ORDER
May, 1995
R. K. Gupta, J. M.
1. This appeal has been filed by the assessee against the order dt. 3rd Sept., 1990, passed by the CIT(A)-IV, New Delhi.
2. The only grievance of the assessee is against the disallowance of Rs. 2,000 on account of fire fighting charges under s. 24(1)(ii) of the IT Act, 1961. The assessee has 1/5th share in the property No. 304, Ansal Bhawan, New Delhi. On 29th June, 1987, there was a fire in the said property. The building was sealed. By a letter dt. 3rd Aug., 1987, the Estate Manager, Ansal Bhawan, called upon the assessee to pay his contribution of Rs. 2,000 for providing fire fighting and safety works facility in the building as notified by the Chief Fire Officer, Delhi, in pursuance of Delhi Fire Prevention and Fire Safety Act, 1986. The total expenditure for providing the safety measures to be incurred was Rs. 26,075 out of which Rs. 10,000 was to be borne by the five occupiers and the remaining expenditure was to be borne by the owner of the entire building. The assessee’s 1/5th share worked out to Rs. 2,000, which was paid by him. The other four co-owners also paid their respective 1/5th share. The assessee claimed deduction of Rs. 2,000 under s. 24(1)(ii) of the Act while computing income from property. AO disallowed the claim on the ground that the assessee’s case did not fall under the said provision because the amount paid could not be said to be the premium which expression is directly related to the contract of insurance. On appeal, the action of the AO was confirmed by the first appellate authority. He held that the expenditure was in the nature of capital expenditure and was not covered under s. 24(1)(ii) and even if one were to take a liberal view, the said expenditure at best fell under the head ‘repairs’ and since 1/6th has already been allowed, no further relief can be granted on this account.
3. The learned counsel for the assessee has contended that the expenditure was incurred to ensure safety against the risk of damage and destruction by fire under the instructions of Chief Fire Officer pursuant to notification of the Delhi Administration; that the amount paid was insurance premium and the compensation accruing to the appellant was protection of his source of income; that cl. (ii) of s. 24(1) was neither restrictive to insurance only nor categorical in any manner as pointed out by the AO, and that the word ‘premium’ does not solely imply payment to an insurance company but is of wide import to include all payments to any person under all circumstances, for the limited purpose to ensure against risk of damage or destruction. It was further submitted that the aforesaid provision has to be construed liberally in favour of the assessee. In support of his contention, reliance has been placed on the decision of the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products (1973) 88 ITR 192 (SC). It has further been submitted that the said expenditure was fully allowed in the hands of the assessee’s co-owners for the assessment year under reference.
4. On the other hand, the learned Departmental Representative has contended that the amount paid by the assessee could not be regarded as premium as there was no contract of insurance against the risk of damage or destruction to the property; that it was one time payment for providing fire safety measures and nothing was paid by the assessee in the subsequent year; that a contract of insurance implied (i) periodical payment of an amount called premium, (ii) payment of compensation in case of any damage or destruction to the property, (iii) that the payment is to be made on the happening of a contingency, namely, damage or destruction of the property; that none of the conditions for bringing into existence a contract of insurance is satisfied and that the payment being one time payment for user of the property, it could not be regarded as premium paid to insure property against the risk of damage or destruction.
5. We have considered the rival submissions carefully. Clause (ii) of sub-s. (1) of s. 24 reads as under :
“(ii) the amount of any premium paid to insure the property against the risk of damage or destruction.”
Neither the expression “premium” and nor the expression “insure” have been defined in the Act. The Living Webster Encyclopedic Dictionary of the English language defines the expression “premium” as “the amount paid or agreed to be paid as a consideration for a contract of insurance”. The expression “insure” has been defined as “to guarantee against the risk of loss or harm, to secure indemnity to or on in the case of loss, damage or death”. Keeping in view the meaning of these expressions as above, it cannot be said that the amount paid was premium to insure property in question against the risk of damage or destruction. The said payment was made to provide fire safety measures in the building, the ultimate aim of which might be to ensure the safety of the property against fire. But, in our view, the payment made cannot be regarded as premium for securing the contract of insurance against the risk to the property because in the event of any damage, even after providing safety measures, the assessee will not be entitled to any compensation for the damage to the property in consideration of the amount paid. In the facts and circumstances of the case, the payment in question does not qualify for exemption under s. 24(1)(ii) of the Act.
6. However, having regard to the fact that deduction has been allowed by the tax authorities to the other co-owners, coupled with the fact that the amount involved is very small, we allow the assessee’s claim for deduction of Rs. 2,000.
7. In the result, the appeal is allowed.
R.M. Mehta, A.M.
13th June, 1995
8. I have perused carefully the order proposed by my learned brother, the Judicial Member, and, am in agreement with him right upto the end of para 5 of the order whereby he has taken a view that the amount paid on account of fire fighting charges is not an allowable deduction under s. 24(1)(ii) of the IT Act, 1961. The Judicial Member has considered the matter at length vis-a-vis the facts of the case as also the relevant provisions of law to come to the conclusion that he did. However, I find myself in disagreement with the subsequent directions given by him in para 6 of his order whereby he has allowed the claim for deduction on two grounds, namely, the allowance by the tax authorities to the other co-owners and secondly the amount involved being small. In my opinion these on the facts of the present case cannot be the considerations for allowing the claim especially when the earlier view taken by the Judicial Member is to reject the claim as not being maintainable under the law. Even on the assumption that the claim was allowed in the case of the co-owners by the tax authorities it is for the first time that the Tribunal was seized of the matter and it took a decision after discussing the entire matter and rejecting in the final analysis the assessee’s claim. Similarly, smallness of the amount can be a relevant factor in given cases, but where the issue is strictly of law the Tribunal has to decide the matter accordingly and not be swayed by the quantum involved. I need not reiterate that the present issue before the Tribunal can be a recurring one not only in the assessee’s case but also in the case of all other persons who are so similarly situated. Then again the learned counsel for the assessee has not placed on record the orders of the tax authorities in the case of the “other co-owners” and it is not clear whether such orders if passed were under s. 143(1) or under s. 143(3). In the final analysis, am of the view that the claim for deduction is not maintainable and required to be rejected.
9. In the result, the appeal is rejected.
ORDER OF REFERENCE UNDER S. 255(4) OF THE IT ACT, 1961
19th June, 1995
As there has been a difference of opinion between the Members who heard the present appeal, the same is required to be resolved by the Third Member to be nominated by the Hon’ble President of the Tribunal. The following point of difference is referred :
“Whether, on the facts and in the circumstances of the case, and in accordance with the provisions of law the sum of Rs. 2,000 paid on account of fire fighting charges by the assessee was an allowable deduction under s. 24(1)(ii) of the IT Act, 1961 ?”
Vimal Gandhi, J. M.
1. The Hon’ble President on account of difference in opinion between two learned Members has referred this case to me for disposal in terms of s. 255(4).
2. The facts about which there is no dispute are that the assessee claimed deduction of Rs. 2,000 under s. 24(1)(ii) of the IT Act, 1961, in respect of amount paid by the assessee as fire safety charges. It is stated that the flat in question is situated at 16, K. G. Marg, New Delhi, and is maintained by Ansal Bhawan Maintenance Society. A part of the building caught fire on 29th June, 1987, which led to sealing of the entire building. The administration then directed that fire safety measures should be taken to prevent future occurrence of fire. For providing the above measures, the amount in question was charged from the assessee. The total amount charged was Rs. 10,000. The assessee paid his 1/5th share at Rs. 2,000, the balance having been shared by the other co-owners. It is admitted that in the case of the other co-owners, a similar claim has been allowed.
3. The AO did not allow the claim under s. 24(1)(ii) of the IT Act as in his view, only the insurance premium paid against risk of damage or destruction was permissible. So any amount paid to keep the property safe from any damage or destruction was not covered under the above provision. On appeal, the CIT(A) concurred with the above view.
4. The assessee then brought the issue in appeal before the Tribunal. It was heard by the Bench on 24th Nov., 1994. The file was given to the learned Judicial Member for framing the proposed order. The learned Judicial Member was of the view that payment made by the assessee for providing fire-fighting and safety facilities will not qualify for exemption under s. 24(1)(ii) of the IT Act. All the same, the learned Judicial Member allowed relief to the assessee with the following remarks :
“However, having regard to the fact that deduction has been allowed by the tax authorities to the other co-owners, coupled with the fact that the amount involved is very small, we allow the assessee’s claim for deduction of Rs. 2,000.”
5. The learned Accountant Member did not agree with the view expressed by the learned Judicial Member in para 6 of the order reproduced above. He held that on two grounds, namely, the allowance of deduction by the tax authorities to the other co-owners and, secondly, the amount involved being small, “cannot be the consideration for allowing the claim especially when the earlier view taken by the Judicial Member is to reject the claim as not being maintainable under the law”. He further observed that even if the claim was allowed in the case of the other co-owners by the tax authorities, it was for the first time that the Tribunal was seized of the matter and it took a decision after discussing the entire matter and rejecting it in the final analysis. Similarly, the smallness of the amount can be a relevant factor in given cases, but where the issue is strictly of law, the Tribunal has to decide the matter accordingly and not be dissuaded by the quantum involved. Again, it was not clear whether the orders in the case of the other co-owners were passed under s. 143(1) or under s. 143(3). With the above remarks, the learned Accountant Member accordingly held that the appeal of the assessee should be dismissed.
6. Both the Members framed the following question under s. 255(4) which has been referred to me by the Hon’ble President :
“Whether, on the facts and in the circumstances of the case and in accordance with the provisions of the law the sum of Rs. 2,000 paid on account of fire fighting charges by the assessee was an allowable deduction under s. 24(1)(ii) of the IT Act, 1961 ?”
7. I have heard the parties on the above question. The written submissions submitted by the parties have also been considered. The assessee had emphasised that the scope of the words “premium to insure” in cl. (ii) of s. 24(1) cannot be restricted to premium paid to an insurance company but are entitled to a wider connotation. Thus, any payment made to ensure safety of property against risk of damage or destruction is a permissible deduction. The learned Departmental Representative, on the other hand, has contended that under the provisions of s. 24(1)(ii), only premium paid to “insure the property” is entitled to deduction. The meaning of the word “premium” cannot be enlarged and has to be construed strictly.
8. After considering the question referred as also the submissions of the parties, I am of the view that I have to decide whether the sum of Rs. 2,000 paid by the assessee is a permissible deduction in terms of s. 24(1)(ii) of the Act. In view of agreement between the learned Members that the amount in dispute cannot be allowed as a deduction under the above referred to provision, the question under s. 255(4) should not have been framed in the manner now framed keeping the controversy alive. The question should have been whether on the two reasons given by the learned Judicial Member, the deduction of the disputed amount could be allowed. However, having regard to the questions framed and the arguments advanced by the parties, I would consider whether the amount paid could be allowed as a deduction under s. 24(1)(ii) of the IT Act. A similar deduction in the hands of the other co-owners has already been allowed under s. 24(i)(ii) of the IT Act. It is possible to construe the order of the learned Judicial Member as holding that the view taken in the hands of the other co-owners be not disturbed and interfered with because of the smallness of the amount. For the above reasons, I would consider the above view on the merits in spite of my reservations expressed above.
9. As already noted, the amount in question was paid to the Maintenance Society to provide safety measures to prevent future destruction of the building from fire. The relevant cl. (ii) of s. 24(1) provides as under :
“The amount of any premium paid to insure the property against risk of damage or destruction.”
10. The important words in the above clause are “premium” and “insure”. There cannot be any dispute that insurance premium paid to an insurance company to prevent damage or destruction to a building is entitled to deduction on a plain reading of the provision. The question is whether any sum paid to insure property against risk of damage or destruction and when payment is not made to an insurance company is covered by the clause or not. For determining the above question, it is necessary to appreciate the true import of the words “premium” and “insure” used in the clause.
11. Chambers’ 20th Century Dictionary (1983 Edn.) gives the following meaning to these words :
premium n. a reward : a prize : a bounty : payment made for insurance : a fee for admission as a pupil for a profession : excess over original price or par (opp. to discount) : anything offered as an incentive : pl. premiums, (rare) premia – Premium (Savings) Bond a Government bond, the holder of which gains no interest, but is eligible for a money prize allotted by draw held at stated intervals – at a premium above par. [L. praemium-prae, above, emere, to buy].
insure v. t. to make sure or secure : to guarantee : to make an arrangement for the payment of a sum of money in the event of loss or injury to : to make such an arrangement for the payment of (a sum of money) (arch.) – v. i. to effect or undertake insurance – n. insurability. – adj. insurable that may be insured – ns. insurance the act or system of insuring : a contract of insurance, a policy : the premium paid for insuring : the sum to be received; insurancer (obs.); insurant an insurance policy holder; insurer either party to a contract of insurance (now, strictly the insurance company) [O. Fr. enseurer – en, and seur, sure; see ensure, sure.]
12. It is clear from above that the word “premium” is commonly used to convey “anything more or above par”. The shares, debentures and bonds of blue chip companies are sold at a “premium”. The word premium, therefore, in common parlance means something more than a regulated price or the face value.
The word “premium” does not always have a fixed meaning as payable to an insurance company. The word is used to convey a variety of meanings.
13. In case the word “insure” in the clause under consideration is read as “insurance company”, the other word “premium” would get a fixed meaning. In that case, it would only mean premium payable to an insurance company. The legislature has used the word “insure” and there is no justification to read the word “insure” as insurance company. The word “insure” is a commonly used word and which normally means, “to make sure or secure”. It is, therefore, not possible to read “insure” as an insurance company or policy of insurance. Thus, it is possible to hold that any sum paid to insure a property against risk of damage or destruction would be deductible under s. 24(1)(ii). The above view would serve the purpose and intent of the legislature. There is no good reason why any payment which insures the property against risk of damage or destruction should not be deducted under the provision under consideration and only the premium paid to an insurance company be deducted. There is nothing in the clause under consideration to suggest that the legislature intended to encourage only payments made to insurance companies. The emphasis in the clause is to protect the “property against risk of damage or destruction”. Therefore, any expenditure intended to insure the property against risk of damage or destruction would qualify for deduction. It does not appear to be necessary to restrict the claim of deduction to payment made to an insurance company. There is no dispute that the amount in question was paid to insure the property against risk of damage or destruction and for adopting safety measures as the building had earlier caught fire. Therefore, in my considered view, the amount paid by the assessee in question is entitled to deduction. It is not such a view which can be said to be impossible, obvious inadvertency or an oversight running contrary to reasoning and plain language of the provision. It is a possible view though I must hasten to add that no decision in support of the above view could be cited before me. This should not deter me from taking the above view as, “the life of law has not been logic, it has been experience” (Oliver Wendell Holmes).
14. The related question that has significance is as to what should be the approach where in the cases of the other co-owners similar amount is allowed. In other words, whether in the above situation, a Bench considering the application of the above clause relating to a paltry sum of Rs. 2,000 should take a view different from the one followed in the cases of the other co-owners. On this point, the two learned Members have differed. The difference of opinion has already been recorded and need not be repeated. In my considered opinion, the Tribunal, which is the second appellate authority and the highest fact finding body, should not interfere where the amount involved is insignificant and the view taken on similar facts and circumstances is a possible view. The above equally applies to the two Members constituting a particular Bench. This is necessary for proper and efficient working of the Tribunal and is also necessary for saving precious time and avoidable litigation particularly when all Courts and Tribunals in the country are overburdened. Further, for the aforesaid reasons, I agree with the view taken by the learned Judicial Member and in line with the view that deduction has already been allowed in the case of the other co-owners, the deduction be allowed to the assessee. In the above approach, the Tribunal is not following the order of the AO in the other cases but is trying to be consistent. If deduction has been allowed in one case under similar circumstances, it should be allowed in other cases. In the case of Jaswant Rai vs. CWT (1977) 107 ITR 477 (P&H), their Lordships observed as under :
“If during the same assessment year, the same quantity of wealth in the possession of one co-sharer is subjected to a lower rate of taxation, it would be highly improper to burden a similarly situated co-sharer with a higher rate of tax. If such an action on the part of the assessing authorities is sanctioned, it would militate against the principle of equality of laws enshrined in Art. 14 of the Constitution.”
15. For all the aforesaid reasons, I agree with the order passed by the learned Judicial Member. The matter should now be placed before the regular Bench for passing an appropriate order in accordance with the majority view.