ACIT, New Delhi V. M/s. Spank Hotels Pvt. Ltd., New Delhi

ITA 4452/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5499 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 13-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Assessee Lawyers: V K JAIN
• Keywords: Fair market value

Judgement Text

ITA NO. 4452/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER I.T.A. NO. 4452/DEL/2012 A.Y. : 2009-10 ACIT, CIRCLE 9(1), ROOM NO. 163, C.R. BUILDING, NEW DELHI VS. M/S SPANK HOTELS PVT. LTD., B-6/17, SAFDARJUNG ENCLAVE, NEW DELHI (PAN:AAJCS6454Q) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. V.K. JAIN, ADVOCATE DEPARTMENT BY : S MT. RENUKA JAIN GUPTA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS-XII), NEW D ELHI DATED 28.5.2012 PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE ISSUE RAISED IS THAT LD. CIT(A) ERRED IN DE LETING THE ADDITION OF RS. 48,30,000/- MADE BY THE AO ON ACCOUNT OF EXC ESSIVE REMUNERATION TO THE DIRECTOR U/S. 40A(2)(B) OF THE ACT. 3. IN THIS CASE AO NOTED THAT THE ASSESSEE HAS PAID RS. 60,30,000/- ON ACCOUNT OF SALARY AND HRA PAID TO TH E DIRECTOR OF THE COMPANY. AO WAS OF THE OPINION THAT THE SAME WAS EXCESSIVE. HENCE, INVOKING THE PROVISIONS OF SECTION 40A(2)(B) . ASSESSING OFFICER DISALLOWED RS. 48,30,000/- OUT OF THE ABOVE . 4. UPON ASSESSEES APPEAL LD. CIT(A) HELD AS UNDER: - ITA NO. 4452/DEL/2012 2 THIS ISSUE HAS BEEN DECIDED BY ME IN THE EARLIER O RDER FOR ASSTT. YEAR 2008-09 AND I HOLD THE SAME VIEW AS THE FACTS ARE SIMILAR. AFTER CONSIDERING THE SUBMISSION S GIVEN BY THE APPELLANT AS WELL AS OBSERVATIONS MADE BY TH E AO I AM OF THE OPINION THAT IN ORDER TO MAKE DISALLOWA NCE U/S. 40A(2)(B) IT IS NECESSARY THAT THE AO SHOULD E STABLISH THAT BENEFITS GIVEN TO THE RELATED PARTIES ARE MORE THAN THE FAIR MARKET VALUE. IN THIS CASE THE DIRECTOR P . KESHWANI HIMSELF IS A PROFESSIONAL AS HE IS B-TECH FROM IIT AND AS WELL AS VICE PRESIDENT ALONG WITH EXPERI ENCE IN TAJ GROUP OF HOTEL AS CHIEF OPERATING OFFICER AND V ICE PRESIDENT WITH A T KEARNEY INC. AS THEIR DIRECTOR I NDIA. THE DIRECTOR HIMSELF IS A PROFESSIONAL WHO WITH H IS PROFESSIONAL EXPERTISE STEERED THE COMPANY AND EAR NED PROFITS WELL WHILE COMPARING WITH THE LAST YEAR YEA RS. HENCE, THE ADDITIONS OF RS. 48,30,000/- IS DELETE D. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD COUNSEL OF THE ASSESSEE IN THIS CASE AT THE OUTSET SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 4631 /DEL/2011 (A.Y. 2008-09) VIDE ORDER DATED 22.6.2012 AND IN ITA NO. 3306/DEL/2010 (A.Y. 2007-08) VIDE ORDER DATED 10.10.2012. 7. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D SUBMITTED THAT THE FACTS IN THE PRESENT YEAR MAY BE DIFFERENT FROM OTHER EARLIER YEARS. HOWEVER, SHE COULD NOT DIFFERENTIATE THE FA CTS. ITA NO. 4452/DEL/2012 3 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THE AO HAD MADE DISALLOWANC E IN THE SALARY PAID TO THE DIRECTOR U/S. 40A(2)(B) FOR THE ASSTT. YEAR 2008-09 AND 2007-08, THESE WERE DULY DELETED BY THE TRIBUNAL. IN THESE YEARS THE TRIBUNAL HAS HELD THAT THE SALARY PAID TO THE DIRECTOR WAS REASONABLE. THERE IS NOT CHANGE IN THE ACTIVITY OF THE ASSESSEE. NOR LD. D.R. COULD POINT OUT ANY CHANGE IN THE FACTS.WE FIND THAT THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO ONE DEAL T WITH BY THE TRIBUNAL AS ABOVE. IT WILL BE WORTHWHILE TO REFE R THE DECISION OF THE TRIBUNAL IN ITA NO. 3306/DEL/2010 (A.Y. 2008-09) A S MENTIONED ABOVE. 5. AFTER CONSIDERING THE SUBMISSIONS AND PERUSIN G THE MATERIAL ON RECORD. WE FIND THAT ASSESSEE DESERVES TO SUCCEED ON THE ISSUE INVOLVED. IT IS SEEN THAT AO HAS DISALLOWED SALARY U/S. 40A(2)(B) FOR SUCCEEDING YEAR I.E. A.Y. 2008-09 ALSO. THE SALARY WAS DISALLOWED U/S. 40A(2)(B) WHICH WAS DELETED BY CIT(A) AND TRIBUNAL HAS CONFIRMED THE ORDER OF THE LD. CIT(A) FOR A.Y. 2008-09. THERE IS NO CHANGE IN FACTS AND CIRCUMSTANCES. IN SUBSEQUENT YEAR, THE SALARY PAID TO THE SAME DIRECTOR, HAS BEEN HELD AS REASONABLE BY THE TRIBUNAL. THEREFORE, IN ITA NO. 4452/DEL/2012 4 OUR CONSIDERED VIEW IN PRECEDING YEAR, IT CANNOT BE SAID THAT THE SALARY AMOUNT IS NOT JUSTIFIED. SAME ACTIVITIES ARE INVOLVED I.E. EARNING OF DIVIDEND AND AS EARNING OF INTEREST IN SUBSEQUENT YEAR. NOW LD. DR WANTS THAT SALARY SHOULD BE ALLOWED ONLY OF THE PROPORTIONATE AMOUNT OF THE SERVICES RENDERED. IT IS VERY DIFFICULT TO ATTRIBUTE THE PAR T OF SERVICES PROVIDED BY THE DIRECTOR THAT HOW MUCH PROPORTIONATE IS CORRECT OR HOW MUCH IS NOT CORRECT. THIS HAS TO BE SEEN IN VIEW OF THE SECTION 40(A)(2)(B) IN WHICH BASIS THE ASSESSING OFFICER HAS DISALLOWED. 6. AS STATE ABOVE, THE ORDER OF ASSESSING OFFICER WAS NOT APPROVED EITHER BY LD. CIT(A) OR BY TRIBUNAL FOR IMMEDIATELY SUCCEEDING YEAR. RESPECTFULLY FOLLOWING THE TRIBUNAL, WE DIRECT TO ALLOW HIS CLAIM FOR THE YEAR UNDER CONSIDERATION ALSO. 9. NOW WE FIND THAT TRIBUNAL IN EARLIER YEARS H AS HELD THAT AO WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF THE DIRECTORS REMUNERATION U/S. 40A(2)(B). IN THE PRESENT YEAR, W E FIND THAT FACTS ITA NO. 4452/DEL/2012 5 ARE IDENTICAL. HENCE, FOLLOWING THE PRECEDENT AS A BOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/2/2014, UP ON CONCLUSION OF HEARING. SD/- SD/- [ [[ [C.M. GARG C.M. GARG C.M. GARG C.M. GARG] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER A AA ACCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER DATE 13/2/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES