COMMISSIONER OF INCOME TAX-I, LDH. vs. M/S BIG BEN EXPORTS

PDF · subscribers
ITA/628/2010HC Punjab & HaryanaPHHC01093582201026 September 2011Author: MR. JUSTICE HEMANT GUPTA,MR JUSTICE JASWANT SINGH2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose for consideration. Regarding the first two issues, the Court reasoned that Section 36(1)(ib) of the Act contemplates the deduction of premium paid on an employee's insurance policy by the employer. The Court further held that a partner can be considered an employee if they manage the firm's affairs on a whole-time basis and receive a salary. Since the Revenue did not contend that the partner, on whose life the premium was paid, was not a whole-time employee of the firm, the deduction was permissible. The Court dismissed the appeal, finding no substantial question of law. The third issue regarding Section 80HHC deduction was not pressed by the Revenue.

What were the facts?

The Revenue, Commissioner of Income Tax-II, Ludhiana, appealed against the order of the Income Tax Appellate Tribunal (ITAT) concerning assessment year 2004-05. The assessee, M/s Big Ben Exports, a firm engaged in exports, declared an income of Rs. 57,63,520/-. The assessee debited Rs. 10,00,000/- as Keyman Insurance and claimed it as expenditure under Section 37(1) of the Income Tax Act, 1961. The Assessing Officer (AO) allowed this deduction. The Commissioner of Income Tax (Appeals) [CIT(A)] affirmed the AO's finding. The Revenue's appeal to the ITAT was dismissed. The Revenue then filed an appeal before the High Court under Section 260A of the Act.

What were the issues?

The High Court had to decide the following substantial questions of law, as pressed by the Revenue: 1. Whether the Tribunal was legally justified in dismissing the department's appeal when the disallowance was made by the AO under Section 36(1)(ib) of the Income Tax Act, 1961? 2. Whether the Tribunal was legally justified in holding that a partner is an employee for the purpose of Keyman Insurance? The Revenue argued that the insurance premium was paid in respect of a partner, not an employee, and therefore, the deduction under Section 36(1)(ib) was not available, as it only allows deduction for premiums paid by an employer for the health of his employees. The judgment does not record any arguments from the assessee's side.

Which sections of the Income-tax Act were involved?

Section 36(1)(ib),Section 37(1),Section 10(10D),Section 260A,Section 80HHC

AI-generated summary — verify with the full judgment below

#1# IN THE HIGH COURT OF PUNJAB & HAR

YANA AT CHANDIGARH

.

Date of Decision:-26.09.2011 The Commissioner of Income Tax-II, Ludhiana. ......Appellant. Versus M/s Big Ben Exports. ......Respondent. CORAM:- HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE JASWANT SINGH Present:- Ms. Savita Saxena, Advocate for the Appellant. *** HEMANT GUPTA, J.(ORAL) The Revenue is in appeal under Section 260A of the Income Tax Act, 1961(for short the Act) claiming the following substantial questions of law:-

1.

Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in dismissing

the appeal of the department though the said disallowance was made by the assessing officer under Section 36(ib) of the Income Tax Act, 1961?

2.

Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in dismissing

the appeal of the department by holding that the partner is an employee for the purpose of Keyman Insurance?

3.

Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in dismissing

the appeal of the department regarding computation of deduction under Section 80HHC of the Income Tax Act 1961 and confirming the order of the CIT(A) directing the A.O. to consider the cost of trading goods exported attributable to export turnover excluding the turnover of Rs.15,71,637/-, the sale proceeds in respect of which payments were not realized in stipulated time? During the course of arguments learned Counsel for the revenue pressed questions no.1 & 2 as arising out of the order of the Tribunal. The assessee firm is engaged in exports and declared income of #2# Rs.57,63,520/- in its return filed on 30.10.2004. The assessee debited Rs.10,00,000/- as Keyman Insurance and claimed expenditure in terms of Section 37(1) of the Act. The Keyman Insurance Policy in terms of Section 10(10D) of the Act 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. The assessing officer allowed such deductions. The said finding has been affirmed by the Commissioner and later by the Income Tax Appellate Tribunal. Learned Counsel for the revenue has argued that the insurance premium was paid not in respect of the employee but in respect of a partner, therefore, the deduction under Section 36(ib) is not available as the amount of premium paid by an assessee as an employer to avail or get insurance for the health of his employees alone is allowable deduction. Having heard learned Counsel for the revenue we do not find any substantial question arises for consideration. Section 36(1)(ib) of the Act contemplates deduction of the amount of premium paid on the insurance policy of an employee by the employer. A partner can also be an employee when he manages the affairs of the firm on whole time basis and get salary. It is not a case of the revenue that such partner on whose life premium is being paid was not a whole time employee of the firm. In view of the said fact we do not find any substantial question of law arises for consideration. Dismissed. ( HEMANT GUPTA ) JUDGE ( JASWANT SINGH ) JUDGE September 26, 2011 Vinay

More judgments on Section 37(1)

All 6,995 judgments and leading authorities on Section 37(1) →

Recent GST High Court judgments

Search GST case law →