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,
• 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 .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 under Income 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 Ltd. (2007) 295 ITR 396 (Kar.): The Karnataka 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.
• 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.