Law:

Section:

Section 40a(5) of the income-tax act, 1961-business dissallowance-remuneration, etc., paid in excess of prescribed limits-assessee-company paid premium on personal accident insurance policy in taken by it in relation to some of its employees-concerned employees had no right to claim amount payable under policy which could only be claimed by assessee-whether premium paid by assessee on said policy could be treated as perquisite for the purpose of section 40a(5)-held, no. Facts The assessee was an industrial company. The ITO made a disallowance of certain amount under section 40A(5) in respect of the premia paid on the accident insurance policy taken by the assessee in relation to personal accident or death by accident of some of its employees. The ITO was of the opinion that the benefit under the insurance policy accrued to the employees and not to the employer. So he considered it as a perquisite under Explanation 2 to section 40A(5). On appeal, the AAC held that the contract of insurance for personal accident was between the assessee and the insurance company and the amounts under the policy were payable to the assessee-company and, therefore, the premia paid under the policy should not have been taken as a perquisite for the purpose of Explanation 2 to section 40A(5). On appeal by the revenue, the Tribunal also affirmed the AAC's order. On reference : Held Even casual look at the definition of 'perquisite', as given in Explanation 2(b) to section 40A(5), would clearly indicate that any payment made by the assessee on behalf of the employees either under an obligation or voluntarily, must finally enure to the benefit of the employees and the employees must have a right therein. In the instant case, a perusal of the terms of the insurance policy revealed that the employees did not take the policy. The policy was taken by the assessee. Under the policy the insured was the assessee-company and not the employees. There was a schedule enumerating the names of the employees whose risks had been covered under the policy, but those employees had no right to claim the amount payable under the policy. It could be claimed only by the assessee. It was indeed for the…

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