labourers rather the assessee has made payment to the representative of....

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.... disallowance in the following terms:-  "4. Last ground of appeal is regarding disallowance of Keyman Policy Insurance of Rs. 4,00,000/-. The Assessing Officer, on the basis of endorsement in the policy of Shri Devendra R. Patel, was of the view that appellant company had assigned the policy to Shri Mitesh R. Patel. As per Assessing Officer, since nothing contrary was on record, it was clear that benefits would be enjoyed by the assignee and not the appellant. Assessing Officer held that the policy obtained by the appellant therefore, did not fall within the category of Keyman Insurance and disallowed insurance premium of Rs. 4,00,000/-. 4.1 Before me, appellant filed copy of policy on life of Devendra R. Patel and su....

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....of assessee. 4.2. I have considered the matter. As per CBDTs Circular No.762, premium on Keyman Insurance premium is an allowable business expenditure. In view of clear cut clarification by ICICI Prudential Life Insurance Co. Ltd. that the policy concerned was a Keyman Insurance policy taken by the appellant on life of its director and policy was in the name of the appellant and not assigned in favour of M. R. Patel, the insurance premium of Rs. 4,00,000/- is directed to be allowed." 8. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the findings of the AO while the learned AR on behalf of the assessee supported the findings of the learned CIT(A). 9. We hav....