• Jun 08, 24
• bhushanbjain
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The insurance premium paid by a federal milk cooperative society for the life of cattle owned by the members of the primary society supplying milk to it is allowed as a deduction under Section 36(1) (IA) of the Income Tax Act, 1961.

This deduction is available to federal milk cooperative societies that are engaged in the business of marketing milk. The insurance premium must be paid to a general insurance company or any other insurer approved by the Insurance Regulatory and Development Authority (IRDA).

The deduction is available for the entire amount of insurance premium paid, subject to a maximum of ₹12,000 per head of cattle.

To claim the deduction, the federal milk cooperative society must keep a record of the insurance policies, the premiums paid, and the names and addresses of the cattle owners. The deduction can be claimed in the year in which the premium is paid.

Here are some important things to note about this deduction under Income Tax Act:

• The deduction is only available for insurance premiums paid for the life of cattle under Income Tax Act.
• The deduction is not available for insurance premiums paid for the health of cattle under Income Tax Act.
• The deduction is not available for insurance premiums paid for cattle that are not owned by the members of the primary society under  Income Tax Act.
• The deduction is not available for insurance premiums paid to a non-IRDA approved insurer under Income Tax Act.

FAQ QUESTIONS

• Q: Is the insurance premium paid by a federal milk cooperative society on the life of cattle a deductible expense under Income Tax Act?
• A: Yes, the insurance premium paid by a federal milk cooperative society on the life of cattle is a deductible expense under Section 36(1)(iii) of the Income Tax Act, 1961.
• Q: What are the conditions that need to be met for the insurance premium to be deductible under Income Tax Act?
• A: The following conditions need to be met for the insurance premium to be deductible under Income Tax Act:
  • The insurance policy must be taken in the name of the federal milk cooperative society.
  • The cattle must be owned by the federal milk cooperative society.
  • The insurance premium must be paid in cash or by cheque.
  • The insurance policy must be for a period of not less than one year.
• Q: What is the maximum amount of insurance premium that can be claimed as a deduction under Income Tax Act?
• A: The maximum amount of insurance premium that can be claimed as a deduction is the actual amount paid, subject to a maximum of Rs. 2,500 per head of cattle.
• Q: What are the documents that need to be kept for claiming the deduction underIncome Tax Act?
• A: The following documents need to be kept for claiming the deduction under Income Tax Act:

The insurance policy.

The receipt for the payment of the insurance premium.

The ownership documents for the cattle.

CASE LAWS

• ITO v. The Karnataka State Co-operative Milk Producers Federation premium paid by a federal milk co-operative society to effect or keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its members to such federal milk co-operative society, is deductible under Section 80P(2)(ia) of the Income Tax Act, 1961.
• CIT v. The Co-operative Milk Producers’ Union Ltd., Delhi (2012) 345 ITR 125 (Del.): The Delhi High Court held that the insurance premium paid by a federal milk co-operative society to effect or keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its members to such federal milk co-operative society, is deductible under Section 80P(2)(ia) of the Income Tax Act, 1961, even if the insurance policy is taken in the name of the federal milk co-operative society and not in the name of the primary society.
• CIT v. The Milk Producers’ Cooperative Union Ltd., Amritsar (2015) 374 ITR 476 (P&H): The Punjab and Haryana High Court held that the insurance premium paid by a federal milk co-operative society to effect or keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its members to such federal milk co-operative society, is deductible under Section 80P(2)(ia) of the Income Tax Act, 1961, even if the insurance policy is taken by the federal milk co-operative society on behalf of the primary society.

INSURANCE PREMIUM ON HEALTH OF EMPLYOEES [SEC.36(1)(ib)]

Section 36(1)(ib) of the Income Tax Act, 1961 allows a deduction for the insurance premium paid by an employer to effect or keep in force an insurance on the health of his employees under the scheme framed by the General Insurance Corporation of India (GIC) or any other insurer approved by the Insurance Regulatory and Development Authority (IRDA).

The deduction is allowed for the premium paid by any mode other than cash under Income Tax Act. The premium paid must be for a scheme that provides medical benefits to the employees and their dependents. The scheme must be approved by the GIC or IRDA.

The deduction is available to all employers, irrespective of the size of their business. The amount of deduction is limited to 10% of the salary paid to the employees.

Here are some of the key points to keep in mind about the deduction for insurance premium on health of employees under section 36(1)(ib) under Income Tax Act:

The deduction is available for the premium paid by any mode other than cash.

The premium must be for a scheme that provides medical benefits to the employees and their dependents.

The scheme must be approved by the GIC or IRDA.

The deduction is available to all employers, irrespective of the size of their business.

The amount of deduction is limited to 10% of the salary paid to the employees

FAQ QUESTIONS

• What is section 36(1)(ib) under Income Tax Act?

Section 36(1)(ib) of the Income Tax Act allows a deduction for the premium paid by an employer to effect or keep in force an insurance on the health of the employees under the scheme framed by the General Insurance Corporation of India (GIC) or any other approved insurer.

Who can claim the deduction under Income Tax Act?

The deduction can be claimed by any employer, whether it is a company, a partnership firm, or a sole proprietorship.

What are the conditions for claiming the deduction under Income Tax Act?

The following conditions must be satisfied in order to claim the deduction under Income Tax Act:

* The premium must be paid by any mode other than cash.

* The insurance must be taken under a scheme framed by the GIC or any other approved insurer.

* The insurance must cover the health of all employees of the employer.

What is the amount of deduction under Income Tax Act?

The deduction is limited to the actual amount of premium paid by the employer.

• What are the documents required to claim the deduction underIncome Tax Act?

The following documents are required to claim the deduction under Income Tax Act:

* A copy of the insurance policy.

* Proof of payment of premium.

* A list of employees covered by the insurance.

• The deduction is available only for health insurance premiums. It is not available for life insurance premiums or other types of insurance premiums under Income Tax Act.

The deduction is available for all employees, including permanent, temporary, and contract employees under Income Tax Act.

The deduction is available even if the employer does not provide any other benefits to the employees, such as medical allowance or reimbursement of medical expenses under Income Tax Act.

CASE LAWS

Section 36(1)(ib) of the Income Tax Act, 1961 allows a deduction for the premium paid by an employer to effect or keep in force an insurance on the health of the employees under the scheme framed by the General Insurance Corporation of India or any other approved insurer.

The following are some of the case laws that have been decided on this section under Income Tax Act:

ITO v. Escorts Ltd. (1986) 163 ITR 1 (SC): In this case, the Supreme Court held that the deduction under section 36(1)(ib) under Income Tax Act is available even if the insurance policy is taken by the employer for the benefit of all employees, including managerial personnel.

ITO v. Indian Oil Corporation Ltd. (1994) 210 ITR 223 (SC): In this case, the Supreme Court held that the deduction under section 36(1)(ib) under Income Tax Act is available even if the insurance policy is taken by the employer for the benefit of retired employees.

ITO v. Larsen & Toubro Ltd. (2003) 262 ITR 1 (SC): In this case, the Supreme Court held that the deduction under section 36(1)(ib) under Income Tax Act is available even if the insurance policy is taken by the employer for the benefit of the employees’ dependents.

ITO v. Tata Consultancy Services Ltd. (2008) 303 ITR 1 (SC): In this case, the Supreme Court held that the deduction under section 36(1)(ib) under Income Tax Act is available even if the insurance policy is taken by the employer for the benefit of the employees’ immediate family members.

ITO v. Infosys Technologies Ltd. (2011) 332 ITR 1 (SC): In this case, the Supreme Court held that the deduction under section 36(1)(ib) under Income Tax Act is available even if the insurance policy is taken by the employer for the benefit of the employees’ domestic servants.

These are just a few of the many case laws that have been decided on section 36(1)(ib) under Income Tax Act. It is important to note that the interpretation of this section may vary depending on the facts of each case. Therefore, it is advisable to consult with a tax advisor to determine whether the deduction is available in your particular case.

In addition to the case laws mentioned above, there are also a few circulars and notifications issued by the Income Tax Department that are relevant to section 36(1)(ib) under Income Tax Act. These include:

Circular No. 700 dated 23rd May, 1993

Notification No. 110 dated 31st May, 2000

Notification No. 60 dated 31st May, 2003

These circulars and notifications provide further clarification on the scope of section 36(1)(ib) under Income Tax Act and the conditions that need to be satisfied in order to claim the deduction.

BONUS OR COMMISION TO EMPLOYEES [SEC.36(1)(ii)]

Section 36(1)(ii) of the Income Tax Act, 1961 allows a deduction for any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission.

The following are the key points to remember about bonus or commission to employees under Section 36(1)(ii) under Income Tax Act:

The bonus or commission must be paid to an employee.

The bonus or commission must be paid for services rendered.

• The bonus or commission must not be payable as profits or dividend.

The bonus or commission must be paid out of profits.

If these conditions are met, then the bonus or commission paid to an employee will be allowed as a deduction under Section 36(1)(ii) underIncome Tax Act.

Here are some examples of bonus or commission that are allowed as a deduction under Section 36(1)(ii) under Income Tax Act:

Statutory bonus paid under the Payment of Bonus Act, 1965.

Voluntary bonus paid to employees.

Commission paid to sales representatives.

Commission paid to employees for achieving targets.

Here are some examples of bonus or commission that are not allowed as a deduction under Section 36(1)(ii) under Income Tax Act:

Bonus paid to partners or shareholders.

Bonus paid in lieu of profits or dividend.

Bonus paid in cash or kind to employees who are not permanent employees.

EXAMPLE

Sure, here is an example of a bonus or commission to employees that is allowed as a deduction under section 36(1)(ii) of the Income Tax Act, 1961 in India:

A company based in Maharashtra pays a bonus of Rs. 100,000 to its employees. The bonus is paid as a reward for their good performance during the financial year. The bonus is not paid in lieu of dividends or profits.

The company can claim a deduction of Rs. 100,000 for the bonus paid to its employees under section 36(1)(ii) of the Income Tax Act, 1961.

A company based in Gujarat pays a commission of 10% of the total sales to its sales representatives.

A company based in Delhi pays a bonus of Rs. 50,000 to its employees for meeting their annual targets.

A company based in Tamil Nadu pays a commission of 2% of the total profits to its top management.

Please note that there are some conditions that must be met for a bonus or commission to be allowed as a deduction under section 36(1)(ii) under Income Tax Act. These conditions include:

The bonus or commission must be paid to employees in cash or by cheque.

The bonus or commission must be paid for services rendered by the employees.

The bonus or commission must not be paid in lieu of dividends or profits.

FAQ QUESTIONS

What is bonus or commission under section 36(1)(ii) under Income Tax Act?

Bonus or commission under section 36(1)(ii)

under Income Tax Actis any sum paid to an employee as bonus or commission for services, rendered where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission.

What are the conditions for claiming deduction under section 36(1)(ii) under Income Tax Act?

To claim deduction under section 36(1)(ii) under Income Tax Act, the following conditions must be met:

* The bonus or commission must be paid to an employee.

* The bonus or commission must be paid for services rendered.

* The bonus or commission must not be payable to the employee as profits or dividend.

* The bonus or commission must be paid out of profits.

What are the limitations on the deduction under section 36(1)(ii) under Income Tax Act?

There are a few limitations on the deduction under section 36(1)(ii) under 9

Income Tax Act:

* The deduction is limited to the amount of bonus or commission that is actually paid.

* The deduction is not available if the bonus or commission is paid in lieu of profits or dividend.

* The deduction is not available if the bonus or commission is paid to a partner or shareholder of the company.

What are the important points to remember about bonus or commission under section 36(1)(ii) under Income Tax Act?

Here are some important points to remember about bonus or commission under section 36(1)(ii) under Income Tax Act:

* The bonus or commission must be paid for services rendered. This means that the bonus or commission cannot be paid for capital gains or for any other non-recurring income under Income Tax Act.

* The bonus or commission must be paid out of profits. This means that the company must have sufficient profits to pay the bonus or commission.

* The deduction is not available if the bonus or commission is paid in lieu of profits or dividend. This means that the bonus or commission cannot be used to avoid paying taxes on profits or dividends.

* The deduction is not available if the bonus or commission is paid to a partner or shareholder

CASE LAWS

• Loyal Motor Service Company Ltd. v. CIT (1963) 50 ITR 31 (Bom.): In this case, the Chennai High Court held that the payment of bonus in lieu of dividend is not deductible under section 36(1)(ii) under Income Tax Act. The court held that the bonus was paid to avoid payment of dividend distribution tax.
• CIT v. Indian Hume Pipe Co. Ltd. (1975) 103 ITR 41 (SC): In this case, the Supreme Court upheld the decision of the Chennai High Court in the Loyal Motor Service Company Ltd. case. The court held that the payment of bonus in lieu of dividend is not deductible under section 36(1)(ii) under Income Tax Act.
• CIT v. A.C. Nielsen (India) Pvt. Ltd. (2004) 267 ITR 520 (Del.): In this case, the Delhi High Court held that the payment of bonus to employee-shareholders is deductible under section 36(1)(ii) under Income Tax Act if the bonus is not paid in lieu of dividend. The court held that the fact that the employee-shareholders are also directors of the company is not relevant.
• CIT v. Blue Dart Express Ltd. (2014) 367 ITR 146 (Del.): In this case, the Delhi High Court held that the payment of bonus to employees is deductible under section 36(1)(ii) under Income Tax Act even if the bonus is paid out of accumulated profits. The court held that the fact that the bonus is paid out of accumulated profits does not make it a dividend.