M/s.Hotel & Allied TradesP.Ltd, Cochin V. DCIT, Ernakulam

ITA 678/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64881 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 04-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 15-12-2010
• Court: TRIBUNAL
• Assessee Lawyers: G SARANGAN; P K SASIDHARAN
• Keywords: Capital asset; Depreciation; Capital receipt; Revenue expenditure
• Section: 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 678/COCH/2010 ASSESSMENT YEAR: 2007-08 M/S. HOTEL & ALLIED TRADES (P) LTD., C/O CASINO HOTEL, W/ISLAND, KOCHI-682 003. [PAN : AAACH 8770P] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE-1(1), RANGE-1, ERNAKULAM (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT ) I.T.A. NO. 657 /COCH/2010 ASSESSMENT YEAR: 2007-08 THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE- 1(2), , ERNAKULAM VS. M/S. HOTEL & ALLIED TRADES (P) LTD., CASINO HOTEL, W/ISLAND, KOCHI-682 003. [PAN : AAACH 8770P] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SHRI PRATAP NARAYAN SHARMA, JR. DR ASSESSEE BY SHRI G. SARANGAN & SHRI P.K. SASIDHARAN, FCA DATE OF HEARING 04/09/2012 DATE OF PRONOUNCEMENT 25/10/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE O RDER DATED 15-09-2010 PASSED BY LD CIT(A)-II, KOCHI AND THEY RELATE TO THE ASSES SMENT YEAR 2007-08. I.T.A. NOS. 678 & 657/COCH/2010 2 2. THE ASSESSEE IS ASSAILING THE DECISION OF LD CIT(A) IN CONFIRMING THE FOLLOWING ADDITIONS MADE BY THE AO. (A) DISALLOWANCE OF RS.5.00 LAKHS U/S 40A(2)(A) O F THE ACT, OUT OF THE PAYMENTS MADE TO M/S KARUVILANAKUNNEL ENTERPRISES. (B) DISALLOWANCE OF RS.7,87,795/- MADE U/S 40(A)( IA) OF THE ACT. (C) DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80G OF THE ACT. (D) DEDUCTION OF INVESTMENT SUBSIDY AMOUNT OF RS. 75.00 LAKHS FROM THE COST OF ASSETS FOR THE PURPOSE OF COMPUTING DEPRECI ATION. 3. THE REVENUE IS ASSAILING THE DECISION OF LD CIT(A) IN DELETING THE FOLLOWING DISALLOWANCES:- (A) DISALLOWANCE OF CLAIM OF CURRENT REPAIRS OF R S.73,71,453/- (B) DISALLOWANCE OF PAYMENTS MADE TO DIRECTORS U/ S 40A(2)(A) OF THE ACT- RS.11,48,399/-. (C) DISALLOWANCE OF EXPENSES RELATING TO THE EXEM PTED DIVIDEND INCOME MADE UNDER RULE 8D. (D) DISALLOWANCE OF DEPRECIATION RELATING TO INVE STMENT SUBSIDY. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN HOTEL BUSINESS. IT FILED THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS.2.08 C RORES. THE RETURN OF INCOME WAS TAKEN UP FOR SCRUTINY AND THE AO COMPLETED THE ASSESSMENT BY DETERMINING THE TOTAL INCOME AT RS.8.94 CRORES BY MAKING VARIOU S ADDITIONS. THE APPEAL FILED BY THE ASSESSEE BEFORE LD CIT(A) WAS PARTLY ALLOWED . HENCE BOTH THE PARTIES ARE IN APPEAL BEFORE US ON THE ISSUES DECIDED AGAINST E ACH OF THEM. 5. WE SHALL FIRST TAKE UP THE APPEAL OF THE ASS ESSEE. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF RS.5.00 LAKHS MADE U/S 40A(2)(A ) OUT OF THE PAYMENTS MADE TO A CONCERN NAMED M/S KURUVILANAKUNNEL ENTERPRISES. THE ASSESSEE PAID A SUM OF RS.16,22,493.30 TO THE ABOVE SAID CONCERN AND CL AIMED THE SAME AS I.T.A. NOS. 678 & 657/COCH/2010 3 EXPENSES. IT WAS STATED THAT THE ABOVE SAID PAYMEN TS WERE MADE TOWARDS EXPENSES LIKE TEMPO HIRE CHARGES, PRINTING AND STAT IONERY, TAXI HIRE CHARGES AND SUNDRY EXPENSES. THE AO DISALLOWED A SUM OF RS.5.0 0 LAKHS WITH THE OBSERVATION THAT THE ASSESSEE DID NOT FURNISH SUFFI CIENT EXPLANATIONS REGARDING THE NATURE, PURPOSE OF EXPENSES AND FURTHER THE ASS ESSEE DID NOT EXPLAIN THAT THE EXPENSES WERE INCURRED AT FAIR MARKET OF VALUE OF GOODS AND SERVICES PROVIDED BY THE ABOVE SAID CONCERN. THE LD CIT(A) CONFIRMED THE SAID ADDITION, AS THE ASSESSEE HAS FAILED TO PROVE THE REASONABLEN ESS OF THE PAYMENTS EFFECTED TO THE ABOVE SAID CONCERN. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. ACCORDING TO THE ASSESSEE, IT HAS INCURRED THE EXPENSES ONLY AT MARK ET VALUE AND FURTHER THEY HAVE BEEN INCURRED FOR THE PURPOSES OF BUSINESS ONL Y. IT WAS FURTHER CONTENDED THAT THE AO DID NOT BRING ANY MATERIAL ON RECORD TO SUGGEST THAT THE IMPUGNED EXPENSES OR PAYMENTS ARE EXCESSIVE IN NATURE. HOWE VER, FROM THE PERUSAL OF ORDERS OF THE LOWER AUTHORITIES, WE NOTICE THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM THAT THE PAYMENTS MADE TO M/ S KURUVILANAKUNNEL ENTERPRISES WERE NOT EXCESSIVE OR UNREASONABLE. THE RE CANNOT BE ANY DISPUTE THAT THE RESPONSIBILITY TO PROVE THAT THE PAYMENTS MADE TO THE CLOSELY RELATED PERSONS IS REASONABLE IN NATURE LIES UPON THE ASSES SEE. WE NOTICE THAT THE ASSESSEE HAS FAILED TO DISCHARGE THIS RESPONSIBILIT Y. AT THE SAME TIME, THE REVENUE HAS ALSO NOT BROUGHT ON RECORD ANY MATERIAL TO SUGGEST THAT THE QUANTUM OF EXCESS PAYMENTS WAS TO THE TUNE OF RS.5. 00 LAKHS. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DISALLOW ANCE OF RS.5.00 LAKHS MADE BY THE AO OUT OF THE TOTAL PAYMENT OF RS.16.22 LAKH S IS ON THE HIGHER SIDE. ACCORDINGLY, WE ARE OF THE VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED TO RS.2.50 LAKHS. WE OR DER ACCORDINGLY. THE ORDER OF LD CIT(A) IS MODIFIED ACCORDINGLY. I.T.A. NOS. 678 & 657/COCH/2010 4 7. THE NEXT ISSUE RELATES TO THE DISALLOWANCE M ADE U/S 40(A)(IA) OF THE ACT. THE AO NOTICED FROM THE TAX AUDIT REPORT THAT THE A SSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TOWARDS BOAT HIGH ER CHARGES OF RS.4,74,910/- AND RENT OF RS.3,12,885/-. ACCORDING LY, THE AO DISALLOWED BOTH THE EXPENSES BY INVOKING THE PROVISIONS OF SEC. 4 0(A)(IA) OF THE ACT. BEFORE LD CIT(A), IT WAS SUBMITTED THAT THE RENT WAS PAID IN LAKSHADWEEP, WHERE THE BANKING FACILITIES ARE INADEQUATE AND FURTHER THE O WNERS OF BUILDING AND BOATS DECLINED TO ACCEPT PAYMENTS NET OF TDS AMOUNT. THE LD CIT(A) WAS NOT CONVINCED WITH THE SAID EXPLANATIONS AND ACCORDINGL Y CONFIRMED THE ADDITION. 8. BEFORE US, THE LD COUNSEL REITERATED THE SAME CONTENTIONS. HE FURTHER SUBMITTED THAT THE IMPUGNED AMOUNTS HAVE ALREADY BE EN PAID AND HENCE THE PROVISIONS OF SEC.40(A)(IA) IS NOT ATTRACTED TO THE PAYMENTS ALREADY MADE. FOR THIS PROPOSITION, THE LD COUNSEL RELIED UPON THE DE CISION OF VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILY NE SHIPPING & TRANSPORTS VS. ADDL. CIT REPORTED IN (2012)(136 ITD 23). 9. THERE SHOULD NOT BE ANY DISPUTE THAT THE ASS ESSEE IS LIABLE TO DEDUCT TAX AT SOURCE ON THE IMPUGNED PAYMENTS, EVEN IF THE RECIPI ENTS OBJECT TO IT. ACCORDINGLY, THE PROVISIONS OF SEC.40(A)(IA) SHALL BE ATTRACTED IF NO TAX IS DEDUCTED AT SOURCE. HOWEVER, THE VISAKHAPATNAM SPE CIAL BENCH, IN THE CASE OF MERILYN SHIPPING & TRANSPORTS, REFERRED SUPRA, HAS HELD THAT THE PROVISIONS OF SEC.40(A)(IA) SHALL BE ATTRACTED ONLY TO THE AMOUNT S WHICH REMAIN PAYABLE AS AT THE YEAR END AND THE SAID PROVISIONS SHALL NOT APPL Y TO THE AMOUNTS ALREADY PAID DURING THE COURSE OF YEAR. HOWEVER, THE DETAILS OF PAYMENTS ALREADY MADE AND THE AMOUNT OUTSTANDING AS AT THE YEAR END WERE NOT FURNISHED BEFORE US. HENCE, THESE DETAILS REQUIRE VERIFICATION AT THE EN D OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE IMPUGNED I SSUE AFRESH IN ACCORDANCE I.T.A. NOS. 678 & 657/COCH/2010 5 WITH THE DECISION OF THE SPECIAL BENCH REFERRED SUP RA. THE ASSESSEE IS ALSO DIRECTED TO FURNISH ALL THE DETAILS THAT MAY BE CAL LED FOR BY THE AO. 10. THE NEXT ISSUE RELATES TO THE DENIAL OF DED UCTION U/S 80G FOR WANT OF NECESSARY CERTIFICATES. BEFORE US, THE ASSESSEE HA S FILED A PHOTOCOPY OF A CERTIFICATE DATED 16 TH JUNE 2006 ISSUED BY M/S HEART CARE FOUNDATION, WHE RE IN IT IS STATED THAT THE DONATION IS EXEMPTED U/S 80G(5)( VI) OF THE I.T. ACT - CIT/CHN/12A/TECH.47/2005-06 DATED 06.12.2005 VALI DITY 29.7.2005 TO 31.3.2008. HOWEVER THE ASSESSEE HAS FAILED TO FURN ISH THE COPIES OF DONATION RECEIPTS AND THE COPY OF ORDER OF THE CONCERNED COM MISSIONER OF INCOME TAX. HENCE, WE ARE OF THE VIEW THAT THIS MATTER REQUIRES RE-EXAMINATION AT THE END OF THE AO, AS THE ASSESSEE HAS FURNISHED A CERTIFICATE BY MAKING A REFERENCE TO THE ORDER OF THE LD CIT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WI TH THE DIRECTION TO EXAMINE THE CLAIM OF DEDUCTION U/S 80G AFRESH IN ACCORDANCE WIT H THE LAW. THE ASSESSEE IS DIRECTED TO FURNISH THE RECEIPTS EVIDENCING DONATIO N PAYMENT AND ALSO A COPY OF THE ORDER OF CONCERNED CIT GIVEN U/S 80G OF THE ACT . 11. THE LAST ISSUE IN THE APPEAL OF THE ASSESSE E RELATES TO THE DEDUCTION OF INVESTMENT SUBSIDY OF RS.75.00 LAKHS FOR THE PURPOS E OF COMPUTATION OF DEPRECIATION. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED A SUM OF RS.75.00 LAKHS UNDER THE SCHEME NAMED INCENTIVE TO ACCOMMODATION INFRASTRUCTURE FOR ITS SWASWARA PROJECT LOCATED AT GOKARNA, KARNATAKA. THE ASSESSEE TREATED IT AS CAPITAL RECEIPT AND DID NOT REDUCE THE SAME FROM THE COST OF CAPITAL ASSETS FOR THE PURPOSE OF COMPUTATION OF DEPRECIATION. ACCORDING TO THE ASSESSEE, THE SAID SUBSIDY DID NOT RELATE TO AN Y SPECIFIC ASSET AND IT IS ONLY N THE NATURE OF AN INCENTIVE GIVEN BY THE GOVERNMENT AND HENCE NO PART OF IT IS REQUIRED TO BE DEDUCTED FROM THE COST OF FIXED ASSE TS. THE AO DID NOT ACCEPT THE SAID CONTENTIONS AND DISALLOWED PROPORTIONATE AMOUN T OF DEPRECIATION RELATABLE TO THE ABOVE SAID SUM OF RS.75.00 LAKHS. THE AO WO RKED OUT THE PROPORTIONATE I.T.A. NOS. 678 & 657/COCH/2010 6 AMOUNT OF DEPRECIATION WITH REFERENCE TO THE AGGREG ATE VALUE OF FRESH ADDITIONS MADE DURING THE YEAR UNDER CONSIDERATION. THE LD C IT(A) HELD THAT THE SUBSIDY AMOUNT IS REQUIRED TO BE DEDUCTED FROM THE COST OF ASSET. HOWEVER, THE FIRST APPELLATE AUTHORITY TOOK THE VIEW THAT THE PROPORTI ONATE AMOUNT OF DEPRECIATION HAS TO BE WORKED OUT WITH REFERENCE TO THE AGGREGAT E COST OF ENTIRE ASSETS AND NOT WITH REFERENCE TO THE VALUE OF ADDITIONS MADE T O THE FIXED ASSETS, AS COMPUTED BY THE AO. ACCORDINGLY, HE SUSTAINED THE DISALLOWANCE OF DEPRECIATION TO THE EXTENT OF RS.9,58,125/- AS AGAINST THE SUM O F RS.60,91,585/- DISALLOWED BY THE AO. 12. WE NOTICE THAT THE AO WAS CONSTRAINED TO MA KE PROPORTIONATE DISALLOWANCE OF DEPRECIATION RELATABLE TO THE SUBSI DY AMOUNT OF RS.75.00 LAKHS, AS THE ASSESSEE HAD FAILED TO FURNISH NECESSARY DET AILS BEFORE HIM. THE ASSESSEE HAS FURNISHED THE COPIES OF SUBSIDY SCHEME AND ALSO THE COPY OF LETTER DATED 30.12.06 ISSUED BY THE MINISTRY OF TOURISM, GOVERNM ENT OF INDIA BEFORE US. THESE FRESH MATERIALS REQUIRE EXAMINATION AT THE EN D OF THE AO. FURTHER, IN OUR VIEW, THERE IS NO SCOPE FOR MAKING PROPORTIONATE DE PRECIATION UNDER THE INCOME TAX ACT. INSTEAD, THE AMOUNT OF SUBSIDY, IF IT IS FOUND TO BE DEDUCTIBLE FROM THE COST OF FIXED ASSETS, HAS TO BE DISTRIBUTED/DEDUCTE D ON AN EQUITABLE BASIS AMONGST/FROM THE COST OF VARIOUS FIXED ASSETS AND T HERE AFTER DEPRECIATION SHOULD BE COMPUTED. IN VIEW OF THE FOREGOING, WE A RE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. A CCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SA ME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE ISSUE AFRESH AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW, AFTER AFFORDING NECESSARY OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. 13. WE SHALL NOW TAKE UP THE APPEAL FILED BY TH E REVENUE. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF CLAIM OF CURRENT REP AIRS AMOUNTING TO RS.73,71,453/-. THE FACTS RELATING THERETO ARE THA T THE ASSESSEE CONSTRUCTED A I.T.A. NOS. 678 & 657/COCH/2010 7 BUILDING IN THE EARLIER YEARS ON THE LAND TAKEN ON LEASEHOLD BASIS. THE ASSESSEE DULY CAPITALIZED THE COST OF BUILDING AND CLAIMED D EPRECIATION THEREON. THE WRITTEN DOWN VALUE OF THE SAID BUILDING STOOD AT RS .73,71,4533/- AS AT THE BEGINNING OF THE YEAR UNDER CONSIDERATION. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED THE WDV VALUE OF THE BUILDING AS REVENUE EXPENSES, BY FOLLOWING THE DECISION RENDERED BY HONBLE MADRAS H IGH COURT IN THE CASE OF TVS LEAN LOGISTICS LTD (293 ITR 432). IT APPEARS THAT THE ASSESSEE CLAIMED THE WDV VALUE OF THE BUILDING AS EXPENDITURE, ONLY IN ITS S TATEMENT OF TOTAL INCOME COMPUTED FOR THE PURPOSES OF INCOME TAX, I.E., IT D ID NOT TREAT THE BUILDING COST AS EXPENDITURE IN ITS BOOKS OF ACCOUNT. HOWEVER, THE ASSESSEE DID NOT CLAIM DEPRECIATION ON THE WDV VALUE OF THE BUILDING. THE AO DISALLOWED THE SAID CLAIM BY HOLDING THAT THE COST OF CONSTRUCTION OF BUILDIN G IS CAPITAL IN NATURE. HOWEVER, THE LD CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE HONBLE MADRAS HIGH COURT REFERRED SUPRA. 14. BEFORE US, THE LD D.R POINTED OUT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON CONSTRUCTION OF BUILDING IS A CAPITAL E XPENDITURE, EVEN IF THE SAID BUILDING WAS PUT UP ON THE LEASE HOLD LAND. THE LD D.R FURTHER SUBMITTED THAT THE IMPUGNED EXPENDITURE WAS NOT INCURRED DURING TH E YEAR UNDER CONSIDERATION AND HENCE, EVEN IF FOR A MOMENT THE CLAIM OF THE AS SESSEE IS ACCEPTED, THE SAME CANNOT BE TREATED AS THE EXPENDITURE OF THE YEAR UN DER CONSIDERATION. 15. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. FIRST OF ALL, THE ASSESSEE HAS NOT SHOWN AS TO HOW THE PROVISIONS OF EXPLANATION 1 TO SEC.32 ARE NOT ATTRACTED TO THE FACTS OF THE INSTANT CASE. SE CONDLY, THE ASSESSEE HAS FAILED TO SHOW THE PARITY OF FACTS BETWEEN THE INSTANT CAS E AND THE CASE LAW RELIED ON BY IT. THIRDLY, WHICH IN OUR VIEW IS VERY VITAL, T HE IMPUGNED EXPENDITURE WAS NOT INCURRED DURING THE YEAR UNDER CONSIDERATION. THE BUILDING WAS CONSTRUCTED ON THE LEASE HOLD LAND IN THE EARLIER YEARS. ACCORDIN GLY, WE FIND FORCE IN THE CONTENTION OF THE REVENUE THAT THE EXPENDITURE INCU RRED IN ANY OF THE EARLIER YEAR I.T.A. NOS. 678 & 657/COCH/2010 8 CANNOT BE CLAIMED AS REVENUE EXPENDITURE DURING THE YEAR UNDER CONSIDERATION. THE LD CIT(A) HAS OMITTED TO CONSIDER THE PERIOD OF INCURRING THE IMPUGNED EXPENDITURE. ACCORDINGLY, WE SET ASIDE THE ORDER O F LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE AO. 16. THE NEXT ISSUE URGED BY THE REVENUE RELATES TO THE DISALLOWANCE MADE U/S 40A(2)(B) AND THE RELIEF GIVEN BY LD CIT(A) TO THE TUNE OF RS.11,48,399/-. THE ASSESSEE HAD INCURRED MEDICAL EXPENSES ON BEHALF OF ITS DIRECTORS AND OTHERS AS DETAILED BELOW:- 1. SHRI DOMINIC JOSEPH RS.8,69,399.12 2. SHRI JOSE DOMINIC RS.4,23,010.58 3. SHRI GEORGE DOMINIC RS. 37,767.31 4. SHRI SIDHARTHAN DOMINIC RS. 31,341.28 5. SHRI THOMAS DOMINIC RS. 3,596.95 THE AO DISALLOWED THE ENTIRE AMOUNTS REFERRED SUPRA TREATING THEM AS PERSONAL IN NATURE. HOWEVER, THE LD CIT(A) PARTLY SUSTAINED THE DISALLOWANCE WITH THE FOLLOWING OBSERVATIONS:- IT HAS BEEN SUBMITTED THAT THE CHAIRMAN SHRI DOM INIC JOSEPH IS NOT GETTING ANY SALARY FROM THE COMPANY AND COMPANY HA S ONLY PROVIDED HIM MEDICAL BENEFITS BEING AGED PERSON AND THE EXPENSE S HAVE BEEN INCURRED TOWARDS TREATMENT FOR THE WHOLE YEAR. ON THE CONS IDERATION OF THE FACTS THAT SHRI DOMINIC JOSEPH BEING CHAIR PERSON IS NOT GETTING ANY SALARY FROM THE COMPANY AND THE COMPANY IS ONLY PROVIDING MEDI CAL FACILITIES TO HIM FOR THE TREATMENT, EXPENSES SEEN REASONABLE AND TH EREFORE, ALLOWED. REGARDING SHRI JOSE DOMINIC, M.D., A SUM OF RS. 4,23,010/- HAS BEEN DEBITED. SHRI JOSE DOMINIC HAS ALSO DRAWN SALARY OF RS. 25,32,000/- DURING THE YEAR APART FROM INTEREST ON LOAN, P.F. AND E.P.F. CONTRIBUTIONS ETC. CONSIDERING THAT SHRI JOSE DOMINIC IS ALSO D RAWING SALARY OF APPROXIMATELY RS. 2 LAKHS IN A MONTH FROM THE COMP ANY, MEDICAL BENEFIT OF RS. 4,23,010/- SEEM EXCESSIVE AS THIS EXCEED AM OUNT OF SALARY PAID FOR ONE MONTH TO THE M.D. THE REASONABLE ALLOWANCES C OULD HAVE BEEN MAXIMUM TO THE EXTENT OF ONE MONTH SALARY WHICH IS ALLOWED AND THE REMAINING DISALLOWANCE IS CONFIRMED. SO, THE AMOU NT OF RS. 2,12,010 IS SUSTAINED AS AN ADDITION. I.T.A. NOS. 678 & 657/COCH/2010 9 FOR SHRI GEORGE DOMINIC AND SHRI SIDHARTHAN D OMINIC, THE AMOUNTS ARE ONLY RS. 3700/- AND 31000/- WHICH DO NOT SEEM UNREASONABLE. HENCE ALLOWED FULLY. AS REGARDS SHRI THOMAS DOMINIC (RELATIVE OF D IRECTOR), MEDICAL EXPENSES OF RS. 3,596.95 HAS BEEN INCURRED WHICH I S WITHOUT ANY REASON AND ACCORDINGLY, THE ADDITION IS SUSTAINED. HENCE , THIS GROUND OF THE APPELLANT IS PARTLY ALLOWED. 17. WE HAVE GONE THROUGH THE DECISION RENDERED BY LD CIT(A) ON THIS ISSUE. IT IS NOTICED THAT SHRI DOMINIC JOSEPH IS THE CHAIR MAN OF THE ASSESSEE COMPANY AND SHRI JOSE DOMINIC IS THE MANAGING DIRECTOR OF T HE ASSESSEE COMPANY. THUS, IT IS SEEN THAT BOTH THE PERSONS ARE WORKING IN THE ASSESSEE COMPANY. UNDER THESE CIRCUMSTANCES, WE AGREE WITH THE VIEW OF THE LD CIT(A) THAT THE MEDICAL EXPENSES INCURRED ON THEM CANNOT BE CONSIDERED AS PERSONAL IN NATURE. ACCORDINGLY, WE UPHOLD THE DECISION OF LD CIT(A) IN ALLOWING THE EXPENSES INCURRED ON SHRI DOMINIC JOSEPH FOR THE REASONS CIT ED BY HIM AND ALSO IN PARTLY SUSTAINING THE DISALLOWANCE MADE ON EXPENSES INCURR ED ON SHRI JOSE DOMINIC. WE ALSO DO NOT FIND ANY INFIRMITY IN THE DECISION O F LD CIT(A) ON EXPENSES INCURRED IN RESPECT OF THREE OTHER PERSONS. 18. THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF PROPORTIONATE EXPENSES INCURRED ON EARNING THE EXEMPTED DIVIDEND INCOME AS PER RULE 8D OF THE ACT. IT WAS BROUGHT TO OUR NOTICE THAT THE JURISDICTIONAL H IGH COURT HAS RENDERED ITS DECISION ON THIS ISSUE IN THE CASE OF CIT VS. DHANA LAKSHMY BANK LTD. (2012) 344 ITR 259 (KER.) AND ALSO IN THE CASE OF CATHOLIC SYR IAN BANK IN ITA NO.467 OF 2009. IN VIEW OF THE ABOVE, THE INSTANT ISSUE NEED S RECONSIDERATION AT THE END OF THE AO IN ACCORDANCE WITH THE DECISION OF HONBL E JURISDICTIONAL HIGH COURT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE IT TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE TH IS ISSUE AFRESH IN THE LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT REFER RED SUPRA. I.T.A. NOS. 678 & 657/COCH/2010 10 19. THE LAST ISSUE IN THE APPEAL OF THE REVENUE RELATES TO THE DEPRECIATION RELATABLE TO THE INVESTMENT SUBSIDY. THE ASSESSEE HAD ALSO RAISED A GROUND ON THE VERY SAME ISSUE AND WE HAVE RESTORED THE SAID M ATTER TO THE FILE OF THE AO FOR THE REASONS STATED BY US IN THE PRECEDING PARAG RAPHS. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND REST ORE IT TO THE FILE OF THE AO FOR FRESH CONSIDERATION. 20. IN THE RESULT, BOTH THE APPEALS ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 25-10-2012. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 25TH OCTOBER, 2012 GJ COPY TO: 1. M/S. HOTEL & ALLIED TRADERS (P) LTD., CASINO HO TEL, W/ISLAND, KOCHI-682 003. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE-1(1 ), RANGE-1, ERNAKULAM. 3. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE- 1(2), ERNAKULAM. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, KOC HI. 5. THE COMMISSIONER OF INCOME-TAX, KOCHI 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN