Tuesday, October 14, 2014

Whole premium paid on Keyman Insurance policy was deductible even if policy cover extended to next year

Where assessee purchased Keyman Insurance Policy on last day of relevant financial year, it was entitled to claim full deduction of premium paid during relevant year itself, even though insurance policy cover extended to next financial year.


a)The assessee paid premium in respect of keyman insurance policy.

b)The Assessing Officer (‘AO’) allowed proportionate amount of premium on finding that the assessee had paid a premium only on the last date of the year, and, therefore, the expenditure pertained to the next financial year.

c)The Tribunal, however, allowed assessee's claim in full. The aggrieved revenue filed instant appeal. The High Court held in favour of assessee as under:

1)There was no dispute regarding the allowability of premium on Keyman Insurance Policy. The disallowance was made by the AO only because the assessee took the insurance policy on the last date of the financial year. Therefore, the AO had held that proportionate amount of the premium pertained to the next financial year.

2)This bifurcation was not permissible. The expenditure was made during the financial year relevant to the assessment year under consideration. Therefore, it was allowable.

3)Extension of insurance policy cover to the next financial year would not mean that the premium paid during the year under consideration was not an allowable expenditure. Thus, premium paid on Keyman Insurance Policy was fully deductible. – CIT V. HARIT EXPORTS LTD [2014] 49 taxmann.com 200 (Bombay)

CLB ordered transfer of shares to petitioner-insurer as it had obtained rights for lost shares after paying for those shares

Where petitioner-insurer had obtained right in respect of lost shares of respondent-company after paying insurance claim to insured and company had no objection to transfer of shares, shares were to be transferred in name of petitioner.


a)A broker had taken insurance policy from petitioner to indemnify him for losses including loss of shares. Petitioner executed the transaction for purchase of shares of respondent-company however certificates of said shares were lost.

b)Accordingly, the petitioner-insurer paid a sum as compensation to insured broker who, in turn, transferred all its rights in respect of shares of respondent-company in favour of petitioner.

c)The petitioner filed petition before CLB for transfer of shares contending that he had acquired all rights, title and interest in respect of shares of respondent-Co.

The Company Law Board held in favour of petitioner as under:

1)The Practicing Company Secretary of respondent-company didn’t object to the prayers made in the petition and stated that company would transfer the shares as requested for subject to furnishing of an indemnity bond and meeting compliances as required in terms of Articles of Association of the company for transfer of shares.

2)Since neither transferors and lodgers nor the respondent-company had raised any objection to transfer of shares in favour of petitioner, shares were to be transferred in name of petitioner – ORIENTAL INSURANCE CO. LTD. V. LUPIN LTD. [2014] 49 TAXMANN.COM 92 (CLB - MUMBAI)