Income Tax Appellate Tribunal ( ITAT ) Pune Bench ruled that the premium paid by the company towards the Life Insurance Policy of the Director in individual capacity is not Business Expenditure.
The assessee Gadgil Holdings Pvt. Ltd., engaged in the business of consultancy and investments filed an appeal against the order of Commissioner of Income (Appeals) [CIT(A)].
The Return of Income for the A.Y. 2015-16 was filed declaring total income of Rs.1,68,690. Against the said return of income, the Assessing Officer (AO) passed under section 143(3) of the Income Tax Act, 1961 at a total income of Rs.2,24,44,390.
While doing so, the AO made addition on account of insurance premium of Rs.1 crore, addition under section 14A Income Tax Act of Rs.70,94,107 and addition on deemed dividend of Rs.51,81,588.
In the present appeal, the tribunal was entrusted to resolve the issue with the addition on account of disallowance of premium paid for life insurance policy of Rs.1 crore.
The bench of Viswanethra Ravi (Judicial Member) and Inturi Rama Rao (Accountant Member) stated that the AO observed the life insurance premium paid insuring the life of director of the appellant company. It was claimed before the AO that premium was paid under key man insurance policy, therefore, the assessee sought deduction as “revenue expenditure”.
Furthermore the tribunal highlighted that the amount was paid by the assessee company and, therefore, in these circumstances, premium is not allowed as a business deduction.
The authority observed that the premium for the director of the assessed firm’s life insurance cannot be deducted since the appellant company was unable to demonstrate the necessity of the expense for business purposes.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
