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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
The aforesaid appeal filed by the Revenue and cross objections filed by the assessee are being disposed off by way of consolidated order to avoid repetition of discussion.
and the assessee has also filed application for Condonation of Delay (COD) on the ground that the delay of filing the cross objections is attributable to the firm of Chartered Accountants with whom case was discussed and only after their advice, present cross objections were filed.
Since the application of COD is not supported with any affidavit attributing huge delay of 829 days to the firm of Chartered Accountants, the same is hereby dismissed and consequently cross objections filed by the assessee are dismissed being barred by limitation.
Appellant, DCIT, Circle 63 (1), New Delhi (hereinafter referred to as the ‘assessee’) by filing the present appeal sought to set aside the impugned order dated 29.05.2015 passed by the Commissioner of Income-tax (Appeals)-20, New Delhi qua the assessment year 2012-13 on the grounds inter alia that :-
“1. On the facts and circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs.22,38,319/- on account of commission paid, which was not made exclusively and wholly for the purpose of assessee's business
On the facts and circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs.6,32,549/- on account of key man insurance premium, which was taken on the name of the partners and not for a key employee of the firm of the company. Partners are certainly not employee of the firm and policy taken in the name cannot be allowed as expenditure.
3. On the facts and circumstances of the case the Ld. CIT (A) has erred in deleting the addition of Rs.48,72,309/- on account of excess depreciation claimed at the block value done on the basis of reliance placed upon CIT Vs H.B.
Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessing Officer (AO) noticed that the assessee has debited an amount of Rs.23,43,541/- towards commission payment. On failure of the assessee to furnish the details regarding the new businesses and clients secured through these commission agents to whom payments were made, the AO made addition of Rs.23,43,541/- on account of disallowance of commission payment. AO also disallowed an amount of Rs.7,73,347/- debited by the assessee towards keyman insurance premium on the ground that since partners in whose name the insurance policies were purchased, were not employees of the assessee firm, expenditure cannot be allowed. AO also disallowed excess depreciation claimed at the block value of Rs.1,85,45,485/- @ 60% on the ground that the tankers are required for transportation of gases and not storage unlike gas cylinders by restricting the depreciation @ 30%.
Assessee carried the matter by way of an appeal before the ld. CIT (A) who has deleted the addition by allowing the appeal. Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal.
Assessee has not preferred to put in appearance despite issuance of the notice and consequently, we proceeded to decide the present documents available on the file.
We have heard the ld. Departmental Representative for the revenue to the appeal who has relied upon the order passed by the AO, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUND NO.1
AO disallowed the amount of Rs.23,43,541/- debited by the assessee towards commission payment on the ground that the assessee has not furnished details regarding the new businesses/clients secured through these commission agents to whom the impugned commission as paid. However, when we examine para 6.2 of the impugned order, the ld. CIT (A) has discussed the issue at length who has deleted the addition vide thrashing the facts and circumstances of the case. During appellate proceedings, assessee has duly furnished branch-wise turnover, commission paid, name and address and PAN of the person to whom commission paid along with details of sale value in rupees, sale quantity in kgs., the name of the party, the amount of commission and the TDS on the commission, which has been recorded in para 6.3 of the impugned order in tabulated form.
So, when assessee has duly proved the details which were also placed before the AO, there is no question of disallowing the payment of been furnished.
Moreover, when it is undisputed fact that similar commission payment has been allowed in the earlier year by the Revenue and in the year under assessment percentage of commission vis-à-vis turnover has been reduced to 0.56% from 0.81% and at the same time, turnover of the assessee has increased to Rs.41.82 crores, it cannot be said that commission has not been paid wholly and exclusively for the purposes of assessee’s business. So, when because of the services rendered by the commission agents, turnover has been increased, even by making payment of lesser percentage of commission, the ld. CIT (A) has rightly deleted the addition. So, we find no illegality or perversity in the deletion of the addition by the ld. CIT (A), hence ground no.1 is determined against the Revenue.
GROUND NO.2
AO disallowed an amount of Rs.7,73,347/- debited by the assessee to keyman insurance premium on the ground that keyman insurance premium does not include partners of the firm but only employees. Undisputedly, when keyman insurance policy was made available to the firm by Life Insurance Corporation of India (LIC) vide Circular No.ACTL/1729/4 dated 24.07.2000 under the title “Relaxation under existing under-writing practice” which has categorically extended interfere into the findings returned by the ld. CIT (A).
When we examine para 7.1 of the impugned order again the ld. CIT (A) has thrashed the issue at length on facts as well as on law and deleted the addition by following the decision rendered by Hon’ble Bombay High Court in case of CIT vs. B.N. Exports – 323 ITR 178 (Bom.) wherein Board Circular No.762 dated 18.02.1998 was also discussed. The ratio of the judgment (supra) is extracted for ready perusal as under :-
“Circular No. 762 dated February 18, 1998 ([1998J 230 ITR (St.) 12), clarifies that the premium paid on a Keyman insurance policy is allowable as business expenditure. The object and purpose of a Keyman insurance policy is to protect the business against a financial setback which may occur as a result of premature death, to the business or professional organization. There is no rational basis to confine the allowability of the expenditure incurred on the premium paid towards such a policy only to a situation where the policy is in respect of the life of an employee. A Keyman insurance policy is obtained on the life of a partner to safeguard the firm against a disruption of the business that may result due to 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. The Tribunal held that the expenditure incurred by the assessee, which was a firm, in paying the premium for a Keyman insurance policy obtained by the firm on the life of its partner must be regarded as expenditure incurred wholly and exclusively for the business of the firm. On appeal it was contended that in law a firm has no separate existence from its partners since a firm is not a juristic entity and that there was no relationship of employer and employee between a firm and its partners, there being no contract of service. On appeal: Held, dismissing the appeal, that there was a finding of fact by the Tribunal that the firm had not taken insurance for the personal benefit of the partner, but for the benefit of the firm, in order to protect itself against the setback that may be caused on So, following the decision of B.N. Exports (supra) the ld. CIT 13.
(A) has rightly arrived at the decision that keyman insurance policy obtained for the partners was just to safeguard the partnership firm so as to avoid loss to the business due to untimely death of the partner which would further cause the loss to the employees of the firm in general by way of loss of employment etc.. So, we find no illegality or perversity in the deletion of addition of Rs.7,73,347/- under keyman insurance policy, hence ground no.2 is determined against the Revenue.
GROUND NO.3
AO has restricted the depreciation of Rs.97,44,617/- claimed by the assessee at the block value of Rs.1,85,45,485/- to 30% as against 60% claimed by the assessee on the ground that the tankers used only for transportation of gases and not for storage unlike gas cylinders. We are of the considered view that when the assessee is into the business of ammonia supply transportation of gases in the tankers, it is equally necessary as to store gas in gas cylinders and both the functions are inextricably linked to each other and part and parcel of the business of the assessee.
Ld. CIT (A) has decided the issue in the light of the facts and circumstances of the case in the light of the law laid down by Hon’ble High Court in case of CIT vs. Goyal MG Gases Ltd. (2008) 296 ITR 72 (Delhi) wherein it is held that tankers or gas cylinders attached to the ./2015 CO No.59/Del/2018 body of a truck continuous to be a gas cylinder and is accordingly entitled to depreciation as applicable to gas cylinder in Appendix 1 to the Income-tax Rules, 1962. So, in these circumstances, disallowance of excess depreciation by the AO is not sustainable in the eyes of law. We are of the considered view that ld. CIT (A) has factually and legally passed a valid order by deleting the addition on account of excess depreciation made by the AO, hence we find no scope to interfere into the findings returned by the ld. CIT(A). Ground No.3 is determined against the Revenue.
In view of what has been discussed above, the appeal filed by the Revenue is hereby dismissed and in view of our findings in para 1, cross objections filed by the assessee are also dismissed being barred by limitation. Order pronounced in open court on this 22nd day of July, 2019.